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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 


FORM S-1

Amendment No. 2

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

 

 

CARBONMETA TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

   7349  

95-4868120

(State or other Jurisdiction of

incorporation or organization)

  

(Primary Standard Industrial

Classification Code Number)

  

(I.R.S. Employer

Identification Number)

 

13110 NE 177th Place, Suite 145, Woodinville, WA 98072

(844) 698-3777

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

 

 

 

Registered Agents, Inc.

8 The Green, Suite R

Dover, DE 19901

(307) 200-2803

 

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

 

 

 

Please send copies of all communications to:

 

Law Offices of Gary L. Blum

3278 Wilshire Boulevard, Suite 603

Los Angeles, CA 90010

(213) 381-7450

 

As soon as practicable after the effective date of this Registration Statement.

(Approximate date of commencement of proposed sale to the public)

 

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 of 1933, please check the following box and list the Securities Act of 1933 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 of 1933, check the following box and list the Securities Act of 1933 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 of 1933, check the following box and list the Securities Act of 1933 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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

 

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

 

Calculation of Registration Fee

 

Title of Each Class of

Securities To Be Registered

  

Amount to

be

Registered

(1)(2)(3)

    

Proposed
Maximum

Offering Price

Per Share (1)

    

Proposed
Maximum

Aggregate

Offering Price (4)

    

Amount of

Registration Fee (4)

  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the March 7, 2022 Lloyd T. Spencer financing (the “March 2022 Spencer financing”)     307,500,000     $ 0.0005     $ 153,750     $ 20  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the March 21, 2022 Tangiers Investment Group, LLC financing (the “March 2022 Tangiers financing”)     375,000,000       0.0005       187,500       17  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the May 10, 2022 MacRab, LLC financing (the “May 2022 MacRab financing”)     226,130,000       0.0005       113,065       10  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the July 14, 2022 BHP Capital NY Inc. financing (the “July 2022 BHP financing”)     125,000,000       0.0005       62,500       6  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the July 14, 2022 Quick Capital, LLC financing (the “July 2022 Quick financing”)     125,000,000       0.0005       62,500       6  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the July 15, 2022 Robert Papiri Defined Benefit Plan. financing (the “July 2022 RPDBP financing”)     50,000,000       0.0005       25,000       2  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the July 15, 2022 Robert Papiri Defined Contribution Plan. financing (the “July 2022 RPDCP financing”)     12,500,000       0.0005       6,250       1  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the July 15, 2022 RGP Capital Partners, Inc. financing (the “July 2022 RGP financing”)     12,500,000       0.0005       6,250       1  
Common stock, par value $.0001 per share, issuable upon conversion of a Convertible Promissory Note issued in connection with the September 12, 2022 RGP Capital Partners, Inc. financing (the “September 2022 RGP financing”)    

75,000,000

      

0.0005

      

37,500

          
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the March 2022 Spencer financing     165,000,000       0.0005       82,500       8  
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the March 2022 Tangiers financing     125,000,000       0.0005       62,500       6  
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the May 2022 MacRab financing     74,375,000       0.0005       37,188       3  
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the July 2022 BHP financing     62,500,000       0.0005       31,250       3  
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the July 2022 Quick financing     62,500,000       0.0005       31,250       3  
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the July 2022 RPDBP financing     25,000,000       0.0005       12,500       1  
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the July 2022 RPDCP financing     6,250,000       0.0005       3,125       -  
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the July 2022 RGP financing     6,250,000       0.0005       3,125       -  
Common stock, par value $.0001 per share, underlying a warrant issued in connection with the September 2022 RGP financing    

37,500,000

      

0.0005

      

18,750

          
Common stock, par value $.0001 per share, previously issued to selling shareholders     908,932,537       0.0005       454,466       41  
Total     2,781,937,537     $ -     $ 1,390,969     $        129  

 

(1) The Offering price has been estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) of the Securities Act and is based upon a $0.0005 per share price on the OTC Marketplace on July 25, 2022, the most recent day that the Registrant’s shares traded on the OTC Marketplace.
   
(2) Pursuant to Rule 416 under the Securities Act, the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.
   
(3) This Registration Statement covers the resale by our selling shareholders of up to 1,308,630,000 shares of common stock issuable upon conversion of convertible notes outstanding, 564,375,000 shares of common stock issuable upon exercise of warrants and 908,932,537 shares of common stock previously issued as Commitment shares
   
(4) Previously paid. The fee is calculated by multiplying the aggregate offering amount by 0.0000927 pursuant to Section 6(b) of the Securities Act.

 

EXPLANATORY NOTE

 

Prior to the effectiveness of this Form S-1, we, “The Company”, are not subject to the periodic reporting requirements of the Exchange Act. We intend, with the filing of this Form S-1, and ultimate effectiveness of this Form S-1, to become SEC Reporting in which case we will be subject to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.

 

 

 

The 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 Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

  
 

 

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

 

PRELIMINARY PROSPECTUS - SUBJECT TO COMPLETION Dated October 11, 2022

 

CARBONMETA TECHNOLOGIES, INC.

 

2,781,937,537

Shares of

Common Stock

 

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”). This prospectus relates to the offering of up to 2,781,937,537 shares of our common stock, par value $0.0001 per share (“Common Stock”) by selling shareholders. This registration statement covers the resale by our selling shareholders of up to 908,932,537 shares of common stock previously issued to such selling shareholders, 564,375,000 shares of common stock issuable upon the exercise of multiple warrants and 1,308,630,000 shares of common stock issuable upon conversion of convertible notes. The information in this prospectus is not complete and may be changed. The selling shareholders 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 is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. 

 

Our Common Stock is subject to quotation on OTC Markets “PINK” under the symbol “COWI.” On July 25, 2022, the last reported sales price for our Common Stock was $0.0005 per share. We urge prospective purchasers of our Common Stock to obtain current information about the market prices of our Common Stock. We will not receive proceeds from the sale of shares from the selling shareholders. We will, however, receive the exercise price of the warrants, if and when such warrants are exercised for cash by the holders of such warrants.

 

The selling shareholders may offer, sell or distribute all or a portion of the shares of common stock registered hereby at a fixed price ($0.0005) until the shares of common stock are listed on a national securities exchange or quoted on the OTCQX or OTCQB, at which time they may be sold at prevailing market prices. There are no underwriting commissions involved in this offering. We have agreed to pay all the costs and expenses of this offering. Selling shareholders will pay no offering expenses. For additional information on the possible methods of sale that may be used by the selling shareholders, you should refer to the section of this prospectus entitled “Plan of Distribution.”

 

We are a shell company pursuant to Rule 405 of the Securities Act. This may impact our ability to attract additional capital.

 

The Company’s sole officer and director, Lloyd Spencer, is the owner of 100% of the Company’s issued and outstanding Series G Preferred Stock. The Company’s Series G Preferred Stock has voting rights equal to 5,000,000 votes per each one share. As such, Mr. Spencer has voting rights equal to 125,000,000,000 shares of common stock and thus control of any item brought before shareholders requiring a vote.

 

This offering is highly speculative and these securities involve a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. Additionally, our auditor has expressed substantial doubt as to our Company’s ability to continue as a going concern. See “RISK FACTORS” beginning on page, 15.

 

Our Common Stock is quoted on the OTC Markets Pink under the symbol “COWI.”

 

We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 and a smaller reporting company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended. As such, we have elected to rely on certain reduced public company disclosure requirements. See “Prospectus Summary — Implications of Being an Emerging Growth Company and a Smaller Reporting Company.”

 

The Company has minimal revenues to date and there can be no assurance that the Company will be successful in furthering its operations and/or revenues. Persons should not invest unless they can afford to lose their entire investment. Investing in our securities involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page 15 of this prospectus.

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is October 11, 2022.

 

 
 

 

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY 4
THE OFFERING 10
SUMMARY FINANCIAL DATA 14
RISK FACTORS 15
NOTE ABOUT FORWARD-LOOKING STATEMENTS 29
TAX CONSIDERATIONS 30
USE OF PROCEEDS 30
DILUTION 30
SELLING SHAREHOLDERS 30
DESCRIPTION OF SECURITIES 34
DIVIDEND POLICY 39
PROPERTIES 39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 39
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS 45
EXECUTIVE COMPENSATION 46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 47
MARKET FOR COMMON STOCK / SHARES ELIGIBLE FOR FUTURE SALE 49
WHERE YOU CAN FIND MORE INFORMATION 50
LEGAL PROCEEDINGS 50
EXPERTS 50
CORPORATE GOVERNANCE 51
FINANCIAL STATEMENTS 54

 

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf. We have not authorized anyone to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. The information in this prospectus is accurate only as of the date on the front of this prospectus. Our business, financial condition, results of operations and prospects may have changed since the date of this prospectus. This prospectus is not an offer or solicitation relating to the securities in any jurisdiction in which such an offer or solicitation relating to the securities is not authorized. You should not consider this prospectus to be an offer or solicitation relating to the securities if the person making the offer or solicitation is not qualified to do so, or if it is unlawful for you to receive such an offer or solicitation.

 

3
 

 

PROSPECTUS SUMMARY

 

This summary highlights certain information appearing elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider prior to investing. After you read this summary, you should read and consider carefully the more detailed information and financial statements and related notes that we include in this prospectus, especially the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If you invest in our securities, you are assuming a high degree of risk.

 

Unless we have indicated otherwise or the context otherwise requires, references in the prospectus to “CarbonMeta,” the “Company,” “we,” “us” and “our” or similar terms are to CarbonMeta Technologies, Inc.

 

Overview of CarbonMeta Technologies, Inc.

 

CarbonMeta Technologies is an environmental research and development company that is commercializing technologies for processing organic wastes into hydrogen and high-value carbon products economically and sustainably. CarbonMeta Technologies and University of Oxford are working together on commercializing a microwave catalysis process for producing hydrogen and carbon products from waste plastics. The Company plans to grow its business by establishing joint venture subsidiary corporations with established partners, pursuing research grants, licensing patented technologies, and developing new technologies that can be licensed. CarbonMeta Technologies has positioned itself to enhance circular methods of production, distribution, consumption, and reuse of organic waste materials such as mixed waste plastic, oil & gas waste materials, and coal mining waste to create hydrogen and carbon products such as graphite, graphene and carbon nanotubes.

 

DESCRIPTION OF BUSINESS

 

CarbonMeta Technologies, Inc. (“CarbonMeta”, the “Company”, “we”, “us”, or “our”) is a publicly quoted environmental research and development company that is commercializing technologies for processing organic wastes into hydrogen and high-value carbon products economically and sustainably.

 

The Company was incorporated on July 8, 2001 under the laws of the State of Delaware as SRM Networks, Inc. In connection with the acquisition of Hy-Tech Computer Systems, Inc. on January 31, 2003, the Company changed its name to Hy-Tech Technology Group, Inc. In connection with the Agreement and Plan of Merger Robotics Workspace Technology, Inc., Innova Holdings, Inc. and the Company’s wholly owned subsidiary, RWT Acquisition, Inc., dated July 21, 2004, the Company’s named changed to Innova Holdings, Inc. Subsequently, on November 20, 2006, the Company changed its name to Innova Robotics and Automation, Inc., and then on April 23, 2008, the Company changed its name to CoroWare, Inc.

 

Our Chief Executive Officer and Director owns all (25,000) issued and outstanding shares of the Company’s Series G Preferred Stock, which has voting rights equal to 5,000,000 votes for each share of Series G held; and 60,000 shares of the Company’s Series D Preferred Stock, which has voting rights equal to 100,000 votes for each share of Series D held. As of the date of this filing, our Chief Executive Officer would have voting rights equal to 131,552,177,763 shares (125,000,000,000 voting shares through the Series G Preferred Stock; 6,000,000,000 voting shares through the Series D Preferred Stock; and 552,177,763 shares of common stock held) or approximately 85% of the shares available to vote for a matter brought before shareholders.

 

On or about July 28, 2021, the Company filed Articles of Amendment to its Amended and Restated Certificate of Incorporation with the State of Delaware to reflect a name change from CoroWare, Inc. to CarbonMeta Technologies, Inc.

 

The Company was an SEC reporting company until October 2016, when the Company’s gross margins and financing costs became unsustainable, and the company ceased operations in October 2016. From 2017 - 2018, the Company investigated multiple business opportunities, but could not pursue them without investor support. In 2020, the Company began investigating emerging technologies and sustainable growth business opportunities related to the production of hydrogen and high value carbon products from organic waste streams. After careful consideration of the potential market opportunities and the partnership with Oxford University, the Company took the decision to raise capital in the public market and therefore become an SEC reporting company again.

 

The Company has six wholly-owned subsidiaries: CoroWare Technologies, Inc. (“CTI”), CoroWare Robotics Solutions, Inc. (“CRS”), RWT Acquisition, Inc. (“RWT”), Carbon Sources, Inc. (“CS”), Coroware Treasury, Inc. (“CWT”), CarbonMeta Research Ltd. (‘CMR”) and a 51% interest in AriCon, LLC (“AriCon).

 

CoroWare Technologies (“CTI”) was incorporated in the State of Florida on May 16, 2006 and its principal business was a software professional services company with a strong focus on information technology integration and robotics integration, business automation solutions, and unmanned systems solutions to its customers in North America and Europe.

 

CoroWare Robotics Solutions, Inc. (“CRS”) was incorporated in the State of Texas on February 27, 2015, and its principal business was as a technology incubation company whose focus was on the delivery of mobile robotics and IOT products, solutions and services for university, government and corporate researchers, and enterprise customers. CRS’s business operations were discontinued in October 2016 when the Company’s gross margins and financing costs became unsustainable.

 

Robotic Workspace Technologies, Inc. (“RWT”) was incorporated in the State of Florida on July 1, 1994, and its principal business was developing and marketing open-architecture PC controls and related products that could improve the performance, applicability, and productivity of robots and other automated equipment. RWT’s business operations were discontinued in September 2007 when the Company’s losses became unsustainable.

 

Carbon Source, Inc. (“CS”) was incorporated in the State of Wyoming on June 14, 2021 and its principal business is waste reclamation technologies and processing.

 

CoroWare Treasury, Inc. (“CWT”) was incorporated in the State of Wyoming on July 6, 2021 and its principal business is acquisitions related to acquiring technologies and subsidiary businesses related to waste processing.

 

CarbonMeta Research Ltd. (‘CMR”) was incorporated in England and Wales on August 12, 2021 and its principal business will focus on the development of technologies and solutions for processing organic wastes and generating economically sustainable hydrogen and high-value carbon products.  Using proprietary and patented technologies, it plans to implement new industrial methods using inexpensive, environmentally friendly catalysts that process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes.

 

AriCon, LLC (“AriCon) was a joint venture that was intended to develop mobile robot platforms, applications, and solutions for the construction industry. In October 2016, AriCon ceased operations of all subsidiary business operations when the Company’s losses became unsustainable, and the Company was not able to obtain investment financing.

 

In the second quarter of FY-2022, the company earned its first revenues with two customers. We believe that the Company will continue to grow its revenues through microwave catalysis trial projects with energy companies, and EarthCrete deployments with construction contractor companies. In addition, the company is actively pursuing federal government grants that can accelerate the Company’s anticipated growth of these businesses.

 

In 2021, the Company began investigating emerging technologies, strategic intellectual property partnerships, and sustainable growth business opportunities related to the production of hydrogen and high value carbon products from organic waste streams. Working cooperatively with Oxford University Innovation, CarbonMeta plans to implement proven and patented technologies to add value to organic waste streams. By utilizing these proven proprietary technologies, collected and captured plastic waste material can be upcycled to high value products such as carbon nanotubes (“CNTs”) and hydrogen gas.

 

CNTs can be used for improved electrical conduction and reinforcing materials that are used in a wide variety of industries including the automotive industry, aviation industry, medical industry, and construction. The number one growth driver is the increasing need for high performance batteries for the electric vehicle market.

 

Plastic waste is a cheap and abundant feedstock that will allow the Company to scale quickly and produce hydrogen gas for a competitive price.

 

In order to relaunch CarbonMeta in a new market and industry, the Company has adopted the following plan:

 

●Acquire or develop patents that will help the Company establish its competitive position and generate service and royalty revenues with potential customers
●Form joint venture corporations with global energy partners and local communities to generate revenues from processing organic waste materials into high value products such as hydrogen gas, graphene and carbon nanotubes
●Form joint venture corporations with commercial construction contractors to form businesses that can produce “carbon negative” construction materials for green building projects;
●Apply for government grants and loans in the United Kingdom, European Union and United States that encourage the development of high value production of hydrogen and high value carbon products from organic waste streams; and
●Develop new proprietary and patented technologies to implement new industrial methods that can use inexpensive, environmentally friendly catalysts to process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes;
●Attract investment funds who will actively work with the Company to achieve these goals and help the Company grow rapidly during the next 3 years.

 

License Agreements

 

On June 2, 2021, the Company (the “Licensee”) entered into a License Agreement (the “Agreement”) with Oxford University Innovation Limited (the “Licensor”). Under the terms of the Agreement, the Licensee will license the licensed technology (OUI Project- Hydrogen from plastics via microwave-initiated catalytic dehydrogenation). The Agreement is non-exclusive and includes the United States and European Union. Signing fees for the Agreement were £54,807 and have been paid in full by the Company. The Royalty Rate is 5% of gross sales. The Agreement comprises milestone fees as: (i) £20,000 upon the first commercial sale of a licensed product; (ii) £50,000 upon generating $1,000,000 in sales; (iii) £10,000 upon the successful grant of the US patent; and (iv) £10,000 upon the successful grant of the EU patent.

 

On December 2, 2021, the Company (“Licensee”) entered into a License of Agreement (the “Agreement”) with Ecomena Limited (an entity located in the United Kingdom) (“Licensor”). Under the terms of the Agreement, the Licensee will license the Licensed Technology to recycle industrial byproduct into cement free pavers and mortars that are environmentally friendly and continuously absorb carbon dioxide. The signing fees payable to the Licensor under the Agreement are £20,000 cash (approximately $27,247 at February 17, 2022) of which £10,000 has been paid by the Licensee, and 160,000,000 shares of the Company’s common stock, which was delivered to the Licensor on February 17, 2022. The royalty rate payable to the Licensor is 5% of product sales, subject to a minimum of £5,000 per year for license years 1 and 2, £3,000 for license year 3 and £1,000 for license year 4 and each license year thereafter. The term of the Agreement is five years from December 2, 2021 to December 2, 2026. The Licensee may terminate the Agreement for any reason at any time provided it gives Licensor six (6) months written notice to terminate expiring after December 2, 2024. If requested by the Licensee, the Licensor shall agree to the Agreement continuing in force after December 2, 2026. As of the date of this filing, the Agreement is still in effect.

 

Production Agreement

 

On January 11, 2022, the Company entered into an Interim Joint Product Development and Sales Representation Agreement (the “Agreement”) with Salvum Corporation. Under the terms of the Agreement, the parties agree to work together to develop both CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” and Salvum’s proprietary concrete alternative products known as “Earthcrete.” During the Term, Salvum agrees to manufacture CarbonMeta’s proprietary cementless paver products known as “Cementless Paver”. CarbonMeta reserves the right to appoint other manufacturers of the products and/or to engage other sales representatives for CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” outside the United States of America. Although the Interim Joint Product Development and Sales Representation Agreement with Salvum Corporation had a term of 180 days and expired on July 11, 2022, the companies continued to work together, and the companies signed a Joint Venture Agreement on August 28, 2022 that supersedes the Interim Joint Product Development and Sales Representation Agreement.

 

Service Award

 

On June 10, 2022, our subsidiary, CarbonMeta Research Ltd. (“CMR”), was granted a Service Award (entitled “Waste Plastic Catalysis Proof of Concept”) from Repsol S.A., a business company located in Spain. The award provides for CMR to provide Repsol with an initial prototype process for converting mixed waste plastic to hydrogen and solid carbon and for Repsol to pay CMR a total of 50,000 Euros in four installments as certain milestones are met. As of June 30, 2022, the first milestone entitling CMR to a payment of 20,000 Euros (approximately $20,744 at June 30, 2022) had been met and CMR’s invoice dated June 24, 2022 for 20,000 Euros was collected in July 2022.

 

4
 

 

In order to further grow its business, the Company plans to:

 

  ● Develop and patent new microwave catalysis processes that can yield high value hydrogen and carbon products;
     
  ● Work closely with commercial building and solar farm general contractors that want to purchase “carbon negative” construction materials that can generate carbon credits;
     
  ● Acquire or develop patents that will help the Company generate royalty revenues with potential customers and partners, and protect the Company’s competitive position against potential competitors;
     
  ● Develop new proprietary and patented technologies to implement new industrial methods that can use inexpensive, environmentally friendly catalysts to process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes;
     
  ● seek out government programs in the United Kingdom, European Union and United States that encourage the development of high value production of hydrogen and high value carbon products from organic waste streams; and
     
  ● Attract investment funds who will actively work with the Company to achieve these goals and help the Company grow rapidly during the next 3 years.

 

Some potential joint venture candidates have been identified and discussions initiated. These candidates are within the Company’s core business model, serving commercial properties, accretive to cash flow, and geographically favorable.  One of these joint ventures, CarbonMeta Green Building Materials LLC will be focused on the development at marketing of construction mix products that are carbon-negative.  Two other joint ventures under discussion are focused on processing waste plastics into hydrogen and high value carbon products.  We plan to fund these joint ventures with customer purchase orders and invoice payments, federal loans, federal grants, and commercial loans.

 

We have unrestricted discretion in seeking and participating in a business opportunity, subject to the availability of such opportunities, economic conditions, and other factors.

 

The selection of a business opportunity in which to participate is complex and risky. Additionally, we have only limited resources and may find it difficult to locate good opportunities. There can be no assurance that we will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to us and our shareholders. We will select any potential business opportunity based on our management’s best business judgment.

 

Our activities are subject to several significant risks, which arise primarily as a result of the fact that we have no specific business and may acquire or participate in a business opportunity based on the decision of management, which potentially could act without the consent, vote, or approval of our shareholders. The risks faced by us are further increased as a result of its lack of resources and our inability to provide a prospective business opportunity with significant capital.

 

Patents/Trademarks

 

We currently hold no patents or trademarks.

 

Research & Development

 

The Company will continue to engage in research and development expenses. These will consist primarily of salaries, and benefits for employees who are responsible for building new products as well as improving existing products. We will expense all of our research and development costs as they are incurred.

 

Compliance Expenses

 

Our company incurs annual expenses to comply with state corporate governance and business licensing requirements. We estimate these costs to be under $2,000 per year for the establishment of foreign corporations in other states that we plan to operate.

 

Labor and Other Supplies

 

We currently have one part time employee. We contract all labor for public company governance services, website development, accounting, legal and daily activities outside of management.

 

5
 

 

Principal Products or Services and Markets

 

The Company is in the business of developing and marketing technologies and solutions that can process organic and construction wastes into economically high-value and ecologically sustainable products.

 

The Company is partnering with a microwave reactor manufacturer in the United States to “scale up” the patented waste plastics microwave processes that the Company licensed from Oxford University Innovation, and with a university partner in the United States to separate, purify and characterize carbon nanotubes that the UK and US developers shall produce.

 

The principal products that the Company intends to market comprise:

 

●amorphous carbon, graphite, nano-graphite, graphene, carbon nanotubes, and hydrogen
●carbon-negative building products that help alleviate climate change by capturing carbon dioxide (CO2) for renewable energy projects

 

Seasonality

 

We do not expect any seasonality in our business.

 

Leases

 

The Company anticipates its most significant lease obligations will be classified as fixed assets that will be used in the normal course of its business. Some lease obligations may include renewal or purchase options, escalation clauses, restrictions, penalties or other obligations that we will consider in determining minimum lease payments. The leases will be classified as either operating leases or capital leases, as appropriate.

 

Governmental Regulation

 

The United States does not have a nationwide recycling regulation that requires businesses to recycle. Although this is the case, many state and local governments have introduced their own waste and recycling mandates that commercial businesses must follow.

 

When we expand our operations to process organic gases and waste materials into carbon and hydrogen products, our operations will be subject to certain foreign, federal, state and local regulatory requirements relating to environmental, and health and safety matters. The company will operate in compliance with all applicable regulatory requirements. However, material costs and liabilities may arise from these requirements or from new, modified or more stringent requirements.

 

6
 

 

Environmental Regulation

 

Upon the establishment or acquisition of a materials processing business or a paver production service, the Company will become subject to federal, state or provincial and local environmental, health, safety and transportation laws and regulations. These laws and regulations are administered by the EPA, Environment Canada, and various other federal, state, provincial and local environmental, zoning, transportation, land use, health and safety agencies in the U.S., Canada and Europe Many of these agencies will examine our subsidiary operations to monitor compliance with these laws and regulations and have the power to enforce compliance, obtain injunctions or impose civil or criminal penalties in case of violations. Because the primary mission of our business is to collect, manage and recycle waste in an environmentally sound manner, a significant portion of our capital expenditures will be related, either directly or indirectly, to supporting the Company’s subsidiary operations as they relate to compliance with federal, state, provincial and local rules.

 

Competition

 

CarbonMeta is pursuing a business strategy that is similar to other companies, but we will be using proprietary and patented technologies that are unique in the industry. Nevertheless, there are many other companies that are already producing carbon nanotubes, including:

 

  ● Advanced Material Development
  ● Carbon Solutions, Inc.
  ● Cnano Technology.
  ● First Graphene
  ● Hyperion Catalysis
  ● Nanocyl S.A.
  ● NanoIntegris
  ● Raymor Nanotech
  ● Tuball

 

Our technologies may also allow us to compete with producers of grey, blue and green hydrogen gas. When utilizing electrical energy from sustainable sources, our hydrogen gas can be considered as green hydrogen and therefore sustainable.

 

As with the carbon nanotubes, there are many other companies that are already producing hydrogen gas, including:

 

  ● PowerTap Hydrogen Capital Corp
  ● Sunhydrogen Inc.
  ● Ways2H
  ● SGH2
  ● Standard Hydrogen Corp
  ● Powerhouse Energygroup
  ● Hydrogen Utopia International
  ● Japan Blue Energy
  ● Wabash Valley Resources
  ● Raven SR
  ● Bayotech
  ● Electro Active

 

Our potential competitors may have greater resources, better access to capital, longer histories, more intellectual property and lower cost operations.

 

They may secure better terms during the investment negotiation process, make strategic decisions more quickly than us and devote more capital to better performing investments than we do.

 

Our competitors may also enter into business combinations or alliances that strengthen their competitive positions.

 

Market opportunity

 

An estimated 8.3 billion metric tonnes of plastic waste have been generated to date, with a mere 9% of that volume being recycled, 12% incinerated and 79% going to landfills. In 2016, the world generated 242 million tonnes of plastic waste—12 percent of all municipal solid waste, according to The World Bank. This plastic waste primarily originated from three regions—57 million tonnes from East Asia and the Pacific, 45 million tonnes from Europe and Central Asia, and 35 million tonnes from North America.

 

Each year an additional 300 million tonnes of plastic waste are produced, which is projected to continue. According to the original study published in Science Advances, by 2050, there will be 12 billion metric tons of plastic in landfills.

 

Lack of proper waste management results in plastic waste reaching earth’s oceans. Several organizations are monitoring the abundance of plastic debris in rivers and oceans. Researchers, universities, and non-profit initiatives all conclude that plastic waste form a hazard for marine wildlife and should be captured, preferably before reaching earth’s oceans. Organizations such as The Ocean Cleanup are making great progress in capturing a portion of the plastic waste streams; however, processing this captured plastic is still a challenge.

 

Over the past few years, several organizations introduced methods to use plastic waste as a feedstock to produce high value materials. Some organizations offer plastic waste recycling solutions that transform unsorted, unwashed waste plastic into liquid fuels; however, these solutions do not address the worldwide objective of reducing greenhouse gas emissions.

 

Pyrolysis is a common technique used to convert plastic and organic wastes into energy, in the form of solid, liquid, and gaseous fuels. Different catalysts are used to improve the pyrolysis process and improve efficiency. However, catalysts are expensive, thus making the overall process less profitable. Moreover, this process is also energy-intensive, and the resulting oil product requires additional energy to be further refined. Pyrolysis also requires emission treatment technologies since some gasses produced through this method are toxic.

 

Working cooperatively with university and industry partners, CarbonMeta Technologies plans to implement new industrial processes that selectively break carbon-hydrogen bonds in plastics waste using inexpensive, environmentally friendly iron-based catalysts to yield high purity hydrogen and high value carbons. Using these proven proprietary technologies, collected plastic waste material can be upcycled to high value products such as hydrogen gas, graphene and carbon nanotubes.

 

Businesses worldwide are seeking solutions to decarbonize transportation and power generation; and affordable high purity carbon products for industrial processes such as steel production and electric vehicle batteries.

 

Hydrogen has been identified as an affordable and clean solution for decarbonizing transportation, and the market production has been projected to grow from $129B in 2020 to $219B in 2030.

 

  ● https://www.grandviewresearch.com/industry-analysis/hydrogen-generation-market
  ● https://www.globenewswire.com/news-release/2022/04/08/2419052/0/en/Hydrogen-Generation-Market-Size-Worth-USD-220-37-Billion-Globally-by-2028-at-5-6-CAGR-Fortune-Business-Insights.html

 

Today, hydrogen is primarily produced by processing natural gas, which results in the production of CO2, and increasingly by electrolyzing water into hydrogen and oxygen. With hydrogen demand expected to increase further, there is an urgent need to develop new low-carbon technologies to affordably produce hydrogen.

 

  ● https://www.iea.org/reports/the-future-of-hydrogen
  ● https://www.precedenceresearch.com/hydrogen-generation-market

 

Similarly, high purity carbon is in growing demand for steel production, electric vehicle battery anode production, and many industrial processes. The global graphite market has been projected to grow from $14B in 2019 to $21B in 2027.

 

  ● https://www.alliedmarketresearch.com/graphite-market
  ● https://www.fortunebusinessinsights.com/graphite-market-105322
  ● https://www.globenewswire.com/en/news-release/2022/03/08/2399045/0/en/Graphite-Market-to-Worth-USD-25-70-Billion-by-2021-2028-Graphite-Industry-CAGR-of-8-2.html

 

Moreover, the carbon nanotubes market has been projected to grow from $876M in 2021 to $1.7B in 2026, although some market estimates are even larger. Market demand is being driven by the use of carbon nanotubes in protective coatings, lithium-ion batteries, mobile phones and computing devices.

 

  ● https://www.marketsandmarkets.com/Market-Reports/carbon-nanotubes-139.html
  ● https://www.fortunebusinessinsights.com/carbon-nanotubes-cnt-market-102700

 

Today, the majority of the world’s graphite is produced in China primarily through mining and increasingly by industrial production. Similarly, the majority of the world’s carbon nanotubes are produced in China using an energy intensive plasma vapor deposition process.

 

CarbonMeta Technologies is developing a technology that uses microwave catalysis to heat waste plastics and biowaste in the absence of oxygen to produce hydrogen and solid carbon without the generation of CO2. The technology, which was developed by University of Oxford, is scalable and modular, and has the potential to process millions of tons of plastic worldwide.

 

CarbonMeta Technologies plans to achieve this scale through partnerships and joint venture partnerships with global energy companies, waste management companies, and waste remediation companies worldwide.

 

7
 

 

Growth Issues

 

Scalability

 

CarbonMeta has been and will continue to partner with leading edge materials research taking place at Oxford University and other universities that are developing unique solutions for processing organic waste into high value hydrogen and carbon products.

 

Insufficient Capital

 

Currently, CarbonMeta is confronted with the need to attract and retain a consistent investment source in order to grow our operations rapidly. If CarbonMeta is not funded properly, it will prevent us from capturing a significant portion of the market. To establish a first mover advantage in this space, CarbonMeta is seeking funding from the capital markets which may include debt and equity offerings.

 

Production Lead Time

 

We anticipate that the lead time for the development of our first patented solution that will be commercially operational will be 18 months. This reflects equipment ordering, installation, development, testing, operational readiness, and market readiness.

 

Marketing Strategy

 

CarbonMeta shall market its hydrogen and carbon products to industrial customers that are developing higher capacity electrochemical energy storage, and construction customers that are seeking higher strength concrete materials, and tire manufacturers that are developing lower-resistance and longer wear tires for automobiles and trucks.

 

CarbonMeta shall market its carbon nanotube products to industrial customers that are developing higher capacity electrochemical energy storage, and construction customers that are seeking higher strength concrete materials, and tire manufacturers that are developing lower-resistance and longer wear tires for automobiles and trucks. The Company will implement a direct sales and marketing strategy to reach potential customers and generate revenues.

 

Employees

 

As of the date of this Report, we had one (1) part time employee that served as the Company’s sole officer and director. Our employee is not represented by a union. We consider relations with our employee to be positive and productive. We plan to expand our management team within the next 12 months to include certain officers for any acquisitions and any new subsidiaries or operational activities management deems necessary. We consider our relations with our employees and consultants to be in good standing. Please see DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS for additional information.

 

Report to Shareholders

 

The public may read and copy these reports, statements, or other information we file at the SEC’s public reference room at 100 F Street, NE., Washington, DC 20549 on official business days during the hours of 10 a.m. to 3 p.m. State that the public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at (http://www.sec.gov).

 

8
 

 

Not a Blank Check Company

 

The Company and Mr. Spencer who is the sole member of the Board of Directors have no intentions nor plans to use the Company as a vehicle for a private company to become a reporting company through a reverse merger. The Company commenced operations, has a major account customer, is pursuing joint venture projects in Europe and the United States, and is pursuing grant funding opportunities to commercialize decarbonization and hydrogen production technologies in Europe and the United States.

 

Therefore, the Company is a not a blank check company because the Company has no plans or intentions to engage in a merger or acquisition with an unidentified company, companies, entity or person.

 

Going Concern

 

The Company had minimal revenues and has incurred losses of $71,177,661 from inception through the six months ended June 30, 2022 and negative working capital of $32,105,798 at June 30, 2022. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders.

 

The Company intends to overcome the circumstances that impact its ability to remain a going concern through a combination of the commencement of revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing. The Company anticipates raising additional funds through public or private financing, strategic relationships or other arrangements in the near future to support its business operations; however, the Company may not have commitments from third parties for a sufficient amount of additional capital. The Company cannot be certain that any such financing will be available on acceptable terms, or at all, and its failure to raise capital when needed could limit its ability to continue its operations. The Company’s ability to obtain additional funding will determine its ability to continue as a going concern. Failure to secure additional financing in a timely manner and on favorable terms would have a material adverse effect on the Company’s financial performance, results of operations and stock price and require it to curtail or cease operations, sell off its assets, seek protection from its creditors through bankruptcy proceedings, or otherwise. Furthermore, additional equity financing may be dilutive to the holders of the Company’s common stock, and debt financing, if available, may involve restrictive covenants, and strategic relationships, if necessary, to raise additional funds, and may require that the Company relinquish valuable rights. Please see NOTE C – GOING CONCERN within the Company’s financial statement for the six months ended June 30, 2022 for further information.

 

Company Information

 

We are a Delaware corporation. Our corporate address is 20205 144th Ave NE, Woodinville, WA 98072, our telephone number is (844) 698-3777 and our website address is www.carbonmetatech.com. The information on our website is not a part of this prospectus. The Company’s stock is quoted under the symbol “COWI” on the OTC Markets “PINK.” The Company’s transfer agent is Empire Stock Transfer whose address is 1859 Whitney Mesa Dr., Henderson, NV, Tel: (702) 818-5898 Fax: (702) 974-1444.

 

9
 

 

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

 

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

  ● an exemption from compliance with the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act of 2002 on the design and effectiveness of our internal controls over financial reporting;
     
  ● reduced disclosure about the company’s executive compensation arrangements; and
     
  ● exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a shareholder approval of any golden parachute arrangements.

 

We may take advantage of these provisions until December 31, 2025 or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earlier to occur of: the last day of the fiscal year in which we have more than $1.07 billion in annual revenues; the date we qualify as a “large accelerated filer,” with a non-affiliate public float in excess of $700 million; or the issuance by us of more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some, but not all, of the available benefits under the JOBS Act. We have taken advantage of some reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

 

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of delayed adoption of new or revised accounting standards and, therefore, we will adopt new or revised generally accepted accounting principles in the United States on the relevant dates on which adoption of such standards is required for other public companies that are not emerging growth companies.

 

Smaller Reporting Company

 

We also qualify as a “smaller reporting company” under Rule 12b-2 of the Exchange Act, which is defined as a company with a public equity float of less than $75 million. To the extent that we remain a smaller reporting company at such time as we are no longer an emerging growth company, we will still have reduced disclosure requirements for our public filings some of which are similar to those of an emerging growth company, including having to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

 

THE OFFERING

 

Securities offered   Up to 2,781,937,537 shares of our Common Stock
     
Offering Amount   $1,393,969
     
Terms of the Offering  

The Selling Shareholders will determine when and how they sell the shares offered in this prospectus, as described in “Plan of Distribution” beginning on page 31.

     
Common Stock Issued and Outstanding Before This Offering   18,962,886,254 (1)
     
Common Stock Issued and Outstanding After This Offering  

 

20,810,891,254 (2)(3)(4)(5)(6)(7)(8)(9)(10)

     
Risk Factors   See “Risk Factors” beginning on page 15 and the other information set forth in this prospectus for a discussion of factors you should consider before deciding to invest in our securities.
     
    Our convertible notes and warrants contain anti-dilution provisions that protect note holders from potentially losing value. In the case of our existing convertible notes, if the Company issues a new convertible note with a conversion price less than the pre-existing note, then the conversion price of any outstanding principal and interest of the existing notes may be reset to the price of the new convertible note at the option of the note holder. In the case of our existing warrants, if the Company issues a new warrant with a conversion price less than the existing warrants, then the conversion price of the existing warrants shall be reset to the price of the new warrant at the option of the warrant holder.
     
    Our note and warrant conversion prices are disclosed below [(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)].
     
Market for Common Stock   Our Common Stock is subject to quotation on the OTC Markets “PINK” under the symbol “COWI.”
     
Dividends   We have not declared or paid any cash dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.
     
Transfer agent and registrar   Empire Stock Transfer

 

10
 

 

 

(1) The number of shares of our common stock outstanding before this Offering is 18,962,886,254 as of October 10, 2022.
   
(2)

On March 7, 2022, the Company received $66,000 from the Company Chief executive Officer Lloyd Spencer and issued to Lloyd T. Spencer (the “Holder”) a Promissory Note (the “Note”) in the principal amount of $66,000. The Note has a term of one (1) year (Maturity Date of March 7, 2023) and bears interest at 12% annually. The Holder shall have the right, on any calendar day, at any time on or following the Issue Date, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any Default Interest) into fully paid and non-assessable shares of Common Stock. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall equal $0.0002. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In conjunction with the financing transaction, the Company issued the Holder a five-year Common Stock Purchase Warrant granting the Holder the right to purchase 165,000,000 shares of common stock at an exercise price of $0.0002 per share and 33,000,000 shares of common stock. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. The transaction closed on March 7, 2022.

   
(3)

On March 21, 2022, the Company issued to Tangiers Investment Group, LLC (the “Holder”) a Promissory Note (the “Note”) in the principal amount of $55,000. The Note has a term of one (1) year (Maturity Date of March 21, 2023) and bears interest at 12% annually. The Holder shall have the right, on any calendar day, at any time on or following the Issue Date, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any Default Interest) into fully paid and non-assessable shares of Common Stock. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall equal $0.0002. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In conjunction with the financing transaction, the Company issued the Holder a five-year Common Stock Purchase Warrant granting the Holder the right to purchase 125,000,000 shares of common stock at an exercise price of $0.0004 per share and 27,500,000 shares of common stock as commitment shares. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. The transaction closed on March 21, 2022.

   
(4)

On May 10, 2022, the Company issued MacRab, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the amount of $33,056. The Note has a term of one (1) year (Maturity date of May 10, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In connection with this Note, the Holder was issued five-year warrants to purchase 74,375,000 shares of common stock at an exercise price of $0.0004 per share and 16,527,775 shares of common stock as commitment shares. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. The transaction closed on May 10, 2022.

   
(5)

On July 14, 2022, the Company issued BHP Capital NY, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 14, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In connection with this note, the Holder was issued five-year warrants to purchase 62,500,000 shares of the Company’s common stock at an exercise price of $0.0004. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 212,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

11
 

 

(6)

On July 14, 2022, the Company issued Quick Capital, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 14, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In connection with this note, the Holder was issued five-year warrants to purchase 62,500,000 shares of the Company’s common stock at an exercise price of $0.0004. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price.  In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 212,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

   
(7) On July 15, 2022, the Company issued the Robert Papiri Defined Benefit Plan (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $10,000. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In connection with this note, the Holder was issued five-year warrants to purchase 25,000,000 shares of the Company’s common stock at an exercise price of $0.0004. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 85,000,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.
   
(8) On July 15, 2022, the Company issued the Robert Papiri Defined Contribution Plan (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $2,500. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In connection with this note, the Holder was issued five-year warrants to purchase 6,250,000 shares of the Company’s common stock at an exercise price of $0.0004. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 21,250,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.
   
(9) On July 15, 2022, the Company issued the RGP Capital Partners, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $2,500. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In connection with this note, the Holder was issued five-year warrants to purchase 6,250,000 shares of the Company’s common stock at an exercise price of $0.0004. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 21,250,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.
   
(10) On September 12, 2022, the Company issued the RGP Capital Partners, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $15,000. The Note has a term of one (1) year (Maturity date of September 12, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. If the Company, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. In connection with this note, the Holder was issued five-year warrants to purchase 37,500,000 shares of the Company’s common stock at an exercise price of $0.0004. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 127,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on September 12, 2022.

 

12
 

 

(11) Previously Existing Convertible Note Conversion Terms

 

    Conversion Terms /
Note Holder   Exercise Price
Richard Wynns #2   75% of the average of the 3 lowest closing trading prices in prior 10-day trading days prior the applicable conversion date.
Richard Wynns #3   75% of the average of the 3 lowest closing trading prices in prior 10-day trading days prior the applicable conversion date.
Westmount International Holdings   85% of the lowest closing trading price in prior 30-day trading days prior the applicable conversion date or $0.02 whichever is lower. Per the Note, all calculations must be rounding to the nearest $0.0001 per share.
Barclay Lyons   50% of the lesser of: (i) the closing bid price on the day before conversion or (ii) the average of the 5 trading prices prior to the applicable conversion date. In no case shall the conversion price be less than $0.0001. There is a ceiling on the conversion rate of $0.05 per share, but is discounted down based on a forward split.
Redwood Management   75% of the average of the 3 lowest closing trading prices in prior 10-day trading days prior the applicable conversion date.
Blackbridge Capital #1   The average of the 5 day trading days prior the applicable conversion date. The number of shares issued will be multiplied by 115%.
Blackbridge Capital #3   The conversion price equals 60% of the lowest trading prices for the common stock during the (30) trading day period prior to the conversion.
Premier IT Solutions   The average of the 5-day trading days prior the applicable conversion date. The number of shares issued will be multiplied by 115%.
Kelburgh Ltd.   85% of the average of the 5 trading days prior to conversion.
Raphael Cariou #2   The average of the 5-day trading days prior the applicable conversion date. The number of shares issued will be multiplied by 115%.
Raphael Cariou #3   The average of the 5-day trading days prior the applicable conversion date. The number of shares issued will be multiplied by 115%.
Raphael Cariou #4   The average of the 5-day trading days prior the applicable conversion date. The number of shares issued will be multiplied by 115%.
AGS Capital Group- Note #1   35% of the lowest closing trading price in prior 20-day trading days prior the applicable conversion date.
AGS Capital Group- Note #2   35% of the lowest closing trading price in prior 20-day trading days prior the applicable conversion date.
Tangiers Investment Group #2   $.001
Tangiers Investment Group #3   $.001
Tangiers Investment Group #4   $.001
Tangiers Investment Group #5   $.001
Tangiers Investment Group #6   $.001
Tangiers Investment Group #7   $.001
Tangiers Investment Group #8*   $.0002
Zoom Marketing   85% of the average of the 3 lowest closing trading price in prior 5-day trading days prior the applicable conversion date.
LG Capital #1   The conversion price equals 50% of the lowest trading prices for the common stock during the (10) trading day period prior to the conversion, including the date of conversion.
LG Capital #2 (assigned from Ratzker)   The conversion price equals 50% of the lowest trading prices for the common stock during the (10) trading day period prior to the conversion, including the date of conversion.
LG Capital #3   The conversion price equals 45% of the lowest trading prices for the common stock during the (20) trading day prior trading days including the day upon wich a Notice for Conversion is given.
Burrington Capital #2   The conversion price equals 60% of the lowest trading prices for the common stock during the (20) trading day period prior to the conversion or $0.01 whichever is lower.
Patrick Ferro (assigned from YA Global)   The conversion price equals 50% of the average of the 3 lowest trading prices for the common stock during the (30) trading day period prior to the conversion or $0.02 whichever is lower. Per the Note, all calculations must be rounding to the nearest $0.0001 per share.
Dakota Capital (assigned from YA Global)   The conversion price equals 50% of the lowest trading prices for the common stock during the (30) trading day period prior to the conversion or $0.02 whichever is lower. Per the Note, all calculations must be rounding to the nearest $0.0001 per share.
Barry Liben (assigned from YA Global)   The conversion price equals 50% of the average of the 3 lowest trading prices for the common stock during the (30) trading day period prior to the conversion or $0.02 whichever is lower. Per the Note, all calculations must be rounding to the nearest $0.0001 per share.
Jared Robert   The conversion price equals 60% of the lowest trading prices for the common stock during the (20) trading day period prior to the conversion or $0.01 whichever is lower.

 

13
 

 

SUMMARY FINANCIAL DATA

 

The following summary of our financial data should be read in conjunction with, and is qualified in its entirety by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, appearing elsewhere in this prospectus.

 

Statements of Operations Data

 

   

For the six

months ended

June 30, 2022

    

For the

year-ended

December 31, 2021

    

For the

year-ended
December 31, 2020

  
Revenue   $ 21,555     $ -     $ -  
Loss from operations   $ (425,537 )   $ (428,502 )   $ (150,000 )
Other (expenses) income   $ (6,347,736 )   $ 8,697,449     $ (11,579,741 )
Net (loss) income   $ (6,773,273 )   $ 8,268,947     $ (11,729,741 )

 

Balance Sheet Data

 

   

As of

June 30, 2022

   

As of

December 31, 2021

  

As of

December 31, 2020

 
Cash   $ 7,939   $10,573   $- 
Total assets   $ 221,416   $

159,646

   $- 
Total liabilities   $

32,139,027

   $

26,046,833

   $

39,777,577

 
Total stockholders’ (deficit)   $ (31,917,611 )  $(25,887,187)  $(39,777,577)

 

14
 

 

RISK FACTORS

 

An investment in our Common Stock involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this Offering Circular, before purchasing our Common Stock. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this Offering Circular, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Statement Regarding Forward-Looking Statements”.

 

Risks Relating to Our Financial Condition

 

Our independent registered accounting firm has expressed concerns about our ability to continue as a going concern.

 

The report of our independent registered accounting firm expresses concern about our ability to continue as a going concern based on the absence of significant revenues, our significant losses from operations and our need for additional financing to fund all of our operations. It is not possible at this time for us to predict with assurance the potential success of our business. The revenue and income potential of our proposed business and operations are unknown. If we cannot continue as a viable entity, we may be unable to continue our operations and you may lose some or all of your investment in our common stock.

 

We have limited operational history in an emerging industry, making it difficult to accurately predict and forecast business operation.

 

As we have less than ten years of corporate operational history and have yet to generate revenue under our new business model, it is extremely difficult to make accurate predictions and forecasts on our finances. This is compounded by the fact that we operate in both the carbon nanotubes and hydrogen sectors, which is a rapidly transforming technological sector. There is no guarantee that we will properly execute our business model in either sector.

 

As a growing company, we have yet to achieve a profit and may not achieve a profit in the near future, if at all.

 

We have not yet produced a net profit and may not in the near future, if at all. While we expect our revenue to grow, we have not achieved profitability and cannot be certain that we will be able to sustain our current growth rate or realize sufficient revenue to achieve profitability. Further, many of our competitors in the field of carbon nanotubes and hydrogen technology have a significantly larger user base and revenue stream but have yet to achieve profitability. Our ability to continue as a going concern may be dependent upon raising capital from financing transactions, increasing revenue throughout the year and keeping operating expenses below our revenue levels in order to achieve positive cash flows, none of which can be assured.

 

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

 

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features and products or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in continued equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of our common stock. Any debt financing we secure in the future, could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired, and our business may be harmed.

 

15
 

 

We expect our quarterly financial results to fluctuate.

 

We expect our net sales and operating results to vary significantly from quarter to quarter due to a number of factors, including changes in:

 

  ● Demand for our products; and
     
  ● Our ability to obtain and retain existing customers; and
     
  ● Our ability to develop our carbon nanotubes and hydrogen products; and
     
  ● General economic conditions, both domestically and in foreign markets; and
     
  ● Advertising and other marketing costs; and
     
  ● Costs of producing the carbon nanotubes and hydrogen; and
     
  ● Retaining key personnel
     
  ● Positive returns on our alternative investments.

 

As a result of the variability of these and other factors, our operating results in future quarters may be below the expectations of our stockholders.

 

Risks Relating to Our Business and Industry

 

The COVID-19 pandemic may materially and adversely affect our business and operations.

 

The impact on our business from the outbreak of the COVID-19 coronavirus is unknown at this time and difficult to predict. While vaccines are currently being administered in the United States and other countries throughout the world, at the current time the federal government and local states have instituted restrictions which could adversely affect the Company’s operations. The impact of COVID-19 has also created global supply chain challenges. These challenges create risk in the timing of delivery of kiosks and products. As outbreaks happen in certain areas of the supply chain it will create delays. Having redundancies in these areas to minimize timeline creep is not cost effective. Additionally, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity. Other potential adverse effects of COVID-19 might include, for example, our ability to meet projected goals through the continued availability of our workforce; adverse impacts from new laws and regulations affecting our business or increased cyber risks and reliance on technology infrastructure to support our business and operations, including through remote-work protocols. The specific impact that COVID-19 could have on these risks remains uncertain.

 

We have a history of losses, and we may not become profitable in the future.

 

The company has incurred losses in all the years since formation. Most of these investments were made in product development, engineering and some sales expenses. We may incur similar net losses for the foreseeable future.

 

We expect to continue to make significant future expenditures related to the development and expansion of our business, including:

 

  ● investments in our research and development team and in the development of processing organic waste streams into higher value carbon and hydrogen products;
  ● investments in sales and marketing, including expanding our sales force, increasing our customer base, increasing market awareness of our platform and development of new technologies;
  ● expanding of our operations and infrastructure, including internationally; and
  ● hiring additional employees.

 

CarbonMeta is changing its industry direction and business model

 

It will take 12-18 months to establish a firm direction towards revenue and profitability. The company will need to build out a new corporate leadership team, identify additional acquisition opportunities, and continue to work on and evolve its long-term business plan. The company is also incurring costs associated with general administration, including legal, accounting and other expenses related to being a public company upon completion of this offering.

 

As a result of these increased expenses, we will have to generate and sustain increased revenue to be profitable in future periods. Further, in future periods, our revenue growth rate could decline, and we may not be able to generate sufficient revenue to offset higher costs and achieve or sustain profitability. If we fail to achieve, sustain or increase profitability, our business and operating results could be adversely affected.

 

16
 

 

We have no operating history, which makes it difficult to predict our future results of operations.

 

The company was inactive from November 2016 through June 2020, which limits our ability to forecast our future results of operations and subjects us to a number of uncertainties, including our ability to plan for and anticipate future growth. Our historical revenue growth should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow or our revenue could decline for a number of reasons, including slowing demand for our solutions, increasing competition, a decrease in the growth of our overall market, or our failure, for any reason, to continue to capitalize on growth opportunities. We have also encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as determining appropriate investments of our limited resources, competition from other companies, attracting and retaining customers, hiring, integrating, training and retaining skilled personnel,

 

Changing global economic conditions may adversely affect our industry, business and results of operations.

 

Our overall performance depends in part on worldwide economic conditions and trade relations with Asia, Europe and Latin America. These conditions could adversely affect our customers’ ability or willingness to purchase products and services and could adversely affect our operating results. In addition, companies that have competing products may reduce prices which could also reduce our average selling prices and harm our operating results.

 

If we experience significant fluctuations in our rate of anticipated growth and fail to balance our expenses with our revenue forecasts, our results could be harmed.

 

Due to the early stages of our business model, the unpredictability of new markets that we enter and unpredictability of future general economic and financial market conditions, we may not be able to accurately forecast our rate of growth. We plan our expense levels and investment on estimates of future revenue and future anticipated rate of growth. We may not be able to adjust our spending quickly enough if the addition of new subscriptions or the renewal rate for existing subscriptions falls short of our expectations.

 

As a result, we expect that our revenues, operating results and cash flows may fluctuate significantly on a quarterly basis. Our recent revenue growth rates may not be sustainable and may decline in the future. We believe that period-to-period comparisons of our revenues, operating results and cash flows may not be meaningful and should not be relied upon as an indication of future performance.

 

We may in the future be sued by third parties for alleged infringement of their proprietary rights.

 

The waste processing, carbon nanotube, and hydrogen production industries are characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. The outcome of any litigation is inherently uncertain. Any intellectual property claims, with or without merit, could be time-consuming and expensive to resolve, could divert management attention from executing our business plan and could require us to change our technology, change our business practices and/or pay monetary damages or enter into short- or long-term royalty or licensing agreements which may not be available in the future at the same terms or at all. Any adverse determination related to intellectual property claims or litigation could be material to our net income or cash flows of a particular quarter or could otherwise adversely affect our operating results.

 

Our quarterly results can fluctuate and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

 

We may fail to meet or exceed the expectations of securities analysts or investors, and the market price of our common stock or the trading price of the notes could decline. Moreover, our stock price may be based on expectations of our future performance that may be unrealistic or that may not be met. Some of the important factors that may cause our revenues, operating results and cash flows to fluctuate from quarter to quarter include:

 

  ● our ability to retain and increase sales to existing customers, attract new customers and satisfy our customers’ requirements;
     
  ● the number of new employees added;
     
  ● changes in our pricing policies whether initiated by us or as a result of intense competition;
     
  ● the rate of expansion and productivity of our sales force;

 

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  ● new product and service introductions by our competitors;
     
  ● our success in selling our products and services to large enterprises;
     
  ● general economic conditions could adversely affect either our customers’ ability or willingness to purchase additional subscriptions or upgrade their service, or delay a prospective customers’ purchasing decision, or reduce the value of new subscription contracts, or affect renewal rates, all of which could adversely affect our operating results;
     
  ● the timing of customer payments and payment defaults by customers;
     
  ● costs associated with acquisitions of companies and technologies;
     
  ● extraordinary expenses such as litigation or other dispute-related settlement payments; and
     
  ● the impact of new accounting pronouncements.

 

Many of these factors are not within our control, and the occurrence of one or more of them might cause our operating results to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenues, operating results and cash flows may not be meaningful and should not be relied upon as an indication of future performance.

 

As we acquire companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the value of your investment.

 

As part of our business strategy, we regularly evaluate acquisitions of complementary businesses, joint ventures, services and technologies, and we expect that periodically we will continue to make such investments and acquisitions in the future. Acquisitions and investments involve numerous risks, including:

 

  ● the potential failure to achieve the expected benefits of the combination or acquisition;
     
  ● difficulties in and the cost of integrating operations, technologies, services and personnel;
     
  ● diversion of financial and managerial resources from existing operations;
     
  ● risk of entering new markets in which we have little or no experience;
     
  ● potential write-offs of acquired assets or investments;
     
  ● potential loss of key employees;
     
  ● inability to generate sufficient revenue to offset acquisition or investment costs;
     
  ● the inability to maintain relationships with customers and partners of the acquired business;
     
  ● potential unknown liabilities associated with the acquired businesses;
     
  ● unanticipated expenses related to acquired technology and its integration into existing technology;
     
  ● negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation, and the loss of acquired deferred revenue;
     
  ● delays in customer purchases due to uncertainty;
     
  ● the need to implement controls, procedures and policies appropriate for a public company at companies that prior to the acquisition lacked such controls, procedures and policies; and
     
  ● challenges caused by distance, language and cultural differences.

 

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In addition, if we finance acquisitions by issuing additional convertible debt or equity securities, our existing stockholders may be diluted which could affect the market price of our stock. Further, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed, and the value of your investment may decline.

 

The market for carbon nanotubes and hydrogen are volatile, and if it develops more slowly than we expect, our business could be harmed.

 

The market for producing carbon nanotubes and hydrogen is not as mature as the market for packaged enterprise software and hardware, and it is uncertain whether these services will achieve and sustain high levels of demand and market acceptance. If enterprises do not perceive the benefits of carbon nanotubes and hydrogen, then the market for these products and services may not develop at all, or it may develop more slowly than we expect, either of which would significantly adversely affect our operating results. In addition, we may make errors in predicting and reacting to relevant business trends, which could harm our business.

 

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

 

If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology, and our business might be harmed. In addition, defending our intellectual property rights might entail significant expense. Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. While we plan to file patents, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our service is available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

 

We might be required to spend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel.

 

If we fail to develop our brands cost-effectively, our business may suffer.

 

We believe that developing and maintaining awareness of the Carbon Source brand and our other brands in a cost-effective manner is critical to achieving widespread acceptance of our existing and future services and is an important element in attracting new customers. Furthermore, we believe that the importance of brand recognition will increase as competition in our market develops. Successful promotion of our brands will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable secure and useful services at competitive prices. In the past, our efforts to build our brands have involved significant expense. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brands. If we fail to successfully promote and maintain our brands or incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business could suffer.

 

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We are dependent on our management team and development and operations personnel, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner.

 

Our success depends substantially upon the continued services of our executive officers and other key members of management, particularly our Chief Executive Officer. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives. Such changes in our executive management team may be disruptive to our business. We are also substantially dependent on the continued service of our existing development and operations personnel because of the complexity of our service and technologies. We have an employment agreement with our sole officer and director, Lloyd Spencer. We do not maintain key person life insurance policies on any of our employees. The loss of one or more of our key employees or groups could seriously harm our business.

 

Our sole officer and director holds similar positions at another public company

 

Mr. Spencer has been serving as a Director, President and Chief Executive Officer at CarbonMeta Technologies, Inc. (OTCPK:COWI) since November 2008 and currently serves as Secretary and Director of Deep Green Waste & Recycling, Inc. (OTCPK:DGWR).

 

We may not be successful in our efforts to build a pipeline of product candidates.

 

A key element of our strategy is to build a pipeline of carbon and hydrogen products that are marketable. Even if we are successful in building a product pipeline, the potential product candidates that we identify may not be suitable for sale to customers for any number of reasons. If our methods of identifying potential product candidates fail to produce a pipeline of potentially viable product candidates, then our success as a business will be dependent on the success of fewer potential product candidates, which introduces risks to our business model and potential limitations to any success we may achieve.

 

Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to support our operations and increasing customer base.

 

In the technology industry, there is substantial and continuous competition for engineers with high levels of experience in designing, developing and managing software and Internet-related services, as well as competition for sales executives and operations personnel. We may not be successful in attracting and retaining qualified personnel. We expect to experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications. In addition, job candidates and existing employees often consider the value of the stock awards they receive in connection with their employment. If our stock price performs poorly, it may adversely affect our ability to retain highly skilled employees. In addition, since we expense all stock-based compensation, we may periodically change our stock compensation practices, which may include reducing the number of employees eligible for options or reducing the size of equity awards granted per employee. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be severely harmed.

 

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

 

The United States does not have a nationwide recycling regulation that requires businesses to recycle. Although this is the case, many state and local governments have introduced their own waste and recycling mandates that commercial businesses must follow.

 

When we expand our operations to process organic gases and waste materials into carbon and hydrogen products, our operations will be subject to certain foreign, federal, state and local regulatory requirements relating to environmental, and health and safety matters. The company will operate in compliance with all applicable regulatory requirements. However, material costs and liabilities may arise from these requirements or from new, modified or more stringent requirements.

 

If we fail to comply with appropriate regulatory requirements, then the Company could be held liable for any resulting damages, and any liability could exceed the Company’s resources. The Company also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

 

In addition, the Company may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair the Company’s discovery, preclinical development or production efforts.  The Company’s failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

 

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Our business is subject to changing regulations regarding corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.

 

We are subject to rules and regulations by various governing bodies, including, for example, the Securities and Exchange Commission, which are charged with the protection of investors and the oversight of companies whose securities are publicly traded. Our efforts to comply with new and changing regulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

 

Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, our business may be harmed.

 

Natural disasters and other events beyond our control could materially adversely affect us.

 

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers and could decrease demand for our services.

 

We may be unable to manage growth, which may impact our potential profitability.

 

Successful implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management and financial resources. To manage growth effectively, we will need to:

 

  ● Establish definitive business strategies, goals and objectives;
     
  ● Maintain a system of management controls; and
     
  ● Attract and retain qualified personnel, as well as, develop, train and manage management-level and other employees.

 

If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and our stock price may decline.

 

We may not be able to compete successfully with other established companies offering the same or similar services and, as a result, we may not achieve our projected revenue and user targets.

 

If we are unable to compete successfully with other businesses in our existing market, we may not achieve our projected revenue and/or targets. We compete with both start-up and established financial and technology companies. Compared to our business, some of our competitors may have greater financial and other resources, have been in business longer, have greater name recognition and be better established in the carbon nanotubes and hydrogen sectors.

 

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Failure to manage our rapid growth effectively could increase our expenses, decrease our revenue, and prevent us from implementing our business strategy.

 

After funding, we expect to experience a period of rapid growth. To manage our anticipated future growth effectively, we must continue to maintain, and may need to enhance, our information technology infrastructure and financial and accounting systems and controls, as well as manage expanded operations in geographically distributed locations. We also must attract, train, and retain a significant number of qualified sales and marketing personnel, professional services personnel, software engineers, technical personnel, and management personnel. Failure to manage our rapid growth effectively could lead us to over-invest or under-invest in technology and operations; result in weaknesses in our infrastructure, systems, or controls; give rise to operational mistakes, losses, or loss of productivity or business opportunities; and result in loss of employees and reduced productivity of remaining employees. Our growth could require significant capital expenditures and may divert financial resources and management attention from other projects, such as the development of new services. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our revenue could decline or may grow more slowly than expected, and we may be unable to implement our business strategy.

 

We depend on key employees and face competition in hiring and retaining qualified employees.

 

Our employees are vital to our success, and our key management and other employees are difficult to replace. We may not be able to retain highly qualified employees in the future which could adversely affect our business.

 

Our lack of adequate D&O insurance may also make it difficult for us to retain and attract talented and skilled directors and officers.

 

We may in the future be subject to additional litigation, including potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date, we have not obtained directors and officers liability (“D&O”) insurance. While neither Delaware law nor our Articles of Incorporation or Bylaws require us to indemnify or advance expenses to our officers and directors involved in such a legal action, we have entered into an indemnification agreement with our President and intend to enter into similar agreements with other officers and directors in the future. Without adequate D&O insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, our lack of adequate D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which could adversely affect our business.

 

We may experience significant losses from operations.

 

Even if we do generate operating income in one or more quarters in the future, subsequent developments in our industry, customer base, business or cost structure or an event such as significant litigation or a significant transaction may cause us to again experience operating losses. We may not become profitable for the long-term, or even for any quarter.

 

Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to support our planned growth.

 

To continue to execute on our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for senior sales executives and engineers with high levels of experience in designing and developing software and Internet-related services. We may not be successful in attracting and retaining qualified personnel. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. In addition, in making employment decisions, particularly in the Internet and high-technology industries, job candidates often consider the value of the equity awards they are to receive in connection with their employment. Volatility in the price of our stock or failure to obtain stockholder approval for increases in the number of shares available for grant under our equity plans may, therefore, adversely affect our ability to attract or retain key employees. Furthermore, the requirements to expense equity awards may discourage us from granting the size or type of equity awards that job candidates require to join our company. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be severely harmed.

 

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We may fail to realize the anticipated benefits of any acquisition.

 

The success of any acquisition will depend on, among other things, our ability to combine our businesses in a manner that does not materially disrupt existing relationships and that allows us to achieve operational synergies and capitalize on the increased brand recognition and customer base of the combined company. If we are not able to achieve these objectives, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected. In particular, the acquisition may not be accretive or accelerate sales in near or long term.

 

The integration process could result in the loss of key employees; the disruption of our ongoing businesses; or inconsistencies in standards, controls, procedures, or policies that could adversely affect our ability to maintain relationships with third parties and employees or to achieve the anticipated benefits of the acquisition. Integration efforts between the two companies will also divert management’s attention from our core business and other opportunities that could have been beneficial to our shareholders. An inability to realize the full extent of, or any of, the anticipated benefits of the acquisition, as well as any delays encountered in the integration process, could have an adverse effect on our business and results of operations, which may affect the value of the shares of our common stock after the completion of the acquisition.

 

Further, the actual integration may result in additional and unforeseen expenses. Operational improvements and actual cost synergies, if achieved at all, may be lower than we expect and may take longer to achieve than we anticipate. If we are not able to adequately address these challenges, we may be unable to realize the anticipated benefits of the integration of any acquisition.

 

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General Business Risks

 

Our business and operations may experience rapid growth. If we fail to manage our growth, our business and operating results could be harmed and we may have to incur significant expenditures to address the additional operational and control requirements of this growth.

 

We may experience rapid growth in our sales and operations, which may place significant demands on our management, operational and financial infrastructure. If we do not manage our growth, the quality of our products and services could suffer, which could negatively affect our brand and operating results. To manage this growth, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. These systems enhancements and improvements will require significant capital expenditures and allocation of valuable management resources. If the improvements are not implemented successfully, our ability to manage our growth will be impaired and we may have to make significant additional expenditures to address these issues, which could harm our financial position. The required improvements may include: Enhancing our information and communication systems to attempt to optimize proper service to our customers, and Enhancing systems of internal controls to ensure timely and accurate reporting of all of our operations

 

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

 

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our brand and operating results could be harmed. We may in the future discover areas of our internal controls that need improvement. We cannot be certain that any measures we implement will ensure that we achieve and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

 

We have no operating history under our new business model utilizing carbon nanotubes or hydrogen technology in an emerging and rapidly evolving market. This makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

 

We have no operating history under our new business model utilizing carbon nanotubes or hydrogen technology. You must consider our business and prospects in light of the risks and difficulties we will encounter as an early-stage company in a new and rapidly evolving market. We may not be able to successfully address these risks and difficulties, which could materially harm our business and operating results.

 

We cannot be certain that additional financing will be available on reasonable terms when required, or at all.

 

From time to time, we may need additional financing. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. We may need to raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our Common Stock, and our existing stockholders may experience dilution.

 

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Rapid technological changes.

 

The industries in which the Company intends to compete with are subject to rapid technological changes. No assurances can be given that the technological advantages which may be enjoyed by the Company in respect of their technologies cannot or will not be overcome by technological advances in the respective industries rendering the Company’s technologies obsolete or non-competitive.

 

Lack of indications of product acceptability.

 

The success of the Company will be dependent upon its ability to develop commercially acceptable products and to sell such products in quantities sufficient to yield profitable results. To date, the Company has received no indications of the commercial acceptability of any of its proposed products. Accordingly, the Company cannot predict whether its products can be marketed and sold in a commercial manner.

 

Reliance upon third parties.

 

The Company does not intend on maintaining a significant technical staff nor does it intend on manufacturing its products. Rather it will rely heavily on consultants, contractors, and manufacturers to design, develop and manufacture its products. Accordingly, there is no assurance that such third parties will be available when needed at affordable prices.

 

Protection of intellectual property.

 

The success of the Company will be dependent, in part, upon the protection of its various proprietary technologies from competitive use. Certain of its technologies are the subject of various patents in varying jurisdictions. In addition to the patent applications, the Company relies on a combination of trade secrets, nondisclosure agreements and other contractual provisions to protect its intellectual property rights. Nevertheless, these measures may be inadequate to safeguard the Company’s underlying technologies. If these measures do not protect the intellectual property rights, third parties could use the Company’s technologies, and its ability to compete in the market would be reduced significantly.

 

In the future, the Company may be required to protect or enforce its patents and patent rights through patent litigation against third parties, such as infringement suits or interference proceedings. These lawsuits could be expensive, take significant time, and could divert management’s attention from other business concerns. These actions could put the Company’s patents at risk of being invalidated or interpreted narrowly, and any patent applications at risk of not issuing. In defense of any such action, these third parties may assert claims against the Company. The Company cannot provide any assurance that it will have sufficient funds to vigorously prosecute any patent litigation, that it will prevail in any of these suits, or that the damages or other remedies awarded, if any, will be commercially valuable. During the course of these suits, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation, which could result in the negative perception by investors, which could cause the price of the Company’s common stock to decline dramatically.

 

Risks Related to this Offering

 

We are a shell company pursuant to Rule 405 of the Securities Act. This may impact our ability to attract additional capital.

 

We have limited assets, and our operations appear to have been primarily organizational since we discontinued previous operations in 2016. We are a shell company pursuant to Rule 405 of the Securities Act. The consequences of shell company status may affect our ability attract additional capital. Under SEC Rule 144 restricted and control securities may be resold in reliance on Rule 144 unless and until the company has ceased to be a shell company, is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act, has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, during the preceding 12 months and has filed current “Form 10 information” with the SEC reflecting its status as an entity. When these conditions are satisfied, then those securities may be sold subject to the requirements Rule 144 after one year has elapsed from the date that the issuer filed “Form 10 information” with the SEC.

 

The unavailability of Rule 144 may affect our ability to attract additional capital as investors may not be willing to purchase restricted or control securities unless they can sell under Rule 144.

 

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The market price of our Common Stock may fluctuate, and you could lose all or part of your investment.

 

The offering price for our Common Stock will be set by us based on a number of factors and may not be indicative of prices that will prevail on OTC Markets “PINK” or elsewhere following this Offering. The price of our Common Stock may decline following this Offering. The stock market in general, and the market price of our Common Stock will likely be subject to fluctuation, whether due to, or irrespective of, our operating results, financial condition and prospects.

 

Our financial performance, our industry’s overall performance, changing consumer preferences, technologies and advertiser requirements, government regulatory action, tax laws and market conditions in general could have a significant impact on the future market price of our Common Stock. Some of the other factors that could negatively affect our share price or result in fluctuations in our share price include:

 

  ● actual or anticipated variations in our periodic operating results;
     
  ● changes in earnings estimates;
     
  ● changes in market valuations of similar companies;
     
  ● actions or announcements by our competitors;
     
  ● adverse market reaction to any increased indebtedness we may incur in the future;
     
  ● additions or departures of key personnel;
     
  ● actions by stockholders;
     
  ● speculation in the press or investment community; and
     
  ● our intentions and ability to list our Common Stock on a national securities exchange and our subsequent ability to maintain such listing.

 

We do not expect to declare or pay dividends in the foreseeable future.

 

We do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business. Therefore, holders of our Common Stock will not receive any return on their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or at all.

 

Because we do not have an audit or compensation committee, shareholders will have to rely on our directors, none of whom is not independent, to perform these functions.

 

We do not have an audit or compensation committee comprised of an independent director. Indeed, we do not have any audit or compensation committee. The Board of Directors performs these functions as a whole. No members of the Board of Directors are an independent director. 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.

 

Because we lack certain internal controls over financial reporting in that we do not have an audit committee and our Board of Directors has no technical knowledge of U.S. GAAP and internal control of financial reporting and relies upon the Company’s financial personnel to advise the Board on such matters, we are subject to increased risk related to financial statement disclosures.

 

We lack certain internal controls over financial reporting in that we do not have an audit committee and our Board of Directors has no technical knowledge of U.S. GAAP and internal control of financial reporting and relies upon the Company’s financial personnel to advise the Board on such matters. Accordingly, we are subject to increased risk related to financial statement disclosures.

 

Our sole officer and director holds a significant percentage of our outstanding voting securities, which could reduce the ability of minority shareholders to effect certain corporate actions.

 

Our sole officer and director, Lloyd Spencer, is the beneficial owner of 552,177,763 shares of common stock, 60,000 shares of Series D Preferred Stock and 25,000 shares of Series G Preferred Stock, which controls 90% of the voting securities prior to the Offering and 83% of our outstanding voting securities after the Offering, assuming all 2,781,937,537 shares of common stock in this Offering are sold. Mr. Spencer is the owner of 100% of the Company’s issued and outstanding Series G Preferred stock. The Company’s Series G Preferred stock has voting rights equal to 5,000,000 votes per each one share. As such, Mr. Spencer has voting rights equal to 125,000,000,000 shares of common stock and thus control of any item brought before shareholders requiring a vote. As a result of this ownership, Mr. Spencer possesses and can continue to possess significant influence and can elect and can continue to elect a majority of our Board of Directors and authorize or prevent proposed significant corporate transactions. Mr. Spencer’s ownership and control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer.

 

Upon completion of this offering, we will be subject to the current and periodic reporting requirements.

 

Upon the effectiveness of this registration statement, we will be subject to the periodic and current reporting requirements required by Section 13(a) of the Exchange Act, and any amendments thereof.

 

26
 

 

The preparation of our consolidated financial statements involves the use of estimates, judgments and assumptions, and our consolidated financial statements may be materially affected if such estimates, judgments or assumptions prove to be inaccurate.

 

Financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) typically require the use of estimates, judgments and assumptions that affect the reported amounts. Often, different estimates, judgments and assumptions could reasonably be used that would have a material effect on such financial statements, and changes in these estimates, judgments and assumptions may occur from period to period over time. Significant areas of accounting requiring the application of management’s judgment include, but are not limited to, determining the fair value of assets and the timing and amount of cash flows from assets. These estimates, judgments and assumptions are inherently uncertain and, if our estimates were to prove to be wrong, we would face the risk that charges to income or other financial statement changes or adjustments would be required. Any such charges or changes could harm our business, including our financial condition and results of operations and the price of our securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our consolidated financial statements and our business.

 

If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our Common Stock could be negatively affected.

 

Any trading market for our Common Stock will be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our Common Stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage or us, the market price and market trading volume of our Common Stock could be negatively affected.

 

Future issuances of our Common Stock or securities convertible into our Common Stock, or the expiration of lock-up agreements that restrict the issuance of new Common Stock or the trading of outstanding stock, could cause the market price of our Common Stock to decline and would result in the dilution of your shareholding.

 

Future issuances of our Common Stock or securities convertible into our Common Stock, and/or conversion of the Notes convertible into Common Stock, or the expiration of lock-up agreements that restrict the sale of Common Stock by selling shareholders, or the trading of outstanding stock, could cause the market price of our Common Stock to decline. We cannot predict the effect, if any, of the exercise of conversion of the Notes into Common Stock or other future issuances of our Common Stock or securities convertible into our Common Stock, or the future expirations of lock-up agreements, on the price of our Common Stock. In all events, future issuances of our Common Stock would result in the dilution of your shareholding. In addition, the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our Common Stock.

 

Our shares are subject to the penny stock rules, making it more difficult to trade our shares.

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If the price of our Common Stock is less than $5.00, our Common Stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore stockholders may have difficulty selling their shares.

 

27
 

 

Our Common Stock and Our Shareholders May Be Subject to Significant Dilution

 

If all Convertible Notes were converted as of the date of this filing, shareholders would undergo significant dilution to their holdings. Based on the latest trading price of our shares, the Company may be subject to issuing 33,315,040,282 common shares assuming full conversion of all the notes, which would require 100% of the total outstanding common shares. See Convertible Notes in the MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

 

Some of the convertible notes are convertible at floating rates below the then-prevailing market price and, as a result, the lower the stock price at the time the holder converts, the more common shares the holder gets. For these floating rate convertible notes, NOTE H – CONVERTIBLE DEBT, NET discloses the range of the discounts to the market price used to determine the conversion prices. For these floating rate convertible notes, there may be no limit on how low the conversion price can be, which means that there may be no limit on the number of shares that the company may be obligated to issue.

 

To the extent the noteholders convert these floating rate notes and then sell the common stock, the common stock price may decrease due to the additional shares in the market. This could allow the noteholders to receive greater amounts of common stock, the sales of which would further depress the stock price.

 

The interest payable on the convertible notes is also convertible into shares of common stock. Disclose that the lower the common stock price, the more shares of common stock the holders of the convertible debentures will receive in payment of interest. NOTE H – CONVERTIBLE DEBT, NET discloses the range of interest rates and how much has accrued as of a recent date.

 

The conversion of convertible notes may result in substantial dilution to the interests of other holders of common stock since noteholders may ultimately convert and sell the full amount issuable on conversion. Even if the noteholders are prohibited from converting notes if the shares would exceed a certain percentage of the company’s then-outstanding common stock (such as 4.99% or 9.99%), this restriction does not prevent the noteholders from converting and selling some of their holdings and then converting again to receive additional shares. In this way, the noteholders could sell more than these limits while never holding more than the limits. See Convertible Notes in the MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

 

The table below shows the number of shares that could be issued upon conversion of the notes (including principal and accrued interest) based upon a reasonable range of market prices and conversion prices. The range includes market prices, 25% below, 50% below and 75% below the most recent closing prices.

 

   Number of Shares Issuable with
Convertible Notes for Principal and Interest
At and Below Market Price
Note Holder  100%
$0.0002		   25% Below
$0.0015		   50% Below
$0.0001		   25% Below
$0.00005
Richard Wynns #2   522,531,800    696,709,067    1,045,063,600    2,090,127,200
Richard Wynns #3   511,314,050    681,752,067    1,022,628,100    2,045,256,200
Westmount International Holdings   7,338,320,500    9,784,427,333    14,676,641,000    29,353,282,000
Barclay Lyons   541,529,000    722,038,667    1,083,058,000    2,166,116,000
Redwood Management   1,429,345,650    1,905,794,200    2,858,691,300    5,717,382,600
Blackbridge Capital #1   371,163,529    494,884,705    742,327,058    1,484,564,116
Blackbridge Capital #3   79,347,750    105,797,000    158,695,500    317,391,000
Premier IT Solutions   306,570,306    408,760,408    613,140,613    1,226,281,225
Kelburgh Ltd.   178,328,412    237,771,216    356,656,824    713,313,647
Raphael Cariou #2   90,466,808    120,622,411    180,933,616    361,867,232
Raphael Cariou #3   2,007,059,864    2,676,079,819    4,014,119,729    8,028,239,458
Raphael Cariou #4   2,254,999,774    3,006,666,365    4,509,999,547    9,019,999,095
AGS Capital Group- Note #1   1,685,638,000    2,247,517,333    3,371,276,000    6,742,552,000
AGS Capital Group- Note #2   2,206,240,143    2,937,653,524    4,406,480,286    8,812,960,571
Tangiers Investment Group #2   1,098,915,100    1,098,915,100    1,098,915,100    1,098,915,100
Tangiers Investment Group #3   166,630,100    166,630,100    166,630,100    166,630,100
Tangiers Investment Group #4   493,546,500    493,546,500    493,546,500    493,546,500
Tangiers Investment Group #5   1,896,575,900    2,528,767,867    3,793,151,800    7,586,303,600
Tangiers Investment Group #6   114,981,690    114,981,690    114,981,690    114,981,690
Tangiers Investment Group #7   113,486,170    113,486,170    113,486,170    113,486,170
Tangiers Investment Group #8*   284,131,550    284,131,550    284,131,550    284,131,550
Zoom Marketing   397,995,786    530,661,048    795,991,572    1,591,983,144
LG Capital #1   919,548,000    1,225,944,000    1,838,916,000    3,677,832,000
LG Capital #2   689,596,200    919,461,600    1,379,192,400    2,758,384,800
LG Capital #3   613,036,000    817,381,333    1,226,072,000    2,452,144,000
Burrington Capital #2   694,904,667    926,539,556    1,389,809,333    2,779,618,667
Patrick Ferro   636,353,000    848,470,667    1,272,706,000    2,545,412,000
Dakota Capital   4,303,671,700    5,738,228,933    8,607,343,400    17,214,686,800
Barry Liben   528,000,000    704,000,000    1,056,000,000    2,112,000,000
Lloyd Spencer*   342,476,750    342,476,750    342,476,750    342,476,750
Jared Robert   501,425,583    668,567,444    1,002,851,167    2,005,702,333
MacRab   74,375,000    74,375,000    74,375,000    74,375,000
Total   33,392,505,282    43,623,039,423    64,090,287,705    125,491,942,548

 

Beginning in 2021, the Company began working cooperatively with note holders to extinguish dilutive convertible notes; or working cooperatively with note holders to amend dilutive convertible notes with fixed conversion rates. The company continues to work cooperatively with note holders with the objective of extinguishing or renegotiating dilutive convertible notes, although we can offer no guarantee that these negotiations will be successful.

 

28
 

 

NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

Statements under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Business” and elsewhere in this prospectus may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements include, among other things, statements regarding:

 

  ● our ability to scale up the microwave catalysis processes that reportedly work in a laboratory setting;
     
  ● our ability to reliably source the materials from our supply chain partners in order to supply EarthCrete Cementless Concrete mix to our customers;
     
  ● our ability to attract enough investment in order to properly finance the capital and operational expenses needed to establish the business;
     
  ● our ability to apply for an win significant government grants that will help the Company compete well in a rapidly growing marketplace;
     
  ● our ability to identify government regulations and spending bills that can help the Company compete;
     
  ● our ability to identify joint ventures and strategic business relationships;
     
  ● our ability to carefully manage our cost of revenues, development expenses, sales and marketing expenses, and general and administrative expenses;

 

29
 

 

as well as other statements regarding our future operations, financial condition and prospects, and business strategies. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this registration statement, of which this prospectus is a part, including the risks described under “Risk Factors.” Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances that occur in the future.

 

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we may have projected. Any forward-looking statements you read in this prospectus reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity. You should specifically consider the factors identified in this prospectus that could cause actual results to differ before making an investment decision. In addition, as discussed in “Risk Factors,” our shares may be considered a “penny stock” and, as a result, the safe harbors provided for forward-looking statements made by a public company that files reports under the federal securities laws may not be available to us.

 

TAX CONSIDERATIONS

 

We are not providing any tax advice as to the acquisition, holding or disposition of the securities offered herein. In making an investment decision, investors are strongly encouraged to consult their own tax advisor to determine the U.S. Federal, state and any applicable foreign tax consequences relating to their investment in our securities.

 

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 not receive any proceeds from the sale of shares of common stock in this offering, except from the issuance of 74,375,000 shares of our common stock underlying the warrant issued to MacRab, LLC, 165,000,000 shares of our common stock underlying the warrant issued to Lloyd Spencer, 125,000,000 shares of our common stock underlying the warrants issued to Tangiers Investment Group, LLC 62,500,000 shares of our common stock underlying the warrants issued to BHP Capital NY Inc., 62,500,000 shares of our common stock underlying the warrants issued to Quick Capital, LLC, 25,000,000 shares of our common stock underlying the warrant issued to the Robert Papiri Defined Benefit Plan, 6,250,000 shares of our common stock underlying the warrant issued to the Robert Papiri Defined Contribution Plan, and 43,750,000 shares of our common stock underlying the warrants issued to RGP Capital Partners, Inc.

 

DETERMINATION OF OFFERING PRICE

 

The pricing of the Shares has been arbitrarily determined and established by the Company. No independent accountant or appraiser has been retained to protect the interest of the investors. No assurance can be made that the offering price is in fact reflective of the underlying value of the Shares. Each prospective investor is urged to consult with his or her counsel and/or accountant as to offering price and the terms and conditions of the Shares. Factors to be considered in determining the price include the amount of capital expected to be required, the market for securities of entities in a new business venture, projected rates of return expected by prospective investors of speculative investments, the Company’s prospects for success and prices of similar entities.

 

DILUTION

 

Not applicable. We are not offering any shares in this registration statement. All shares are being registered on behalf of our selling shareholders.

 

SELLING SHAREHOLDERS

 

This prospectus covers the resale from time to time by the selling shareholders and future shareholders identified in the table below of up to 2,781,937,537 shares of our common stock, which were issued in various transactions exempt from registration under the Securities Act, as follows:

 

  ● 908,932,537 of the shares registered hereby for resale are common stock previously issued to such selling shareholders;
     
  ● 307,500,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to Lloyd Spencer, the Company’s sole officer and director, on March 7, 2022. Please see NOTE H – CONVERTIBLE DEBT, NET within the Company’s financial statement for the six months ended June 30, 2022 for additional information;
     
  ● 165,000,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to Lloyd Spencer on March 7, 2022. Please see NOTE H – CONVERTIBLE DEBT, NET within the Company’s financial statement for the six months ended June 30, 2022 for additional information;
     
  ● 375,000,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to Tangiers Investment Group, LLC on March 21, 2022. Please see NOTE H – CONVERTIBLE DEBT, NET within the Company’s financial statement for the six months ended June 30, 2022 for additional information;
     
  ● 125,000,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to Tangiers Investment Group, LLC on March 21, 2022;
     
  ● 226,130,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to MacRab, LLC on May 10, 2022. Please see NOTE H – CONVERTIBLE DEBT, NET within the Company’s financial statement for the six months ended June 30, 2022 for additional information;
     
  ● 74,375,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to MacRab, LLC on May 10, 2022;
     
  ● 125,000,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to BHP Capital NY Inc. on July 14, 2022. Please see NOTE P – SUBSEQUENT EVENTS within the Company’s financial statement for the six months ended June 30, 2022 for additional information;
     
  ● 62,500,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to BHP Capital NY Inc. on July 14, 2022;
     
  ● 125,000,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to Quick Capital, LLC on July 14, 2022. Please see NOTE P – SUBSEQUENT EVENTS within the Company’s financial statement for the six months ended June 30, 2022 for additional information;
     
  ● 62,500,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to Quick Capital, LLC on July 14, 2022;
     
  ● 50,000,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to the Robert Papiri Defined Benefit Plan on July 15, 2022. Please see NOTE P – SUBSEQUENT EVENTS within the Company’s financial statement for the six months ended June 30, 2022 for additional information;
     
  ● 25,000,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to the Robert Papiri Defined Benefit Plan on July 15, 2022;
     
  ● 12,500,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to the Robert Papiri Defined Contribution Plan on July 15, 2022. Please see NOTE P – SUBSEQUENT EVENTS within the Company’s financial statement for the six months ended June 30, 2022 for additional information;
     
  ● 6,250,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to the Robert Papiri Defined Benefit Plan on July 15, 2022;
     
  ● 12,500,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to RGP Capital Partners, Inc. on July 15, 2022. Please see NOTE P – SUBSEQUENT EVENTS within the Company’s financial statement for the six months ended June 30, 2022 for additional information
     
  ● 6,250,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to RGP Capital Partners, Inc. on July 15, 2022;
     
  ●

75,000,000 of the shares registered hereby are issuable upon conversion of the Convertible Note, which we sold to RGP Capital Partners, Inc. on September 12, 2022. Please see NOTE P – SUBSEQUENT EVENTS Within the Company’s financial statement for the six months ended June 30, 2022 for additional information; and

     
  ● 37,500,000 of the shares registered hereby are issuable upon the exercise of the warrant issued to RGP Capital Partners, Inc. on September 12, 2022.

 

30
 

 

The selling shareholders named below are selling the securities. The table assumes that all of the securities will be sold in this offering. However, any or all of the securities listed below may be retained by any of the selling shareholders, and therefore, no accurate forecast can be made as to the number of securities that will be held by the selling shareholders upon termination of this offering. The shares of our Common Stock may be offered and sold by the Selling Shareholders at a fixed price of $0.0005 per share until the shares of common stock are listed on a national securities exchange or quoted on the OTCQX or OTCQB, at which time they may be sold at prevailing market prices. We will not receive proceeds from the sale of shares from the selling shareholders, but we will however receive proceeds from the issuance of 74,375,000 shares of our common stock underlying the warrant issued to MacRab, LLC, 165,000,000 shares of our common stock underlying the warrant issued to Lloyd Spencer, 125,000,000 shares of our common stock underlying the warrants issued to Tangiers Investment Group, LLC 62,500,000 shares of our common stock underlying the warrants issued to BHP Capital NY Inc., 62,500,000 shares of our common stock underlying the warrants issued to Quick Capital, LLC, 25,000,000 shares of our common stock underlying the warrant issued to the Robert Papiri Defined Benefit Plan, 6,250,000 shares of our common stock underlying the warrant issued to the Robert Papiri Defined Contribution Plan, and 43,750,000 shares of our common stock underlying the warrants issued to RGP Capital Partners, Inc., 600,000,000 shares issuable upon conversion of Mr. Spencer’s 60,000 shares of Series D Preferred Stock, 425,000,000 shares issuable upon conversion of Mr. Spencer’s 85,000 shares of Series E Preferred Stock and 250,000,000 shares issuable upon conversion of Mr. Spencer’s 25,000 shares of Series G Preferred Stock. We believe that the selling shareholders listed in the table have sole voting and investment powers with respect to the securities indicated. Each selling shareholder who is also an affiliate of a broker dealer as noted below has represented that: (1) the selling shareholder purchased in the ordinary course of business; and (2) at the time of purchase of the securities being registered for resale, the selling shareholder had no agreements or understandings, directly or indirectly, with any person to distribute the securities.

 

Stockholder  Beneficial Ownership Before Offering
(ii)		   Percentage
of
Common Stock
Owned
Before
Offering
(ii)		   Shares of Common Stock Included
in Prospectus		   Beneficial Ownership After the Offering
(iii)		   Percentage
of
Common Stock
Owned
After the Offering
(iii)		 
Lloyd Spencer (iv)   2,299,677,763    10.79%   934,071,428    1,365,606,335    *%
Tangiers Investment Group, LLC (v)   527,500,000    2.47%   527,500,000    0    0.00%
MacRab, LLC (vi)   817,032,775    3.83%   317,032,775    500,000,000    2.34%
EcoMena Limited (vii)   160,000,000    *%   160,000,000    0    0.00%
Salvum Corporation (viii)   83,333,334    *%   83,333,334    0    0.00%
Mark Duiker (ix)   30,000,000    *%   30,000,000    0    0.00%
Mohamed Khalil (x)   30,000,000    *%   30,000,000    0    0.00%
Bill Elder (xi)   20,000,000    *%   20,000,000    0    0.00%
BHP Capital NY Inc. (xii)   212,500,000    *%   

212,500,000

    0    

0.00

%
Quick Capital, LLC (xiii)   

212,500,000

    *%   

212,500,000

    0    0.00%
Robert Papiri Defined Benefit Plan (xiv)   85,000,000    *%   85,000,000    0    0.00%
Robert Papiri Defined Contribution Plan (xv)   21,250,000    *%   21,250,000    0    0.00%
RGP Capital Partners, Inc. (xvi)   148,750,000    *%   148,750,000    0    0.00%
TOTAL   

4,647,543,872

    21.81%   2,781,937,537    1,865,606,335    8.75%

 

 

* Less than 1%

 

(i) These columns represent the aggregate maximum number and percentage of shares that the selling stockholders can own at one time (and therefore, offer for resale at any one time).

 

(ii) The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling stockholders has sole or shared voting power or investment power and also any shares, which the selling stockholders has the right to acquire within 60 days. The percentage of shares owned by each selling stockholder is based on 21,325,891,254 shares of common stock that is comprised of 18,937,886,254 shares of common stock issued and outstanding at October 10, 2022, plus 307,500,000 shares of common stock issuable up conversion of the note issued to Lloyd Spencer on March 7, 2022, 375,000,000 shares of common stock issuable up conversion of the note issued to Tangiers Investment Group, LLC on March 21, 2022, 226,130,000 shares of common stock issuable up conversion of the note issued to MacRab, LLC on May 10, 2022, 125,000,000 shares of common stock issuable up conversion of the note issued to BHP Capital NY Inc on July 14, 2022, 125,000,000 shares of common stock issuable up conversion of the note issued to Quick Capital, LLC on July 14, 2022, 50,000,000 shares of common stock issuable up conversion of the note issued to the Robert Papiri Defined Benefit Plan on July 15, 2022, 12,500,000 shares of common stock issuable up conversion of the note issued to the Robert Papiri Defined Contribution Plan on July 15, 2022, 12,500,000 shares of common stock issuable up conversion of the note issued to RGP Capital Partners, Inc. on July 15, 2022, 37,500,000 shares of common stock issuable up conversion of the note issued to RGP Capital Partners, Inc. on September 12, 2022, 574,375,000 shares of our common stock underlying the warrants issued to MacRab, LLC, 165,000,000 shares of our common stock underlying the warrant issued to Lloyd Spencer, 125,000,000 shares of our common stock underlying the warrants issued to Tangiers Investment Group, LLC 62,500,000 shares of our common stock underlying the warrants issued to BHP Capital NY Inc., 62,500,000 shares of our common stock underlying the warrants issued to Quick Capital, LLC, 25,000,000 shares of our common stock underlying the warrant issued to the Robert Papiri Defined Benefit Plan, 6,250,000 shares of our common stock underlying the warrant issued to the Robert Papiri Defined Contribution Plan, and 43,750,000 shares of our common stock underlying the warrants issued to RGP Capital Partners, Inc.

 

(iii) Assumes that all securities registered will be sold.

 

31
 

 

(iv) Includes 552,177,763 shares of common stock previously issued to Mr. Spencer, 307,500,000 shares of common stock issuable up conversion of the note issued to Mr. Spencer on March 7, 2022 and 165,000,000 shares of common stock issuable to Mr. Spencer upon exercise of the warrant issued to Mr. Spencer on March 7, 2022, 600,000,000 shares issuable upon conversion of Mr. Spencer’s 60,000 shares of Series D Preferred Stock, 425,000,000 shares issuable upon conversion of Mr. Spencer’s 85,000 shares of Series E Preferred Stock and 250,000,000 shares issuable upon conversion of Mr. Spencer’s 25,000 shares of Series G Preferred Stock,. Mr. Spencer’s address is 13110 NE 177th Place, Suite 293, Woodinville, WA 98072.

 

(v) Includes 27,500,000 shares of common stock previously issued to Tangiers Investment Group, LLC (“Tangiers”), 375,000,000 shares of common stock issuable up conversion of the note issued to Tangiers on March 21, 2022 and 125,000,000 shares of common stock issuable to Tangiers upon exercise of the warrant issued to Tangiers on March 21, 2022. The principal of Tangiers is Michael Sobeck and its address is 2305 Historic Decatur Rd, Suite 100, San Diego, CA 92106.

 

(vi) Includes 16,527,775 shares of common stock previously issued to MacRab, LLC (“MacRab”), 226,130,000 shares of common stock issuable up conversion of the note issued to MacRab on May 10, 2022, 74,375,000 shares of common stock issuable to MacRab upon exercise of the warrant issued to MacRab on May 10, 2022 and 500,000,000 shares of common stock issuable to MacRab upon exercise of the warrant issued to MacRab on April 14, 2022. The principal of MacRab is Mackey McFarlane and its address is 738 Mandalay Grove Ct., Merritt Island, FL 32953.

 

(vii) Includes 160,000,000 shares of common stock previously issued to EcoMena Limited (“EcoMena”). The principal of EcoMena is Mohammed Khalil and its address is 199 Roundhay Rd, Leeds LS8 5AN, United Kingdom.

 

(viii) Includes 83,333,334 shares of common stock previously issued to Salvum Corporation (“Salvum”). The principal of Salvum is Robert Switzer and its address is 31441 Santa Margarita Parkway, #A258, Rancho Santa Margarita, CA 92688.

 

(ix) Includes 30,000,000 shares of common stock previously issued to Mark Duiker. Mr. Duiker’s address is Prinses Margrierstraat 57, Ridderkerk -2983ED, The Netherlands.

 

(x) Includes 30,000,000 shares of common stock previously issued to Mohamed Khalil. Mr. Khalil’s address 199 Roundhay Rd, Leeds LS8 5AN, United Kingdom.

 

(xi) Includes 20,000,000 shares of common stock previously issued to Bill Elder. Mr. Elder’s address is 10289 Latney Road, Faifax, VA 22032.

 

(xii) Includes 25,000,000 shares of common stock previously issued to BHP Capital NY Inc. (“BHP”), 125,000,000 shares of common stock issuable up conversion of the note issued to BHP on July 14, 2022 and 62,500,000 shares of common stock issuable to BHP upon exercise of the warrant issued to BHP on July 14, 2022 The principal of BHP is Bryan Pantofel and its address is 45 SW 9th Street, Suite 1603, Miami, FL 33130.

 

(xiii) Includes 25,000,000 shares of common stock previously issued to Quick Capital, LLC (“Quick”), 125,000,000 shares of common stock issuable up conversion of the note issued to BHP on July 14, 2022 and 62,500,000 shares of common stock issuable to Quick upon exercise of the warrant issued to Quick on July 14, 2022 The principal of Quick is Eilon Natan and its address is 66 West Flagler Street, Suite 900 - #2292, Miami, FL 33130.

 

(xiv) Includes 10,000,000 shares of common stock previously issued to the Robert Papiri Defined Benefit Plan (“RPDBP”), 50,000,000 shares of common stock issuable up conversion of the note issued to the RPDBP on July 15, 2022 and 25,000,000 shares of common stock issuable to the RPDBP upon exercise of the warrant issued to the RPDBP on July 15, 2022. The Trustee of the RPDBP is Robert Papiri and its address is PO Box 110672, Campbell, CA 95008.

 

(xv) Includes 2,500,000 shares of common stock previously issued to the Robert Papiri Defined Contribution Plan (“RPDCP”), 12,500,000 shares of common stock issuable up conversion of the note issued to the RPDBP on July 15, 2022 and 6,250,000 shares of common stock issuable to the RPDCP upon exercise of the warrant issued to the RPDCP on July 15, 2022. The Trustee of the RPDCP is Robert Papiri and its address is PO Box 110672, Campbell, CA 95008.

 

(xvi) Includes 2,500,000 shares of common stock previously issued to RGP Capital Partners, Inc. (“RGP”), 12,500,000 shares of common stock issuable up conversion of the note issued to RGP on July 15, 2022 and 6,250,000 shares of common stock issuable to RGP upon exercise of the warrant issued to the RGP on July 15, 2022. Includes 15,000,000 shares of common stock previously issued to RGP Capital Partners, Inc. (“RGP”), 75,000,000 shares of common stock issuable up conversion of the note issued to RGP on September 12, 2022 and 37,500,000 shares of common stock issuable to RGP upon exercise of the warrant issued to the RGP on September 12, 2022. The principal of RGP is Robert Papiri and its address is 304 S, Jones Ave., #1856, Las Vegas, NV 89107.

 

(xvii) Those shareholders shown with an asterisk (*) after their name in the “Stockholder” column are registered broker-dealers or affiliates of broker-dealers.

 

32
 

 

PLAN OF DISTRIBUTION

 

The Selling Shareholders and any of its pledgees, donees, assignees and other successors-in-interest may, from time to time sell any or all of their shares of Common Stock on any market or trading facility on which the shares are traded or in private transactions. On July 25, 2022, the last reported sales price for our Common Stock was $0.0005 per share. Because our Common Stock is subject to quotation on OTC Pink Market, our Common Stock may only be offered and sold by the Selling Shareholders at a fixed price of $0.0005 per share until the shares of common stock are listed on a national securities exchange or quoted on the OTCQX or OTCQB, at which time they may be sold at prevailing market prices. We urge prospective purchasers of our Common Stock to obtain current information about the market prices of our Common Stock.

 

  ● ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
     
  ● block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal;
     
  ● facilitate the transaction;
     
  ● purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  ● an exchange distribution in accordance with the rules of the applicable exchange;

 

  ● privately-negotiated transactions;
     
  ● broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
     
  ● through the writing of options on the shares;
     
  ● a combination of any such methods of sale; and
     
  ● any other method permitted pursuant to applicable law.

 

The selling stockholders may also sell shares under Rule 144 of the Securities Act, if available, rather than under this prospectus. The selling stockholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if it deems the purchase price to be unsatisfactory at any particular time.

 

The selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that a selling stockholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then existing market price. We cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the selling stockholders. The selling stockholders and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, may be deemed to be “underwriters” as that term is defined under the Securities Exchange Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the rules and regulations of such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

 

We are required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling stockholders, but excluding brokerage commissions or underwriter discounts.

 

The selling stockholders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. The selling stockholders have not entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into.

 

The selling stockholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The selling stockholders and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations under such Act, including, without limitation, Regulation M. These provisions may restrict certain activities of and limit the timing of purchases and sales of any of the shares by, the selling stockholders or any other such person. In the event that any of the selling stockholders are deemed an affiliated purchaser or distribution participant within the meaning of Regulation M, then the selling stockholders will not be permitted to engage in short sales of common stock. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. In addition, if a short sale is deemed to be a stabilizing activity, then the selling stockholders will not be permitted to engage in a short sale of our common stock. All of these limitations may affect the marketability of the shares.

 

If a selling stockholder notifies us that it has a material arrangement with a broker-dealer for the resale of the common stock, then we would be required to amend the registration statement of which this prospectus is a part and file a prospectus supplement to describe the agreements between the selling stockholder and the broker-dealer.

 

33
 

 

DESCRIPTION OF SECURITIES

 

Description of Registrant’s Securities to be Registered.

 

We are registering on this Registration Statement only our common stock, the terms of which are described below. However, because our preferred stock will remain outstanding following the effectiveness of this Registration Statement, we also describe below the terms of our preferred stock to the extent such terms qualify the rights of our common stock.

 

Our authorized capital consists of 35,000,000,000 shares of common stock, par value $.0001 per share (the “Common Stock”) and 10,000,000 are shares of preferred stock, par value $.001 per share (the “Preferred Stock”). At June 30, 2022, December 31, 2021 and December 31, 2020, the Company had 18,687,886,254, 17,592,057,165 and 13,701,742,065 shares of Common Stock outstanding, respectively, and 1,296,043, 1,256,233 and 1,256,233 shares of Preferred Stock outstanding, respectively.

 

Common Stock

 

The Company is authorized to issue 35,000,000,000 shares of Common Stock, par value $.0001. Each share of common stock shall be entitled to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

 

Capitalization as of the date of this filing

 

Security  Par Value   Authorized   Outstanding   Voting Rights
Common Stock   0.0001    35,000,000,000    18,962,886,254   1:1

 

Voting. Each holder of our common stock is entitled to one vote for each share held of record on any matter submitted to a vote of stockholders.

 

Dividends and Distributions. Subject to preferences that may apply to any outstanding shares of preferred stock, the holders of common stock may be entitled to receive ratably any dividend or distribution of cash, property or shares of our capital stock that is paid or distributed by the Company.

 

Liquidation Rights. Upon our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets remaining after payment of any liabilities and the liquidation preferences and any accrued or declared but unpaid dividends, if any, with respect to any outstanding shares of preferred stock.

 

No Preemptive, Conversion or Redemption Rights. Holders of common stock have no preemptive rights and no right to convert their common stock into other securities. There are no redemption or sinking fund provisions applicable to our common stock.

 

Subject to Rights of Preferred Stock. The rights of the holders of our common stock are subject to, and may be adversely affected by, the rights of holders of any shares of preferred stock that we may designate and issue in the future.

 

Delaware Anti-Takeover Law

 

Certain provisions of our charter documents and Delaware law could have an anti-takeover effect and could delay, discourage or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might otherwise result in a premium being paid over the market price of our common stock.

 

Our certificate of incorporation and by-laws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors, including, among other things:

 

● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
   
  the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
   
● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
   
● a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
   
● the requirement that a special meeting of stockholders may be called only by a majority vote of our board of directors or by stockholders holding shares of our common stock representing in the aggregate a majority of votes then outstanding, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
   
● the ability of our board of directors, by majority vote, to amend our by-laws, which may allow our board of directors to take additional actions to prevent a hostile acquisition and inhibit the ability of an acquirer to amend our by-laws to facilitate a hostile acquisition; and
   
● advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may 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 us.

 

Delaware Anti-Takeover Statute

 

We are also subject to certain anti-takeover provisions under the General Corporation Law of the State of Delaware, or the DGCL. Under Section 203 of the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or (i) our board of directors approves the transaction prior to the stockholder acquiring the 15% ownership position, (ii) upon consummation of the transaction that resulted in the stockholder acquiring the 15% ownership position, the stockholder owns at least 85% of the outstanding voting stock (excluding shares owned by directors or officers and shares owned by certain employee stock plans) or (iii) the transaction is approved by the board of directors and by the stockholders at an annual or special meeting by a vote of 66 2/3% of the outstanding voting stock (excluding shares held or controlled by the interested stockholder). These provisions in our certificate of incorporation and by-laws and under Delaware law could discourage potential takeover attempts.

 

Preferred Stock

 

Our Articles of Incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock, par value $0.001, with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.

 

Series A, B, C, E and F Preferred Shares do not have any voting rights as disclosed in their respective certificates of designation. Nonetheless, Delaware corporate law provides that a “class vote” is required if the amendment to the Certificate of Incorporation (a) Increases or decreases the par value of the shares of the affected class(es); (b) increases or decreases the aggregate number of authorized shares of the affected class(es); or (c) adversely affects the powers, preferences, or special rights of the shares of such class.

 

34
 

 

Series A Preferred Stock

 

The Company has authorized 125,000 shares of Series A Preferred Stock. Each share of Series A Preferred Stock (i) pays a dividend of 5%, payable at the discretion of the Company in cash or common stock, (ii) is convertible immediately after issuance into the Company’s common stock at the lesser of $3.00 per share or 75% of the average closing bid prices over the 20 trading days immediately preceding the date of conversion, (iii) has a liquidation preference of $1.00 per share, (iv) may be redeemed by the Company at any time up to five years after the issuance date for $1.30 per share plus accrued and unpaid dividends, and (v) has no voting rights except as provided by Delaware law. To the extent that under DGCL the holders of the Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series A Preferred Stock represented at a duly held meeting at which a quorum is present.

 

There were no issuances, conversions or redemptions of Series A Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. As of the date of this filing, June 30, 2022 and December 31, 2021, the Company had 0, 0 and 0 shares of Series A Preferred Stock issued and outstanding, respectively.

 

Series B Preferred Stock

 

The Company has authorized 525,000 shares of Series B Preferred Stock. Each share of Series B Preferred Stock (i) pays a dividend of 5%, payable at the discretion of the Company in cash or common stock, (ii) is convertible immediately after issuance into the Company’s common stock at the lesser of $3,000 per share or 75% of the average closing bid prices over the 20 trading days immediately preceding the date of conversion, (iii) has a liquidation preference of $1.00 per share, (iv) may be redeemed by the Company at any time up to five years after the issuance date for $1.30 per share plus accrued and unpaid dividends, and (v) has no voting rights except as provided by Delaware law. To the extent that under DGCL the holders of the Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series A Preferred Stock represented at a duly held meeting at which a quorum is present.

 

There were no issuances, conversions or redemptions of Series B Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. As of the date of this filing, June 30, 2022 and December 31, 2021, the Company had 159,666, 159,666 and 159,666 shares of Series B Preferred Stock issued and outstanding, respectively.

 

  

Series B

Preferred Stock

   Percentage of 
   Beneficially   Series B 
Name of Beneficial Owner  Owned   Preferred Stock 
Jem Wynns   1,000    0.6%
John & Mary Ranalli   2,000    1.3%
Paul & Kathryn Ireson   2,000    1.3%
Richie & Amanda Wynns   1,000    0.6%
Scott & Julianna Puras   2,500    1.6%
Robert D. & Elizabeth Jess   3,000    1.9%
Robert & Barbara Ihrig   15,000    9.4%
Steven Ranalli   1,000    0.6%
Robert D. & Elizabeth Jess   7,000    4.4%
Robert & Barbara Ihrig   12,000    7.5%
Paul & Kathryn Ireson   1,000    0.6%
Steven Ranalli   1,000    0.6%
Sharron Lightner   2,000    1.3%
Robert Lewis   11,000    6.9%
Charles Burton Adams   13,500    8.5%
David W. Vaughan   3,000    1.9%
Fielding Thomas Da Meron   10,000    6.3%
Jem Wynns   2,500    1.6%
Robert & Barbara Ihrig   10,000    6.3%
Jeffrey Bertoia   5,000    3.1%
Richard J. Bertoia   5,000    3.1%
Paul & Kathryn Ireson   5,000    3.1%
Ken Kareta   10,000    6.3%
Paul & Kathryn Ireson   5,000    3.1%
Robert & Barbara Ihrig   5,000    3.1%
Scott & Julianna Puras   10,000    6.3%
Stephen A. Puras   3,000    1.9%
Charles Burton Adams   11,166    7.0%
           
Total   159,666    100.00%

 

Series C Preferred Stock

 

The Company has authorized 500,000 shares of Series C Preferred Stock. During 2007, the Company initiated a private offering under Regulation D of the Securities Act of 1933 (the “Private Offering”), of an aggregate 500,000 units (collectively referred to as the “Units”) at a price of $1.00 per Unit, with each Unit consisting of one share of Series C Preferred Stock at the lesser of 85% of the average closing bid price of the common stock over the 20 trading days immediately preceding the date of conversion, or $2,400 per share and stock purchase warrants equal to the number of shares of common stock converted from the Series C Preferred Stock, exercisable at $3,600 per share and which expire five years from the conversion date. The Series C Holders have no voting rights except as provided by Delaware law. To the extent that under DGCL the holders of the Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series A Preferred Stock represented at a duly held meeting at which a quorum is present.

 

There were no issuances, conversions or redemptions of Series C Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. As of the date of this filing, June 30, 2022 and December 31, 2021, the Company had 0, 0 and 0 shares of Series C Preferred Stock issued and outstanding, respectively.

 

35
 

 

Series D Preferred Stock

 

On November 10, 2011 the Board approved by unanimous written consent an amendment to the Company’s Certificate of Incorporation to designate the rights and preferences of Series D Preferred Stock. There are 500,000 shares of Series D Preferred Stock authorized with a par value of $0.001. Each share of Series D Preferred Stock has a stated value equal to $1.00. These preferred shares rank higher than all other securities. Each outstanding share of Series D Preferred Stock shall be convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price which is defined as 85% of the average closing bid price of the common stock over the twenty trading days immediately preceding the date of conversion, but no less than par value of the common stock. Mandatory conversion could have been demanded by the Company prior to October 1, 2013. Each share of the Series D Preferred Stock shall have voting rights equal to 100,000 votes of common stock.

 

There were no issuances, conversions or redemptions of Series D Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. As of the date of this filing, June 30, 2022 and December 31, 2021 there were 100,000, 100,000 and 100,000 shares of Series D Preferred Stock issued and outstanding.

 

  

Series D

Preferred Stock

   Percentage of 
   Beneficially   Series D 
Name of Beneficial Owner  Owned   Preferred Stock 
Lloyd Spencer   60,000    60.00%
Shanna Gerrard   20,000    20.00%
Jared Robert   20,000    20.00%
           
Total   100,000    100.00%

 

Series E Preferred Stock

 

On March 9, 2012, the Company filed the Certificate of Designation of the Rights and Preferences of Series E Preferred Stock of the Company with the Delaware Secretary of the State pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 1,000,000 authorized shares of Series E Preferred Stock, par value $0.001 per share. The Series E Preferred Stock is convertible into common stock at 50% of the lowest closing bid price of the common stock over the 20 days immediately prior the date of conversion, but no less than the par value of the common stock. To the extent that under DGCL the holders of the Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series A Preferred Stock represented at a duly held meeting at which a quorum is present.

 

There were no issuances, conversions or redemptions of Series E Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. As of the date of this filing, June 30, 2022 and December 31, 2021, there were 821,377, 821,377 and 791,567 shares of Series E Preferred Stock issued and outstanding, respectively.

 

  

Series E

Preferred Stock

   Percentage of 
   Beneficially   Series E 
Name of Beneficial Owner  Owned   Preferred Stock 
Adam Wong   10,000    1.2%
Andrew Alaniz   10,000    1.2%
Ben Parkermeyer   10,000    1.2%
Bryan Kyllonen   20,000    2.4%
Cameron Owens   10,000    1.2%
Collin Carpenter   30,000    3.7%
David Hyams   20,000    2.4%
Jared Robert   53,669    6.5%
Jennifer Solsvik   80,000    9.7%
John Watson   35,696    4.3%
Joseph Daziel   71,076    8.7%
Ken Gaddis   10,000    1.2%
Lloyd Spencer   85,000    10.3%
Martin Nielsen   40,000    4.9%
MD Global Partners LLC   80,728    9.8%
Michelle Reindal   6,000    0.7%
Mike Lewis   20,000    2.4%
Monica Van Tassel   15,000    1.8%
Phoebe Spencer   10,000    1.2%
Randi Cowett   10,000    1.2%
Rayomand Vatcha   51,960    6.3%
Shanna Gerrard   112,248    13.7%
Steven Mueller   

30,000

    

3.7

%
           
Total   821,377    100.00%

 

36
 

 

Series F Preferred Stock

 

On October 4, 2013, the Company filed the certificate of designation pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 500,000 authorized shares of Series F Preferred Stock, par value $0.001 per share.

 

The shares of Series F Preferred Stock have a stated value of $1.00, have no voting rights, are entitled to no dividends due or payable and are convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price, which is defined as 85% of the average closing bid price of the common stock over the five trading days immediately preceding the date of conversion, but no less than the par value of the common stock. At any time after the issuance date through the fifth anniversary of the issuance of the Series F Preferred Stock, the Company shall have the option to redeem any unconverted shares at an amount equal to 130% of the stated value of the Series F Preferred Stock plus accrued and unpaid dividends, if any. Redemption shall be established by the Company in its sole and absolute discretion and no holder of Series F Preferred Stock may demand that the Series F Preferred Stock be redeemed.

 

There were no issuances, conversions or redemptions of Series F Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. As of the date of this filing, June 30, 2022 and December 31, 2021, the Company had 190,000, 190,000 and 180,000 shares of Series F Preferred Stock issued and outstanding, respectively.

 

   

Series F

Preferred Stock

     Percentage of  
    Beneficially     Series F  
Name of Beneficial Owner   Owned     Preferred Stock  
John Kroon     40,000       21.05 %
Cape First Funding, LLC     110,000       57.89 %
Martin Nielsen     40,000       21.05 %
                 
Total     190,000       100.00 %

 

Series G Preferred Stock

 

On April 17, 2014, the Company filed the certificate of designation pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 500,000 authorized shares of Series G Preferred Stock, par value $0.001 per share.

 

The shares of Series G Preferred Stock have a stated value of $1.00, have voting rights equal to 5,000,000 votes of common stock, are entitled to no dividends due or payable, are non-redeemable, and are convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price, which is defined as 85% of the average closing bid price of the common stock over the twenty trading days immediately preceding the date of conversion, but no less than par value of the common stock.

 

There were no issuances, conversions or redemptions of Series G Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. As of the date of this filing, June 30, 2022 and December 31, 2021, the Company had 25,000, 25,000 and 25,000 shares of Series G Preferred Stock issued and outstanding, respectively.

 

  

Series G

Preferred Stock

   Percentage of 
   Beneficially   Series G 
Name of Beneficial Owner  Owned   Preferred Stock 
Lloyd Spencer   25,000    100.00%
           
Total   25,000    100.00%

 

37
 

 

Options and Warrants

 

As of the date of this filing, the Company has issued warrants/options to the persons and upon the terms below:

 

Name   Date of Issuance   Shares upon
Issuance of
warrants or
options (v)		     Exercise
Price (vi)		     Expiration
Date
Lloyd Spencer (i)   March 7, 2022     165,000,000     $ 0.0004     March 7, 2027
Tangiers Investment Group, LLC (ii)   March 21, 2022     125,000,000       0.0004     March 21, 2027
MacRab, LLC (iii)   April 14, 2022     500,000,000       0.0004     April 14, 2027
MacRab, LLC (iv)   May 10, 2022     74,375,000       0.0004     May 10, 2027
BHP Capital NY Inc. (v)   July 14, 2022     62,500,000       0.0004     July 14, 2027
Quick Capital, LLC (vi)   July 14, 2022     62,500,000       0.0004     July 14, 2027
Robert Papiri Defined Benefit Plan (vii)   July 15, 2022     25,000,000       0.0004     July 15, 2027
Robert Papiri Defined Contribution Plan (viii)   July 15, 2022     6,250,000       0.0004     July 15, 2027
RGP Capital Partners, Inc. (ix)   July 15, 2022     6,250,000       0.0004     July 15, 2027
RGP Capital Partners, Inc. (x)   September 12, 2022     37,500,000       0.0004     September 12, 2027
Total         1,064,375,000              

 

  (i) On March 7, 2022, the Company issued Lloyd Spencer (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the amount of $66,000. The Note has a term of one (1) year (Maturity date of March 7, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. The transaction closed on March 7, 2022. In connection with this note, the Holder was issued warrants to purchase 165,000,000 shares of the Company’s Common Stock at $0.0004 per share.
     
  (ii) On March 21, 2022, the Company issued Tangiers Investment Group, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the amount of $55,000. The Note has a term of one (1) year (Maturity date of March 21, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. The transaction closed on September 8, 2021. In connection with this note, the Holder was issued warrants to purchase 125,000,000 shares of the Company’s Common Stock at $0.0004 per share.
     
  (iii) On April 14, 2022, the Company and MacRab, LLC (the “Investor) entered into a Standby Equity Commitment Agreement (the “Agreement”) whereby the Company shall issue and sell to the Investor, from time to time, up to $5,000,000 of the Company’s common stock. Under the terms of the Agreement, the Purchase Price of the Company’s common stock shall be 88% of the Market Price on the date the Purchase Price is calculated. The Market Price shall mean the average of the two lowest volume weighted average prices of the Company’s common stock during the Valuation Period. In connection with this note, the Holder was issued warrants to purchase 500,000,000 shares of the Company’s Common Stock at $0.0004 per share.
     
  (iv) On May 10, 2022, the Company issued MacRab, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the amount of $33,056. The Note has a term of one (1) year (Maturity date of May 10, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued warrants to purchase 74,375,000 shares of the Company’s Common Stock at $0.0002 per share.
     
  (v) On July 14, 2022, the Company issued BHP Capital NY, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 14, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 62,500,000 shares of the Company’s common stock at an exercise price of $0.0004 per share.
     
  (vi) On July 14, 2022, the Company issued Quick Capital, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 14, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 62,500,000 shares of the Company’s common stock at an exercise price of $0.0004 per share.
     
  (vii) On July 15, 2022, the Company issued the Robert Papiri Defined Benefit Plan (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $10,000. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 25,000,000 shares of the Company’s common stock at an exercise price of $0.0004 per share.
     
  (viii) On July 15, 2022, the Company issued the Robert Papiri Defined Contribution Plan (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $2,500. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 6,250,000 shares of the Company’s common stock at an exercise price of $0.0004 per share.
     
  (ix) On July 15, 2022, the Company issued the RGP Capital Partners, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $2,500. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 6,250,000 shares of the Company’s common stock at an exercise price of $0.0004 per share.
     
  (x) On September 12, 2022, the Company issued RGP Capital Partners, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $15,000. The Note has a term of one (1) year (Maturity date of September 12, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 37,500,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 127,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder.

 

To date, no warrants or options have been issued under shareholder approved plans and no shareholder approved plans currently exist.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common stock is Empire Stock Transfer, 1859 Whitney Mesa Dr., Henderson, NV, Tel: (702) 818-5898 Fax: (702) 974-1444.

 

INTERESTS OF NAMED EXPERTS AND COUNSEL

 

The validity of the shares of common stock offered hereby will be passed upon for the Registrant by Gary L. Blum Esq. The financial statements for the years ended December 31, 2021 and 2020 for CarbonMeta Technologies, Inc. included in this prospectus and elsewhere in the registration statement have been audited by Michael T. Studer CPA P.C., 111 West Sunrise Highway, 2nd Floor, East Freeport, New York 11520, as indicated in its report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in auditing and accounting in giving said reports.

 

38
 

 

DIVIDEND POLICY

 

We have never paid any cash dividends on our common stock and anticipate that, for the foreseeable future, no cash dividends will be paid on our common stock.

 

PROPERTIES

 

Our current office space is located at 13110 NE 177th Place., Suite 145, Woodinville, WA 98072. As our operations grow, we anticipate requiring additional space during the third quarter of 2022. We are currently entered into a month to month lease, but we believe will be at our current office space for the foreseeable future.

 

We believe that our facilities are adequate for our current needs and that, if required, we will be able to expand our current space or locate suitable new office space and obtain a suitable replacement for our executive and administrative headquarters.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATION

 

Please read the following discussion of our financial condition and results of operations in conjunction with financial statements and notes thereto, as well as the “Risk Factors” and “Description of Business” sections included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors”.

 

Overview

 

CarbonMeta Technologies, Inc. (f/k/a CoroWare, Inc.) (“CarbonMeta”, the “Company”, “we”, “us”, or “our”) is a publicly quoted environmental research and development company that is commercializing technologies for processing organic wastes into hydrogen and high-value carbon products economically and sustainably.

 

The Company was incorporated on July 8, 2001 under the laws of the State of Delaware as SRM Networks, Inc. In connection with the acquisition of Hy-Tech Computer Systems, Inc. on January 31, 2003, the Company changed its name to Hy-Tech Technology Group, Inc. In connection with the Agreement and Plan of Merger Robotics Workspace Technology, Inc., Innova Holdings, Inc. and the Company’s wholly owned subsidiary, RWT Acquisition, Inc., dated July 21, 2004, the Company’s named changed to Innova Holdings, Inc. Subsequently, on November 20, 2006, the Company changed its name to Innova Robotics and Automation, Inc. and then on April 23, 2008, the Company changed its name to CoroWare, Inc. On or about July 28, 2021, the Company filed Articles of Amendment to its Amended and Restated Certificate of Incorporation with the State of Delaware to reflect a name change from CoroWare, Inc. to CarbonMeta Technologies, Inc.

 

The Company was a reporting company with the Securities and Exchange Commission until October 2016, when the Company’s gross margins and financing costs became unsustainable.  In 2020, the Company began investigating emerging technologies and sustainable growth business opportunities related to the production of hydrogen and high value carbon products from organic waste streams.  After careful consideration of the potential market opportunities and the partnership with Oxford University, the Company took the decision to raise capital in the public market and therefore become an SEC reporting company again.

 

The Company has six wholly-owned subsidiaries: CoroWare Technologies, Inc. (“CTI”), CoroWare Robotics Solutions, Inc. (“CRS”), RWT Acquisition, Inc. (“RWT”), Carbon Sources, Inc. (“CS”), Coroware Treasury, Inc. (“CWT”), CarbonMeta Research Ltd. (‘CMR”) and a 51% interest in AriCon, LLC (“AriCon).

 

CoroWare Technologies (“CTI”) was incorporated in the State of Florida on May 16, 2006 and its principal business was a software professional services company with a strong focus on information technology integration and robotics integration, business automation solutions, and unmanned systems solutions to its customers in North America and Europe.

 

CoroWare Robotics Solutions, Inc. (“CRS”) was incorporated in the State of Texas on February 27, 2015, and its principal business was as a technology incubation company whose focus was on the delivery of mobile robotics and IOT products, solutions and services for university, government and corporate researchers, and enterprise customers. CRS’s business operations were discontinued in October 2016 when the Company’s gross margins and financing costs became unsustainable.

 

Robotic Workspace Technologies, Inc. (“RWT”) was incorporated in the State of Florida on July 1, 1994, and its principal business was developing and marketing open-architecture PC controls and related products that could improve the performance, applicability, and productivity of robots and other automated equipment. RWT’s business operations were discontinued in September 2007 when the Company’s losses became unsustainable.

 

Carbon Source, Inc. (“CS”) was incorporated in the State of Wyoming on June 14, 2021 and its principal business is waste reclamation technologies and processing.

 

CoroWare Treasury, Inc. (“CWT”) was incorporated in the State of Wyoming on July 6, 2021 and its principal business is acquisitions related to acquiring technologies and subsidiary businesses related to waste processing.

 

CarbonMeta Research Ltd. (‘CMR”) was incorporated in England and Wales on August 12, 2021 and its principal business will focus on the development of technologies and solutions for processing organic wastes and generating economically sustainable hydrogen and high-value carbon products. Using proprietary and patented technologies, it plans to implement new industrial methods using inexpensive, environmentally friendly catalysts that process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes.

 

AriCon, LLC (“AriCon) was a joint venture that was intended to develop mobile robot platforms, applications, and solutions for the construction industry. In October 2016, AriCon ceased operations of all subsidiary business operations when the Company’s losses became unsustainable, and the Company was not able to obtain investment financing.

 

In 2021, the Company began investigating emerging technologies, strategic intellectual property partnerships, and sustainable growth business opportunities related to the production of hydrogen and high value carbon products from organic waste streams. Working cooperatively with Oxford University Innovation, CarbonMeta plans to implement proven and patented technologies to add value to organic waste streams. By utilizing these proven proprietary technologies, collected and captured plastic waste material can be upcycled to high value products such as carbon nanotubes (“CNTs”) and hydrogen gas.

 

CNTs can be used for improved electrical conduction and reinforcing materials that are used in a wide variety of industries including the automotive industry, aviation industry, medical industry, and construction. The number one growth driver is the increasing need for high performance batteries for the electric vehicle market.

 

Plastic waste is a cheap and abundant feedstock that will allow the Company to scale quickly and produce hydrogen gas for a competitive price.

 

In FY-2022, the Company anticipates generating waste catalysis revenues through technology assessment projects with one or more customers in the global energy or waste management industries. The technology assessments will provide these customers early visibility into the value of microwave catalysis for processing waste plastics, biowastes, or other organic wastes.

 

In FY-2022, the Company generated market demand for its cement-less concrete through an Interim Joint Product Development and Sales Representation Agreement with Salvum Corporation. Moving forward the two companies formed a Joint Venture Agreement on August 28, 2022 whose purpose is the development, marketing and sales of Earthcrete cement-less concrete.

 

In FY-2023 and beyond, CarbonMeta Technologies anticipates growing its business by licensing its technologies and processes to potential customers, or establishing joint venture companies to whom the Company will sublicense its technologies and processes in order to generate revenues directly.

 

In FY-2024, CarbonMeta Technologies may establish wholly owned subsidiaries to whom the Company will sublicense its technologies and processes in order to generate revenues directly.

 

License Agreements

 

On June 2, 2021, the Company (the “Licensee”) entered into a License Agreement (the “Agreement”) with Oxford University Innovation Limited (the “Licensor”). Under the terms of the Agreement, the Licensee will license the licensed technology (OUI Project- Hydrogen from plastics via microwave-initiated catalytic dehydrogenation). The Agreement is non-exclusive and includes the United States and European Union. Signing fees for the Agreement were £54,807 and have been paid in full by the Company. The Royalty Rate is 5% of gross sales. The Agreement comprises milestone fees as: (i) £20,000 upon the first commercial sale of a licensed product; (ii) £50,000 upon generating $1,000,000 in sales; (iii) £10,000 upon the successful grant of the US patent; and (iv) £10,000 upon the successful grant of the EU patent.

 

On December 2, 2021, the Company (“Licensee”) entered into a License of Agreement (the “Agreement”) with Ecomena Limited (an entity located in the United Kingdom) (“Licensor”). Under the terms of the Agreement, the Licensee will license the Licensed Technology to recycle industrial byproduct into cement free pavers and mortars that are environmentally friendly and continuously absorb carbon dioxide. The signing fees payable to the Licensor under the Agreement are £20,000 cash (approximately $27,247 at February 17, 2022) of which £10,000 has been paid by the Licensee, and 160,000,000 shares of the Company’s common stock, which was delivered to the Licensor on February 17, 2022. The royalty rate payable to the Licensor is 5% of product sales, subject to a minimum of £5,000 per year for license years 1 and 2, £3,000 for license year 3 and £1,000 for license year 4 and each license year thereafter. The term of the Agreement is five years from December 2, 2021 to December 2, 2026. The Licensee may terminate the Agreement for any reason at any time provided it gives Licensor six (6) months written notice to terminate expiring after December 2, 2024. If requested by the Licensee, the Licensor shall agree to the Agreement continuing in force after December 2, 2026. As of the date of this filing, the Agreement is still in effect.

 

Production Agreement

 

On January 11, 2022, the Company entered into an Interim Joint Product Development and Sales Representation Agreement (the “Agreement”) with Salvum Corporation. Under the terms of the Agreement, the parties agree to work together to develop both CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” and Salvum’s proprietary concrete alternative products known as “Earthcrete.” During the Term, Salvum agrees to manufacture CarbonMeta’s proprietary cementless paver products known as “Cementless Paver”. CarbonMeta reserves the right to appoint other manufacturers of the products and/or to engage other sales representatives for CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” outside the United States of America. Although the Interim Joint Product Development and Sales Representation Agreement with Salvum Corporation had a term of 180 days and expired on July 11, 2022, the companies continued to work together, and the companies signed a Joint Venture Agreement on August 28, 2022 that supersedes the Interim Joint Product Development and Sales Representation Agreement.

 

Service Award

 

On June 10, 2022, our subsidiary, CarbonMeta Research Ltd. (“CMR”), was granted a Service Award (entitled “Waste Plastic Catalysis Proof of Concept”) from Repsol S.A., a business company located in Spain. The award provides for CMR to provide Repsol with an initial prototype process for converting mixed waste plastic to hydrogen and solid carbon and for Repsol to pay CMR a total of 50,000 Euros in four installments as certain milestones are met. As of June 30, 2022, the first milestone entitling CMR to a payment of 20,000 Euros (approximately $20,744 at June 30, 2022) had been met and CMR’s invoice dated June 24, 2022 for 20,000 Euros was collected in July 2022.

 

39
 

 

12 MONTH MILESTONES TO IMPLEMENT BUSINESS OPERATIONS

 

The Milestones encompass what management believes the Company needs to accomplish to be successful. The Milestones are broken down by quarters and projected costs.

 

A.0-3 Months

 

○CarbonMeta Technologies, Inc. shall become “SEC Fully Reporting”.
   
○Apply for federal / state grant opportunities related to plastics catalysis in United States and Europe
   
○Complete waste plastics microwave catalysis technical assessment project with global energy customer in Europe
   
○Sign multi-year contractual agreement with strategic customer for the delivery of services related to waste plastics microwave catalysis
   
○Pursue sales opportunities related to plastics catalysis in United States, Europe and Saudi Arabia
   
○Establish joint venture Salvum Corporation, CarbonMeta Green Building Materials LLC, whose focus will be on the development at marketing of construction mix products that are carbon-negative.
   
○Nota Bene: Funding to underwrite sales, marketing, accounting, audit, legal and regulatory expenses shall be raised through Reg-A investment funding, S-1 convertible note funding, and initial revenues.
   
 ○Estimated Cost: $200,000

 

B.4-6 Months

 

○CarbonMeta Green Building Materials LLC begins earning revenues through the delivery of EarthCrete mix products to customers beginning in the April-June 2023 timeframe
   
○CarbonMeta Research UK begins waste plastics microwave catalysis pilot project with global energy customer in Europe
   
○Establish long term partnerships with (1) microwave reactor partner, and (1) gas products distribution partner, and (1) carbon products distribution partner
   
○Establish CarbonMeta Research US to handle microwave catalysis of agricultural waste, oil spill waste, and coal mining waste research consulting engagements
   
○Hire R&D, sales and marketing staff to grow the Company’s revenues and ancillary staff to support the Company’s operations
   
○

Nota Bene: Funding to underwrite all expenses shall be raised through Reg-A investment funding, S-1 convertible note funding, and ongoing revenues.

   
 ○Estimated Cost: $500,000

 

C.7-12 Months

 

○Establish long term project in the United States with (1) new customer or investor in the petrochemical, coal, agricultural or construction industry
   
○Establish long term project in the United Kingdom with (1) new customer or investor in the petrochemical, coal, agricultural or construction industry
   
○Hire R&D, sales and marketing staff to grow the Company’s revenues and ancillary staff to support the Company’s operations
   
○

Nota Bene: Funding to underwrite all expenses shall be raised through Reg-A investment funding, S-1 convertible note funding, and ongoing revenues.

   
 ○Estimated Cost: $1,000,000

 

D.13-24 Months

 

○Establish R&D facility in Saudi Arabia to research microwave catalysis of agricultural waste, oil spill waste, and coal mining waste
   
○Grow existing plastics catalysis pilot projects and construction paver projects in United States, Europe and Saudi Arabia
   
○Identify, initiate discussions, and begin due diligence on a strategic acquisition candidate in the recycling or reclamation industry
   
○Re-evaluate Company’s business plan with a focus on profitability and sustainability
   
○Nota Bene: Funding to underwrite all expenses shall be raised through Reg-A investment funding, S-1 convertible note funding, and ongoing revenues.
   
 ○Estimated Cost: $2,000,000

 

These Milestones are as of the date stated (unless specifically noted otherwise) and should be read in conjunction with financial statements and notes thereto for the applicable period referenced. These Milestones and the Financing Needs discussion may include information that has since changed and may not be consistent with other sections of this prospectus.

 

Financing Needs

 

In order to fund our operations, we rely upon direct investments with accredited investors, joint ventures, and customer revenues. Once the Company becomes profitable, we intend to fund our operations from free cash flow.

 

At present, the Company only has sufficient funds to conduct its operations for three to six months. There can be no assurance that additional financing will be available in amounts or on terms acceptable to the Company, if at all.

 

If we are not successful in generating sufficient liquidity from Company operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on the Company’s business, results of operations liquidity and financial condition.

 

The Company presently does not have any available credit, bank financing or other external sources of liquidity. Due to its brief history and historical operating losses, the Company’s operations have not been a source of liquidity. The Company will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, the Company may need to sell additional shares of its common stock or borrow funds from private lenders. There can be no assurance that the Company will be successful in obtaining additional funding.

 

The Company will need additional investments in order to continue operations. Additional investments are being sought, but the Company cannot guarantee that it will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. In the event there is a downturn in the U.S. stock and debt markets, this could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses, fail to collect significant amounts owed to it, or experience unexpected cash requirements that would force it to seek alternative financing. Further, if the Company issues additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders.

 

40
 

 

The below discussions are as of the date stated (unless specifically noted otherwise) and should be read in conjunction with financial statements and notes thereto for the applicable period referenced. These discussions may include information that has since changed and may not be consistent with other sections of this prospectus.

 

Results of Operations:

 

For the three months ended June 30, 2022 versus June 30, 2021:

 

  

June 30,

2022

  

June 30,

2021

   $ Change 
Gross revenue  $21,555   $-   $21,555 
Operating expenses   189,578    37,500    152,078 
Loss from operations   (168,023)   (37,500)   (130,523)
Other income (expense)   (5,555,713)   (43,895,348)   38,339,635 
Net income (loss)   (5,723,736)   (43,932,848)   38,209,112 
Net income (loss) per share - basic and diluted  $(0.00)  $(0.00)  $0.00 

 

Revenues

 

During the three months ended June 30, 2022, revenues were $21,555 compared to revenues of $- during the three months ended June 30, 2021. For the three months ended June 30, 2022, the Company had two customers. The first is a European global energy industry for whom we are in a technology assessment project to evaluate our microwave catalysis process for mixed waste plastics. The Company has a contractual agreement with this customer for the technology assessment project. The second is a construction contractor with expertise in the deployment of solar farm systems.  The Company has a Interim Joint Product Development and Sales Representation Agreement with this customer, and the companies subsequently signed a Joint Venture Agreement on August 28, 2022 that supersedes the Interim Joint Product Development and Sales Representation Agreement. For the three months ended June 30, 2021, the Company had no customers.

 

Operating Expenses

 

Operating expenses were $189,578 for the three months ended June 30, 2022 compared to $37,500 for the three months ended June 30, 2021.

 

We anticipate that our cost of revenues will increase in 2022 and for the foreseeable future as we continue to identify potential acquisitions, joint ventures and licensing opportunities.

 

We incurred $4,545 and $0 in research and development expenses during the three months ended June 30, 2022 and 2021, respectively.

 

We incurred $37,500 and $37,500 in compensation expenses during the three months ended June 30, 2022 and 2021, respectively. The Company anticipates that it will need to expand its management team with future acquisitions or joint ventures.

 

Loss from Operations

 

Loss from operations was $168,023 for the three months ended June 30, 2022 compared to $37,500 for the three months ended June 30, 2021.

 

Other Income (Expenses)

 

Other income (expenses) was ($5,555,713) during the three months ended June 30, 2022 compared to other income (expenses) of ($43,895,348) in the three months ended June 30, 2021, a decrease of $38,339,635. Other expenses is comprised primarily of gain/loss on derivative liabilities and interest expense. The loss from derivative liabilities for the three months ended June 30, 2022 was ($5,284,532) compared to ($43,675,910) for the three months ended June 30, 2021, a decrease of $38,391,378. The embedded conversion features associated with our convertible debentures are valued based on the number of shares that are indexed to that liability. Keeping the number of shares constant, the liability associated with the embedded conversion features increases as our share price increases and, likewise, decreases when our share price decreases. Derivative income (expense) displays the inverse relationship.

 

Net Income (Loss)

 

Net income (loss) for the three months ended June 30, 2022 was ($5,723,736) compared to ($43,895,348) for the three months ended June 30, 2021, a decrease of $38,209,112. The decrease in net (loss) is primarily a result of the change in derivative liabilities.

 

41
 

 

For the six months ended June 30, 2022 versus June 30, 2021:

 

   June 30, 2022   June 30, 2021   $ Change 
Gross revenue  $21,555   $-   $21,555 
Operating expenses   447,092    75,000    372,092 
Loss from operations   (425,537)   (75,000)   (350,537)
Other Income (expense)   (6,347,736)   (49,880,221)   43,532,485 
Net Income (loss)   (6,773,273)   (49,955,221)   43,181,948 
Net income (loss) per share - basic and diluted  $(0.00)  $(0.00)  $0.00 

 

Revenues

 

During the six months ended June 30, 2022, revenues were $21,555 compared to revenues of $- during the six months ended June 30, 2021. For the six months ended June 30, 2022, the Company had two customers. The first is a European global energy industry for whom we are in a technology assessment project to evaluate our microwave catalysis process for mixed waste plastics. The Company has a contractual agreement with this customer for the technology assessment project. The second is a construction contractor with expertise in the deployment of solar farm systems.  The Company has a Interim Joint Product Development and Sales Representation Agreement with this customer, and the companies subsequently signed a Joint Venture Agreement on August 28, 2022 that supersedes the Interim Joint Product Development and Sales Representation Agreement. For the six months ended June 30, 2021, the Company had no customers.

 

Operating Expenses

 

Operating expenses were $447,092 for the six months ended June 30, 2022 compared to $75,000 for the six months ended June 30, 2021.

 

We anticipate that our cost of revenues will increase in 2022 and for the foreseeable future as we continue to identify potential acquisitions, joint ventures and licensing opportunities.

 

We incurred $8,644 and $0 in research and development expenses during the six months ended June 30, 2022 and 2021, respectively.

 

We incurred $75,000 and $75,000 in compensation expenses during the six months ended June 30, 2022 and 2021, respectively. The Company anticipates that it will need to expand its management team with future acquisitions or joint ventures.

 

Loss from Operations

 

Loss from operations was $425,537 for the six months ended June 30, 2022 compared to $75,000 for the six months ended June 30, 2021.

 

Other Income (Expenses)

 

Other income (expenses) was ($6,347,736) during the six months ended June 30, 2022 compared to ($49,880,221) in the six months ended June 30, 2021, a decrease of $43,532,485. Other expenses are comprised primarily of gain/loss on derivative liabilities and interest expense. The loss from derivative liabilities for the six months ended June 30, 2022 was ($5,855,627) compared to ($49,880,221) for the six months ended June 30, 2021, a decrease of $44,024,594. The embedded conversion features associated with our convertible debentures are valued based on the number of shares that are indexed to that liability. Keeping the number of shares constant, the liability associated with the embedded conversion features increases as our share price increases and, likewise, decreases when our share price decreases. Derivative income (expense) displays the inverse relationship.

 

Net Income (Loss)

 

Net income (loss) for the six months ended June 30, 2022 was ($6,773,273) compared to ($49,955,221) for the six months ended June 30, 2021, a decrease of $43,181,948. The decrease in net loss is primarily a result of the change in derivative liabilities.

 

For the years ended December 31, 2021 versus December 31, 2020:

 

   31-Dec-21   31-Dec-20   $ Change 
Gross revenue  $-   $-   $- 
Operating expenses   428,502    150,000    278,502 
Loss from operations   (428,502)   (150,000)   (278,502)
Other Income (expense)   8,697,449    (11,579,741)   20,277,190 
Net Income (loss)   8,268,947    (11,729,741)   19,998,688 
Net income (loss) per share - basic and diluted  $0.00   $(0.00)  $0.00 

 

Revenues

 

For the year ended December 31, 2021, revenues were $- compared to revenues of $- during the year ended December 31, 2020. During the year ended December 31, 2020, the Company had no operations. For the years ended December 31, 2021 and 2020, the Company had no customers.

 

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Operating Expenses

 

For the years ended December 31, 2021 and 2020, operating expenses were $428,502 and $150,000, respectively. For the years ended December 31, 2021, operating expenses were largely attributable to legal and professional fees of $88,767, accrued executive compensation of $150,000 and other operating expenses of $53,258.

 

We anticipate that our cost of revenues will increase in 2022 and for the foreseeable future as we continue to identify potential acquisitions, joint ventures and licensing opportunities.

 

We incurred $0 and $0 in research and development expenses during the years ended December 31, 2021 and 2020, respectively.

 

We incurred $150,000 and $0 in compensation expenses during the years ended December 31, 2021 and 2020, respectively. The Company anticipates that it will need to expand its management team with future acquisitions or joint ventures.

 

Loss from Operations

 

For the years ended December 31, 2021 and 2020, income (loss) from operations was ($428,502) and ($150,000), respectively.

 

Other Income (Expenses)

 

For the years ended December 31, 2021 and 2020, other income (expenses) was $8,697,449 and ($11,579,741), respectively. During the year ended December 31, 2021, other income (expenses) were largely attributable to a gain on derivative liability of $9,809,916 offset by interest expense of ($923,274) and consulting fees of ($350,000).

 

Net Income (Loss)

 

For the years ended December 31, 2021 and 2020, net income (loss) was $8,268,947 and ($11,729,741), respectively. The increase in net income for the year ended December 31, 2021 was largely attributable to a gain on derivative liability of $9,809,916.

 

Liquidity and Capital Resources

 

For the six months ended June 30, 2022 and 2021, net cash (used in) operating activities was ($121,236) and $-, respectively. The increase in net cash (used in) operating activities for the six months ended June 30, 2022 was largely attributable to a net (loss) of ($6,773,273) offset by a loss from derivative liabilities of $5,852,321 and accounts payable and accrued expenses of $647,282.

 

For the six months ended June 30, 2022 and 2021, net cash (used in) provided by investing activities was ($27,247) and $-, respectively.

 

For the six months ended June 30, 2022 and 2021, cash provided by financing activities was $136,456 and $-, respectively. The increase in net cash provided from financing activities for the six months ended June 30, 2022 was largely attributable to proceeds from convertible debt financing in the amount of $139,456.

 

At June 30, 2022, we had current assets of $33,229, current liabilities of $32,139,027, a working capital deficit of $32,105,798 and an accumulated deficit of $71,177,661.

 

At December 31, 2021, we had current assets of $40,573, current liabilities of $26,046,833, a working capital deficit of $26,006,260 and an accumulated deficit of $64,404,388.

 

We presently do not have any available credit, bank financing or other external sources of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding. We will still need additional capital in order to continue operations until we are able to achieve positive operating cash flow. Additional capital is being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

 

Satisfaction of Outstanding Liabilities

 

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources to satisfy these outstanding liabilities. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.

 

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We currently have no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.

 

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

 

If we are unable to raise the funds, we will seek alternative financing through means such as borrowings from institutions or private individuals. There can be no assurance that we will be able to raise the capital we need for our operations from the sale of our securities. We have not located any sources for these funds and may not be able to do so in the future. We expect that we will seek additional financing in the future. However, we may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.

 

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern and believes that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. Please see NOTE C - GOING CONCERN UNCERTAINTY within the Company’s financial statement for the six months ended June 30, 2022 for further information.

 

Convertible Notes

 

At June 30, 2022 and December 31, 2021, the Company had $2,033,017 and $1,987,425 in outstanding convertible debt, net, respectively. At June 30, 2022 and December 31, 2021, the Company had $1,781,104 and $1,781,104 of outstanding default principal, respectively. If all Convertible Notes were converted as of the date of this filing, shareholders would undergo significant dilution to their holdings. Please see the chart below for the number of shares that could be issued.

 

   Number of Shares
   Convertible
Note Holder  9/15/2022
Richard Wynns #2   522,531,800 
Richard Wynns #3   511,314,050 
Westmount International Holdings   7,338,320,500 
Barclay Lyons   541,529,000 
Redwood Management   1,429,345,650 
Blackbridge Capital #1   371,163,529 
Blackbridge Capital #3   79,347,750 
Premier IT Solutions   306,570,306 
Kelburgh Ltd.   178,328,412 
Raphael Cariou #2   90,466,808 
Raphael Cariou #3   2,007,059,864 
Raphael Cariou #4   2,254,999,774 
AGS Capital Group- Note #1   1,685,638,000 
AGS Capital Group- Note #2   2,203,240,143 
Tangiers Investment Group #2   1,098,915,100 
Tangiers Investment Group #3   166,630,100 
Tangiers Investment Group #4   493,546,500 
Tangiers Investment Group #5    1,896,575,900 
Tangiers Investment Group #6   114,981,690 
Tangiers Investment Group #7   113,486,170 
Tangiers Investment Group #8*   284,131,550 
Zoom Marketing   397,995,786 
LG Capital #1   919,458,000 
LG Capital #2 (assigned from Ratzker)   689,596,200 
LG Capital #3   613,036,000 
Burrington Capital #2   694,904,667 
Patrick Ferro (assigned from YA Global)   636,353,000 
Dakota Capital (assigned from YA Global)   4,303,671,700 
Barry Liben (assigned from YA Global)   528,000,000 
Lloyd Spencer*   342,476,750 
Jared Robert   501,425,583 
Total   33,315,040,282 

 

  (i) All Convertible Notes are in default except those designated with an *

 

The Company’s legacy financing contains unfavorable terms that contributed to dilution and negatively impacted the Company’s market price, and therefore posed a challenge to attracting investment under more favorable. During the year ended December 31, 2021, the Company began the process of extinguishing or renegotiating the terms of this unfavorable legacy debt.   During the quarter ended June 30, 2022, the Company began realizing revenues, and intends to grow its business with key customers directly and through joint venture companies. As a result, the Company has been able to attract investments with third parties that are more favorable to the company, thereby reducing potential dilution.

 

Please see NOTE H – CONVERTIBLE DEBT, NET within the Company’s financial statement for the six months ended June 30, 2022 for further information. In addition, please see THE OFFERING (page 10) for further information on the conversion features of the shares being registered that are issuable upon conversion of convertible debt.

 

Debt

 

At June 30, 2022 and December 31, 2021, the Company had $14,382,636 and $14,142,763 in total debt, exclusive of derivative liabilities, respectively. Please see NOTES F, G, H, I, J and K within the Company’s financial statement for the six months ended June 30, 2022 for further information.

 

Required Capital Over the Next Twelve Months

 

We expect to incur losses from operations for the near future. We believe we will have to raise an additional $2,500,000 to fund our operations over the next twelve months, including roughly $50,000 to remain current in our filings with the SEC. The additional funds will be utilized for hiring ancillary staff and key personnel, corporate website and SEO development, acquisition(s) in the waste and recycling management sector and day to day operations.

 

Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, existing holders of our securities may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our securities.

 

If additional financing is not available or is not available on acceptable terms, we may be required to delay or alter our business plan based on available financing.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Critical Accounting Estimates

 

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

 

44
 

 

Recent Accounting Pronouncements

 

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows. See the Notes to the Financial Statements for more information.

 

OTC Bulletin Board Considerations

 

As discussed elsewhere in this registration statement, the Company’s common stock is currently traded on the OTC Markets “PINK” under the symbol “COWI.”

 

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

 

Directors and Executive Officers

 

The names and ages of our Directors and Executive Officers are set forth below. Our By-Laws provide for not less than one Director. All Directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors are duly elected and qualified. The officers are elected by our Board.

 

Name  Age   Position
Lloyd Spencer  63  

Chief Executive Officer, Principal Financial Officer, Director, Treasurer, Secretary

 

The principal occupations for each of our current executive officers and directors are as follows:

 

LLOYD T. SPENCER became our Chief Executive Office on January 28, 2008, interim Chief Financial Officer on November 17, 2008, and a member of the board of directors and Vice President since September 20, 2007. Beginning in May 2006, Mr. Spencer has served as President and CEO of our subsidiary, CoroWare Technologies, Inc. Beginning in October 2004, Mr. Spencer was co-founder and President of CoroWare, Inc., a Washington State private company that was acquired by Innova Holdings, Inc., which is now known as CarbonMeta Technologies, Inc.  From June 2002 to September 2004, Mr. Spencer was Vice President of Sales at Planet Technologies, a systems integration company based in Germantown, MD. From November 1996 to August 2001, Mr. Spencer was Solutions Unit Manager and Group Product Manager at Microsoft in Redmond, Washington. Prior to Microsoft, Mr. Spencer served as Assistant Vice-President and Business Unit Manager at Newbridge Networks; and Product Line Manager at Sun Microsystems. Mr. Spencer also currently serves as the Secretary and Director of Deep Green Waste & Recycling, Inc., a publicly traded entity (OTCPK: DGWR). Mr. Spencer received his Bachelor’s degree from Cornell University in 1980 with a major in Biology and Animal Science and with an emphasis in Immunogenetics.

 

On February 14, 2014, Mr. Lloyd Spencer, Chairman of the Board of Directors, was appointed as Interim Corporate Secretary. Mr. Spencer continues to serve as President and Chief Executive Officer.

 

Our director will serve until the next annual meeting of stockholders. Our executive officers are appointed by our Board of Directors and serve at the discretion of the Board of Directors.

 

Mr. Spencer is a full-time employee of the Company and devotes 40 – 50 hours per week to the Company.

 

Family Relationships

 

There are no family relationships among the directors and executive officers.

 

Conflicts of Interest- General

 

Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity, involved in participation with such other business entities. While our sole officer and director of our business is engaged in business activities outside of our business, he devotes to our business such time as he believes to be necessary.

 

Conflicts of Interest- Corporate Opportunities

 

Presently no requirement contained in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors of our business to disclose to us business opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty to us to disclose to us any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director of another company. We have no intention of merging with or acquiring an affiliate, associate person or business opportunity from any affiliate or any client of any such person.

 

Code of Ethics Disclosure Statement

 

CarbonMeta Technologies, Inc. has adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer and other employees performing similar functions. The Code of Ethics was revised and updated in 2007 and approved by the board on December 6, 2007. The Code of Ethics is in the investor section of our website at www.carbonmetatech.com.

 

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EXECUTIVE COMPENSATION

 

Executive Compensation

 

Summary Compensation Table

 

Name and Principal Position   Year     Salary- Accrued
($)		     Bonus
($)		     Stock Awards
($)		     Option Awards
($)		     Non-Equity Incentive Plan Compensation
($)		    

Change in Pension

Value &

Non-Qualified Deferred Compensation Earnings
($)

    

All Other

Compensation
($)

     Total
($)		  
                                                       
          (a)     (b)     (c)     (d)                 (e)        
                                                       
Lloyd Spencer- President, Chief Executive Officer, Secretary, Director
(1)		     2022      

75,000

       0       0       0       0          0       0      

75,000

  
      2021      

150,000

       0       0       0       0       0       0      

150,000

  
      2020       150,000       0       0       0       0       0       0       150,000  

 

(1) The values shown in this column represent the aggregate grant date fair value of equity-based awards granted during the fiscal year, in accordance with ASC 718, “Share Based-Payment”. The fair value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model, based on the assumptions described in the Notes to Financial Statements included in this Registration Statement filed on Form S-1.

 

  (a) Accrued salary
     
  (b) Accrued bonus to employee for execution of employment agreement.
     
  (c) Delivery of common stock to employee for execution of employment agreements.
     
  (d) Options issued to employee for execution of employment agreement. More details on Options noted under Employment Agreements section below.
     
  (e) Equity compensation received as a Director of the Company.

 

We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

 

Except as indicated below, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed above.

 

Director’s Compensation

 

CarbonMeta Technologies, Inc. has not paid and does not presently propose to pay cash compensation to any director for acting in such capacity.  No restricted shares were awarded for 2021 or 2020 services.

 

Audit Committee

 

Presently, our Board of Directors is performing the duties that would normally be performed by an audit committee. We intend to form a separate audit committee, and plan to seek potential independent directors. In connection with our search, we plan to appoint an individual qualified as an audit committee financial expert.

 

Employment Agreements

 

The Company has an Employment Agreement with its sole officer and director, Lloyd Spencer.

 

On May 15, 2006, the Company and Lloyd Spencer (the “Executive”) entered into an Employment Agreement (the “Agreement”). The Executive shall serve as an executive officer of the corporation beginning on May 15, 2006 for a terms of five years and the Agreement shall automatically renew on the anniversary date for successive one year periods. As compensation, the Executive shall receive a salary of $12,500 per month. In addition, the Executive received a five-year stock option granting the Executive the right to purchase 5,000,000 shares of the Company’s common stock at a price of $0.18. The option has expired as of the date of this filing.

 

Stock Option Plan and other Employee Benefits Plans

 

The Company does not maintain a Stock Option Plan or other Employee Benefit Plans.

 

Overview of Compensation Program

 

We currently do not maintain a Compensation Committee of the Board of Directors. Until a formal committee is established, our entire Board of Directors has responsibility for establishing, implementing and continually monitoring adherence with the Company’s compensation philosophy. The Board of Directors ensures that the total compensation paid to the executives is fair, reasonable, and competitive.

 

Role of Executive Officers in Compensation Decisions

 

The Board of Directors makes all compensation decisions for, and approves recommendations regarding equity awards to, the executive officers and directors of the Company.

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information, as of October 10, 2022, with respect to any person (including any “group”, as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) who is known to us to be the beneficial owner of more than five percent (5%) of any class of our voting securities, and as to those shares of our equity securities beneficially owned by each of our directors and executive officers and all of our directors and executive officers as a group. Unless otherwise specified in the table below, such information, other than information with respect to our directors and executive officers, is based on a review of statements filed with the Securities and Exchange commission (the “Commission”) pursuant to Sections 13 (d), 13 (f), and 13 (g) of the Exchange Act with respect to our common stock. As of October 10, 2022, there were 18,962,886,254 shares of common stock outstanding, plus 307,500,000 shares of common stock issuable up conversion of the note issued to Lloyd Spencer on March 7, 2022, 375,000,000 shares of common stock issuable up conversion of the note issued to Tangiers Investment Group, LLC on March 21, 2022, 226,130,000 shares of common stock issuable up conversion of the note issued to MacRab, LLC on May 10, 2022, 125,000,000 shares of common stock issuable up conversion of the note issued to BHP Capital NY Inc on July 14, 2022, 125,000,000 shares of common stock issuable up conversion of the note issued to Quick Capital, LLC on July 14, 2022, 50,000,000 shares of common stock issuable up conversion of the note issued to the Robert Papiri Defined Benefit Plan on July 15, 2022, 12,500,000 shares of common stock issuable up conversion of the note issued to the Robert Papiri Defined Contribution Plan on July 15, 2022, 12,500,000 shares of common stock issuable up conversion of the note issued to RGP Capital Partners, Inc. on July 15, 2022, 75,000,000 shares of common stock issuable up conversion of the note issued to RGP Capital Partners, Inc. on September 12, 2022, 574,375,000 shares of our common stock underlying the warrants issued to MacRab, LLC, 165,000,000 shares of our common stock underlying the warrant issued to Lloyd Spencer, 125,000,000 shares of our common stock underlying the warrants issued to Tangiers Investment Group, LLC 62,500,000 shares of our common stock underlying the warrants issued to BHP Capital NY Inc., 62,500,000 shares of our common stock underlying the warrants issued to Quick Capital, LLC, 25,000,000 shares of our common stock underlying the warrant issued to the Robert Papiri Defined Benefit Plan, 6,250,000 shares of our common stock underlying the warrant issued to the Robert Papiri Defined Contribution Plan, 43,750,000 shares of our common stock underlying the warrants issued to RGP Capital Partners, Inc., 600,000,000 shares issuable upon conversion of Mr. Spencer’s 60,000 shares of Series D Preferred Stock, 425,000,000 shares issuable upon conversion of Mr. Spencer’s 85,000 shares of Series E Preferred Stock and 250,000,000 shares issuable upon conversion of Mr. Spencer’s 25,000 shares of Series G Preferred Stock. The number of shares outstanding used in computing the percentage is 22,585,891,254.

 

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The number of shares of common stock beneficially owned by each person is determined under the rules of the Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within sixty (60) days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.

 

The table below shows the number of shares beneficially owned as of October 10, 2022 by each of our individual directors and executive officers, by other holders of 5% or more of the outstanding stock and by all our current directors and executive officers as a group.

 

    Voting Rights   Percentage of 
    Beneficially   Voting Rights 
Name of Beneficial Owner (1)   Owned   (3) 
Lloyd Spencer Common Shares (2)(3)   552,177,763    0.4%
Lloyd Spencer Series D Preferred Shares (2)(3)   60,000,000    3.9%
Lloyd Spencer Series D Preferred Shares (2)(3)   125,000,000,000    81.2%
Officers and Directors as a Group   131,552,177,763    85.4%

 

 

  (1)

Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants, or convertible debt currently exercisable or convertible, or exercisable or convertible within 60 days of October 10, 2022 are deemed outstanding for computing percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any person. Percentages are based on a total of shares of common stock outstanding on October 10, 2022, and the voting rights.

     
  (2) The number of votes used in computing the percentages is 153,977,866,254.
   

Issued and Outstanding Common Shares: 18,977,886,254

Issued and Outstanding Series D Preferred Shares: 10,000,000,000

Issued and Outstanding Series G Preferred Shares: 125,000,000,000

     
  (3) Lloyd Spencer’s beneficial ownership includes 552,177,763 shares of common stock previously issued to Mr. Spencer, 60,000 shares of Series D Preferred Stock, which has voting rights equal to 100,000 votes for each share of Series D held; and 25,000 shares of Series G Preferred Stock, which has voting rights equal to 5,000,000 votes for each share of Series G held;

 

48
 

 

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

 

Market Information

 

The Common Stock of the Company is currently trading on the OTC Markets “PINK” under the symbol “COWI.” The following information reflects the high and low closing prices of the Company’s common stock on the OTC Markets “PINK.”

 

Quarterly period  High   Low 
Fiscal year ended December 31, 2021:          
First Quarter  $0.0051   $0.0001 
Second Quarter  $0.0023   $0.0006 
Third Quarter  $0.0022   $0.0005 
Fourth Quarter  $0.0010   $0.0003 
           
Fiscal year ended December 31, 2020:          
First Quarter  $0.0001   $0.0001 
Second Quarter  $0.0001   $0.0001 
Third Quarter  $0.0001   $0.0001 
Fourth Quarter  $0.0030   $0.0001 

 

Holders

 

As of December 31, 2021, the approximate number of stockholders of record of the Common Stock of the Company was 301.

 

Dividend Policy

 

The Company has never declared or paid any cash dividends on its common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.

 

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Indemnification for Securities Act Liabilities

 

Our Certificate of Incorporation provides to the fullest extent permitted by Delaware Law that our directors or officers shall not be personally liable to us or our shareholders for damages for breach of such director’s or officer’s fiduciary duty. The effect of this provision of our Articles of Incorporation is to eliminate our rights and our shareholders (through shareholders’ derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our Articles of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers.

 

Our By-Laws also provide that the Board of Directors may also authorize us to indemnify our employees or agents, and to advance the reasonable expenses of such persons, to the same extent, following the same determinations and upon the same conditions as are required for the indemnification of and advancement of expenses to our directors and officers. As of the date of this Registration Statement, the Board of Directors has not extended indemnification rights to persons other than directors and officers.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing 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 the Securities Act of 1933 and is, therefore, unenforceable.

 

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 common stock the selling stockholders are offering by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information pertaining to us and our common stock, you should refer to the registration statement and to its exhibits. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document.

 

We will be subject to the informational requirements of the Securities Exchange Act of 1934 and file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facility at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.

 

You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

 

Legal Proceedings

 

We know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us or has a material interest adverse to us.

 

  ● None of our executive officers or directors have (i) been involved in any bankruptcy proceedings within the last five years, (ii) been convicted in or has pending any criminal proceedings (other than traffic violations and other minor offenses), (iii) been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity or (iv) been found to have violated any Federal, state or provincial securities or commodities law and such finding has not been reversed, suspended or vacated.

 

Experts

 

The validity of the shares of common stock offered hereby will be passed upon for the Registrant by Gary L. Blum, Esq. The financial statements for the years ended December 31, 2021 and 2020 for CarbonMeta Technologies, Inc. included in this prospectus and elsewhere in the registration statement have been audited by Michael T. Studer CPA P.C., as indicated in its report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in auditing and accounting in giving said reports.

 

50
 

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

CORPORATE GOVERNANCE

 

Governance of Our Company

 

We seek to maintain high standards of business conduct and corporate governance, which we believe are fundamental to the overall success of our business, serving our shareholders well and maintaining our integrity in the marketplace. Our corporate governance guidelines and code of business conduct, together with our Articles of Incorporation, Bylaws and the charters for each of our Board committees, form the basis for our corporate governance framework. We also are subject to certain provisions of the Sarbanes-Oxley Act and the rules and regulations of the SEC. The full text of the Code of Conduct is available on our website at https://www.carbonmetatech.com

 

Our Board of Directors

 

Our Board currently consists of one member. The number of directors on our Board can be determined from time to time by action of our Board.

 

Our Board believes its members collectively have the experience, qualifications, attributes and skills to effectively oversee the management of our Company, including a high degree of personal and professional integrity, an ability to exercise sound business judgment on a broad range of issues, sufficient experience and background to have an appreciation of the issues facing our Company, a willingness to devote the necessary time to their Board and committee duties, a commitment to representing the best interests of the Company and our stockholders and a dedication to enhancing stockholder value.

 

Risk Oversight. Our Board oversees the management of risks inherent in the operation of our business and the implementation of our business strategies. Our Board performs this oversight role by using several different levels of review. In connection with its reviews of the operations and corporate functions of our Company, our Board of Directors addresses the primary risks associated with those operations and corporate functions. In addition, our Board of Directors reviews the risks associated with our Company’s business strategies periodically throughout the year as part of its consideration of undertaking any such business strategies. Each of our Board committees also coordinates oversight of the management of our risk that falls within the committee’s areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors. The Board also is provided updated by the CEO and other executive officers of the Company on a regular basis.

 

Shareholder Communications. Although we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by writing to us at 13110 NE 177th Place, Suite 145, Woodinville, WA 98072, Attention: Investor Relations or via e-mail communication at investor@carbonmetatech.com. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate. Please note that the foregoing communication procedure does not apply to (i) shareholder proposals pursuant to Exchange Act Rule 14a-8 and communications made in connection with such proposals or (ii) service of process or any other notice in a legal proceeding.

 

Board Committees

 

None.

 

51
 

 

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution.

 

The following table sets forth expenses (estimated except for the NASDAQ Listing Fee, SEC registration fees and FINRA notice fee) in connection with the offering described in the Registration Statement:

 

SEC registration fees  $

129

 
Legal fees and expenses  $5,000 
Accountant’s fees and expenses  $

20,000

 
TOTAL  $

25,129

 

 

Item 14. Indemnification of Directors and Officers.

 

The Certificate of Incorporation of the Company provides that:

 

  ● The Corporation shall indemnify a director or officer of the Corporation who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director or office was a party because the director or officer is or was a director or officer of the Corporation against reasonable attorney fees and expenses incurred by the director or officer in connection with the proceeding. The Corporation may indemnify an individual made a party to a proceeding because the individual is or was a director, officer, employee or agent of the Corporation against liability if authorized in the specific case after determination, in the manner required by the board of directors, that indemnification of the director, officer, employee or agent, as the case may be, is permissible in the circumstances because the director, officer, employee or agent has met the standard of conduct set forth by the board of directors. The indemnification and advancement of attorney fees and expenses for directors, officers, employees and agents of the Corporation shall apply when such persons are serving at the Corporation’s request while a director, officer, employee or agent of the Corporation, as the case may be, as a director, officer, partner, trustee, employee or agent of another foreign or domestic Corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, whether or not for profit, as well as in their official capacity with the Corporation. The Corporation also may pay for or reimburse the reasonable attorney fees and expenses incurred by a director, officer, employee or agent of the Corporation who is a party to a proceeding in advance of final disposition of the proceeding. The Corporation also may purchase and maintain insurance on behalf of an individual arising from the individual’s status as a director, officer, employee or agent of the Corporation, whether or not the Corporation would have power to indemnify the individual against the same liability under the law. All references in these Articles of Incorporation are deemed to include any amendment or successor thereto. Nothing contained in these Articles of Incorporation shall limit or preclude the exercise of any right relating to indemnification or advance of attorney fees and expenses to any person who is or was a director, officer, employee or agent of the Corporation or the ability of the Corporation otherwise to indemnify or advance expenses to any such person by contract or in any other manner. If any word, clause or sentence of the foregoing provisions regarding indemnification or advancement of the attorney fees or expenses shall be held invalid as contrary to law or public policy, it shall be severable and the provisions remaining shall not be otherwise affected. All references in these Articles of Incorporation to “director”, “officer”, “employee”, and “agent” shall include the heirs, estates, executors, administrators and personal representatives of such persons.

 

Any indemnification as outlined above is not exclusive of any other rights to indemnification afforded by Delaware law.

 

Item 15. Recent Sales of Unregistered Securities.

 

Each of the below transactions were exempt from the registration requirements of the Securities Act in reliance upon Rule 701 promulgated under the Securities Act, Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act.

 

Common Stock

 

For the six months ended June 30, 2022 and fiscal years ended in December 31, 2021 and 2020, the Company issued and/or sold the following unregistered securities:

 

Issuances during the six months ended June 30, 2022:

 

On January 21, 2022, the Company issued 206,896,552 shares of common stock to a consultant for accrued consulting fees in connection with negotiating and arranging for the entry by the Company into a Mutual Release and Settlement Agreement with Y.A. Global Investments, LP dated July 19, 2021.

 

On January 21, 2022, the Company issued its sole officer and director, Lloyd Spencer, 428,571,428 shares of common stock for past due compensation in the amount of $150,000.

 

On February 14, 2022, the Company issued 83,333,334 shares of common stock as per the terms of the Memorandum of Understanding to an Interim Joint Product Development and Sales Representation Agreement dated January 11, 2022 (see Note A, Production Agreement).

 

On February 14, 2022, the Company issued its sole officer and director, Lloyd Spencer, 30,000,000 shares of common stock as compensation for serving on the Board of Directors of CarbonMeta Research Ltd.

 

On February 14, 2022, the Company issued a total of 90,000,000 shares (30,000,000 shares each) of common stock to three other individuals as compensation for serving on the Board of Directors of CarbonMeta Research Ltd.

 

On February 17, 2022, the Company issued 160,000,000 shares of its common stock to Ecomena Limited (an entity located in the United Kingdom) pursuant to a License of Agreement dated December 2, 2021 between Ecomena Limited and CarbonMeta Technologies, Inc. (see Note A, License Agreements).

 

On March 7, 2022, the Company issued 33,000,000 shares of its common stock to Lloyd Spencer in connection with a $66,000 convertible note financing.

 

On March 21, 2022, the Company issued 27,500,000 shares of its common stock to Tangiers Investment Group, LLC in connection with a $55,000 convertible note financing.

 

On April 4, 2022, the Company issued 20,000,000 shares of its common stock to Bill Elder, a third-party contractor, as compensation for his business development services.

 

On May 10, 2022, the Company issued 16,527,775 shares of its common stock to MacRab, LLC in connection with a $33,056 convertible note financing.

 

Issuances during the year ended December 31, 2021:

 

On March 9, 2021, the Company issued 7,500,000,000 shares of its common stock to its sole officer and director, Lloyd Spencer, as compensation for accrued wages of $750,000 for fiscal years 2016, 2017, 2018, 2019 and 2020.

 

On May 28, 2021, the Company issued 400,315,100 shares of common stock to a noteholder (Tangiers Investment Group, LLC) in satisfaction of $17,000 principal and $23,032 interest.

 

On June 4, 2021, the Company’s sole officer and director, Lloyd Spencer, returned 7,500,000,000 shares of common stock previously issued to Mr. Spencer on March 9, 2021 (see second preceding paragraph) for accrued compensation so that the shares may be used for future business transactions.

 

On August 10, 2021, the Company issued 250,000,000 shares of common stock to a noteholder (Y.A. Global Investments, LP) in satisfaction of $25,000 principal against a convertible note.

 

On September 14, 2021, the Company issued 250,000,000 shares of common stock to a noteholder (Tangiers Investment Group, LLC) in satisfaction of $25,000 principal against a convertible note.

 

On September 24, 2021, the Company issued 666,666,666 shares of common stock to a noteholder (YA Global Investments, LP) in satisfaction of $200,000 principal against a convertible note.

 

On September 27, 2021, the Company issued 666,666,666 shares of common stock to a noteholder (YA Global Investments, LP) in satisfaction of $200,000 principal against a convertible note.

 

On October 7, 2021, the Company issued 458,333,333 shares of common stock to a noteholder (YA Global Investments, LP) in satisfaction of $137,500 principal against a convertible note.

 

On October 13, 2021, the Company issued 458,333,335 shares of common stock to a noteholder (YA Global Investments, LP) in satisfaction of $137,500 principal against a convertible note.

 

On October 21, 2021, the Company issued 200,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On October 22, 2021, the Company issued 120,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On October 22, 2021, the Company issued 20,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On November 4, 2021, the Company issued 200,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On November 10, 2021, the Company issued 100,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On November 12, 2021, the Company issued 100,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

Issuances during the year ended December 31, 2020:

 

None.

 

52
 

 

The number of common shares authorized with a par value of $0.0001 per share at June 30, 2022, December 31, 2021 and 2020 is 35,000,000,000, 35,000,000,000 and 35,000,000,000, respectively. At June 30, 2022, December 31, 2021 and 2020, there are 18,687,886,254, 17,592,057,165, and 13,701,742,065 shares of common stock outstanding, respectively.

 

Preferred Stock

 

Six months ended June 30, 2022

 

None

 

Year ended December 31, 2021

 

None

 

Year ended December 31, 2020

 

None

 

The number of preferred shares authorized with a par value of $0.001 per share at June 30, 2022, December 31, 2021 and 2020 is 10,000,000, 10,000,000 and 10,000,000, respectively. At June 30, 2022, December 31, 2021 and 2010, there are 1,296,043, 1,256,233 and 1,256,233 shares of preferred stock issued and outstanding, respectively.

 

Except as noted, none of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and the Registrant believes each transaction was exempt from the registration requirements of the Securities Act as stated above. All recipients of the foregoing transactions either received adequate information about the Registrant or had access, through their relationships with the Registrant, to such information. Furthermore, the Registrant affixed appropriate legends to the share certificates and instruments issued in each foregoing transaction setting forth that the securities had not been registered and the applicable restrictions on transfer.

 

53
 

 

Item 16. Exhibits and Financial Statement Schedules.

 

INDEX TO FINANCIAL STATEMENTS

 

Financial Statements   Page
Condensed Consolidated Balance Sheets at June 30, 2022 (Unaudited) and December 31, 2021   F-1
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021 (Unaudited)   F-2
Unaudited Condensed Consolidated Statements of Stockholders (Deficit) for the three and six months ended June 30, 2022 and 2021 (Unaudited)   F-3
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (Unaudited)   F-5
Notes to Unaudited Condensed Consolidated Financial Statements   F-6 to F-25
Report of Independent Registered Public Accounting Firm   F-26
Consolidated Balance Sheets as of December 31, 2021 and 2020   F-27
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020   F-28
Consolidated Statements of Stockholders’ (Deficit) for the years ended December 31, 2021 and 2020   F-29
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020   F-30
Notes to Consolidated Financial Statements   F-31 to F-50

 

54
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

   June 30,   December 31, 
   2022   2021 
   (Unaudited)    
ASSETS          
           
CURRENT ASSETS:          
Cash  $7,939   $10,573 
Accounts receivable   20,744    - 
Inventory   3,157    - 
Prepaid expenses   1,389    30,000 
Total Current Assets   33,229    40,573 
           
Property and equipment, net of accumulated depreciation of $10,406 and $2,704, respectively   36,718    44,420 
Licenses, net of accumulated amortization of $14,034 and $4,603, respectively   151,469    74,653 
TOTAL ASSETS  $221,416   $159,646 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES:          
Accounts payable and accrued expenses  $10,839,145   $10,641,864 
Obligations collateralized by receivables   206,236    206,236 
Convertible debt, net   2,033,017    1,987,425 
Notes payable   124,873    127,873 
Notes payable - related parties   

199,415

    199,415 
Small Business Administration loan   979,950    979,950 
Derivative liabilities   17,756,391    11,904,070 
Total Current Liabilities   32,139,027    26,046,833 
TOTAL LIABILITIES   32,139,027    26,046,833 
           
Commitments and contingencies   -    - 
           
STOCKHOLDERS’ DEFICIT:          
Redeemable convertible preferred stock, Series A, $0.001 par value, 125,000 shares authorized, 0 shares issued and outstanding   -    - 
Redeemable convertible preferred stock, Series B, $0.001 par value, 525,000 shares authorized, 159,666 shares issued and outstanding   160    160 
Redeemable convertible preferred stock, Series C, $0.001 par value, 500,000 shares authorized, 0 shares issued and outstanding   -    - 
Redeemable convertible preferred stock, Series D, $0.001 par value, 500,000 shares authorized, 100,000 shares issued and outstanding   100    100 
Redeemable convertible preferred stock, Series E, $0.001 par value, 1,000,000 shares authorized, 821,377 and 791,567 shares issued and outstanding, respectively   821    791 
Redeemable convertible preferred stock, Series F, $0.001 par value, 500,000 shares authorized, 190,000 and 180,000 shares issued and outstanding, respectively   190    180 
Redeemable convertible preferred stock, Series G, $0.001 par value, 500,000 shares authorized, 25,000 shares issued and outstanding   25    25 
Common stock; 35,000,000,000 and 35,000,000,000 shares authorized at $0.0001 par value, 18,687,886,254 and 17,592,057,165 shares issued, respectively; and 18,499,705,254 and 17,403,876,165 shares outstanding, respectively   1,868,789    1,759,206 
Additional paid-in capital   37,399,569    36,775,736 
Treasury stock; 188,181,000 shares of common stock   (18,997)   (18,997)
Accumulated other comprehensive income   9,393    - 
Accumulated deficit   (71,177,661)   (64,404,388)
TOTAL STOCKHOLDERS’ DEFICIT   (31,917,611)   (25,887,187)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $221,416   $159,646 

 

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

 

F-1
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

For the three and six months ended June 30, 2022 and 2021

 

     2022     2021     2022     2021 
  

For the Three Months

Ended June 30,

  

For the Six Months

Ended June 30,

 
   2022   2021   2022   2021 
CONTRACT SERVICES REVENUES  $21,555   $-   $21,555   $- 
                     
OPERATING EXPENSES                    
Executive Compensation   37,500    37,500    75,000    75,000 
Legal and Professional Fees   123,953         168,009      
Investor Relations   15,118    -    35,782    - 
Consulting Fees   6,670         21,891      
Sales and marketing   21,244    -    35,427    - 
Research and development   4,545    -    8,644    - 
Amortization of licenses   6,526    -    14,430    - 
Depreciation of equipment   3,872    -    7,702    - 
Other operating expenses   (29,850)   -    80,207    - 
TOTAL OPERATING EXPENSES   189,578    37,500    447,092    75,000 
                     
LOSS FROM OPERATIONS   (168,023)   (37,500)   (425,537)   (75,000)
                     
Other (expense) income:                    
Loss from derivative liabilities   (5,284,532)   (43,675,910)   (5,855,627)   (49,360,801)
Interest expense, net   (266,181)   (219,438)   (487,109)   (519,420)
Loss from debt settlements   (5,000)   -    (5,000)   - 
Total other (expense) income   (5,555,713)   (43,895,348)   (6,347,736)   (49,880,221)
                     
LOSS BEFORE INCOME TAXES   (5,723,736)   (43,932,848)   (6,773,273)   (49,955,221)
                     
Income tax expense   -    -    -    - 
                     
Net loss  $(5,723,736)  $(43,932,848)  $(6,773,273)  $(49,955,221)
Net loss per common share:                    
Basic and diluted net loss per common share  $(0.0003)  $(0.0031)  $(0.0004)  $(0.0037)
Weighted average number of common shares outstanding – basic and diluted   18,680,401,516    14,204,468,277    18,483,949,031    13,578,434,976 
Comprehensive income (loss):                    
Net loss  $

(5,723,736

)  $

(43,932,848

)  $

(6,773,273

)  $

(49,955,221

)
Foreign currency translation adjustments   

9,393

    -    

9,393

    - 
Comprehensive loss  $

(5,714,343

)  $

(43,932,848

)  $

(6,763,880

)  $

(49,955,221

)

 

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

 

F-2
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Stockholders’ Deficit

For the three and six months ended June 30, 2022 and 2021

 

For the three and six months ended June 30, 2022:

 

   Series B   Series D   Series E   Series F   Series G   Amount   Shares   Amount   Capital   Stock   Deficit   Income   Total 
                                   Additional           Accumulated Other     
   Preferred Stock   Common Stock   Paid-In   Treasury   Accumulated   Comprehensive     
   Series B   Series D   Series E   Series F   Series G   Amount   Shares   Amount   Capital   Stock   Deficit   Income   Total 
                                                     
Balances, January 1, 2022   159,666    100,000    791,567    180,000    25,000   $1,256    17,592,057,165   $1,759,206   $36,775,736   $(18,997)  $(64,404,388)  $               -    (25,887,187)
                                                                  
Common stock issued for license   -    -    -    -    -    -    160,000,000    16,000    48,000    -    -    -    64,000 
Common stock issued for services   -    -    -    -    -    -    203,333,334    20,333    52,667    -    -    -    73,000 
Common stock and warrants issued in connection with convertible notes financings, net of placement agent fee of $1,350   -    -    -    -    -    -    60,500,000    6,050    102,600    -    -    -    108,650 
Common stock issued for accrued executive compensation   -    -    -    -    -    -    428,571,428    42,857    107,143    -    -    -    150,000 
Common stock issued for accrued consulting fees   -    -    -    -    -    -    206,896,552    20,690    279,310    -    -    -    300,000 
Net loss for the three months ended March 31, 2022   -    -    -    -    -    -    -    -    -    -    (1,049,537)   -    (1,049,537)
Balance, March 31, 2022   159,666    100,000    791,567    180,000    25,000   $1,256    18,651,358,479   $1,865,136   $37,365,456   $(18,997)  $(65,453,925)  $-   $(26,241,074)
Preferred stock adjustments   -    -    29,810    10,000    -    40    -    -    (40)   -    -         - 
Common stock issued for services   -    -    -    -    -    -    20,000,000    2,000    5,000    -    -         7,000 
Common stock and warrants issued in connection with convertible note financings, net of placement agent fee of $2,250   -    -    -    -    -    -    16,527,775    1,653    29,153    -    -         30,806 
Foreign currency translation adjustments   -    -    -    -    -    -    -    -    -    -    -    9,393    9,393 
Net loss for the three months ended June 30, 2022   -    -    -    -    -    -    -    -    -    -    (5,723,736)   -     (5,723,736)
Balances, June 30, 2022   159,666    100,000    821,377    190,000    25,000    $1,296    18,687,886,254    $1,868,789    $37,399,569    $(18,997)   $(71,177,661)   $9,393    $(31,917,611)

 

F-3
 

 

For the three and six months ended June 30, 2021:

 

   Series B   Series D   Series E   Series F   Series G   Amount   Shares   Amount   Capital   Stock   Deficit   Total 
                                   Additional             
   Preferred Stock   Common Stock   Paid-In   Treasury   Accumulated     
   Series B   Series D   Series E   Series F   Series G   Amount   Shares   Amount   Capital   Stock   Deficit   Total 
                                                 
Balances, January 1, 2021   159,666    100,000    821,377    180,000    25,000   $1,256    13,701,742,065   $1,370,174   $31,543,285   $(18,997)  $(72,765,594)  $(39,777,578)
Common shares issued for accrued executive compensation   -    -    -    -    -    -    7,500,000,000    750,000    -    -    -    750,000 
Net loss for the three months ended March 31, 2021   -    -    -    -    -    -    -    -    -    -    (6,022,373)   (6,022,373)
Balances, March 31, 2021   159,666    100,000    821,377    180,000    25,000   $1,256    21,201,742,065   $2,120,174   $31,543,285   $(18,997)  $(78,787,967)  $(45,049,951)
Return of common stock   -    -    -    -    -    -    (7,500,000,000)   (750,000)   -    -    -    (750,000)
Issuance of common stock to a noteholder upon conversion   -    -    -    -    -    -    400,315,100    40,032    -    -    -    40,032 
Net loss for the three months ended June 30, 2021   -    -    -    -    -    -    -    -    -    -    (43,932,848)   (43,932,848)
Balances, June 30, 2021   159,666    100,000    821,377    180,000    25,000   $1,256    14,102,057,165   $1,410,206   $31,543,285   $(18,997)  $(122,720,815)  $(89,692,767)

 

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

 

F-4
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2022 and 2021

 

     2022     2021 
  

For the Six Months Ended

June 30,

 
   2022   2021 
   (Unaudited)   (Unaudited) 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(6,773,273)  $(49,955,221)
Adjustment to reconcile net loss to net cash used in operating activities:          
Depreciation of equipment   7,702    - 
Amortization of licenses   14,430    - 
Amortization of debt discounts   45,592    - 
Stock based compensation   80,000    - 
Loss from derivative liabilities   5,852,321    49,360,801 
Changes in operating assets and liabilities:          
Accounts receivable   (20,744)   - 
Inventory   (3,157)   - 
Prepaid expenses   28,611    - 
Accounts payable and accrued expenses   647,282    594,420 
NET CASH USED IN OPERATING ACTIVITIES   (121,236)   - 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Acquisition of license   (27,247)   - 
NET CASH USED IN INVESTING ACTIVITIES   

(27,247

)   - 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from convertible debt financings   139,456    - 
Payments towards notes payable   (3,000)   - 
NET CASH PROVIDED BY FINANCING ACTIVITIES   136,456    - 
           
Exchange Rate Effect on Cash   9,393    - 
           
Net decrease in cash   (2,634)   - 
Cash at beginning of year   10,573    - 
Cash at end of period  $7,939   $- 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid for interest  $-   $- 
Cash paid for income taxes  $-   $- 
           
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:          
Common Stock issued in satisfaction of accrued executive compensation  $150,000   $- 
Common stock issued for accrued consulting fees  $300,000   $- 
Common Stock issued for prepaid marketing fees  $

25,000

    - 
Common Stock issued for license  $64,000   $- 
Common Stock and Warrants issued in connection with new convertible notes  $

139,456

   $- 
Common stock issued in satisfaction of convertible notes and accrued interest  $-   $

40,032

 

 

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

 

F-5
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE A – ORGANIZATION

 

CarbonMeta Technologies, Inc. (f/k/a CoroWare, Inc.) (“CarbonMeta”, the “Company”, “we”, “us”, or “our”) is a publicly quoted environmental research and development company that is commercializing technologies for processing organic wastes into hydrogen and high-value carbon products economically and sustainably.

 

The Company was incorporated on June 8, 2001 under the laws of the State of Nevada as SRM Networks, Inc. In connection with the acquisition of Hy-Tech Computer Systems, Inc. on January 31, 2003, the Company changed its name to Hy-Tech Technology Group, Inc. In connection with the Agreement and Plan of Merger of Robotics Workspace Technology, Inc., Innova Holdings, Inc. and the Company’s wholly owned subsidiary, RWT Acquisition, Inc., dated July 21, 2004, the Company’s named changed to Innova Holdings, Inc. Subsequently, the Company redomiciled in the State of Delaware and on November 20, 2006, the Company changed its name to Innova Robotics and Automation, Inc. and then on April 23, 2008, the Company changed its name to CoroWare, Inc. On or about July 28, 2021, the Company filed Articles of Amendment to its Amended and Restated Certificate of Incorporation with the State of Delaware to reflect a name change from CoroWare, Inc. to CarbonMeta Technologies, Inc.

 

The Company has six wholly-owned subsidiaries: CoroWare Technologies, Inc. (“CTI”), CoroWare Robotics Solutions, Inc. (“CRS”), Robotic Workspace Technologies, Inc. (“RWT”), Carbon Source, Inc. (“CS”), CoroWare Treasury, Inc. (“CWT”), and CarbonMeta Research Ltd. (“CMR”) and a 51% interest in AriCon, LLC (“AriCon”).

 

CoroWare Technologies, Inc. (“CTI”) was incorporated in the State of Florida on May 16, 2006, was administratively dissolved on November 19, 2016, and its principal business was a software professional services company with a strong focus on information technology integration and robotics integration, business automation solutions, and unmanned systems solutions to its customers in North America and Europe.

 

CoroWare Robotics Solutions, Inc. (“CRS”) was incorporated in the State of Texas on February 27, 2015, and its principal business was as a technology incubation company whose focus was on the delivery of mobile robotics and IOT products, solutions and services for university, government and corporate researchers, and enterprise customers. CRS’s business operations were discontinued in October 2016 when the Company’s gross margins and financing costs became unsustainable.

 

Robotic Workspace Technologies, Inc. (“RWT”) was incorporated in the State of Florida on July 1, 1994, was administratively dissolved on September 25, 2009, and its principal business was developing and marketing open-architecture PC controls and related products that could improve the performance, applicability, and productivity of robots and other automated equipment. RWT’s business operations were discontinued in September 2007 when the Company’s losses became unsustainable.

 

Carbon Source, Inc. (“CS”) was incorporated in the State of Wyoming on June 14, 2021 and its principal business is waste reclamation technologies and processing.

 

CoroWare Treasury, Inc. (“CWT”) was incorporated in the State of Wyoming on July 8, 2021 and its principal business is acquisitions related to acquiring technologies and subsidiary businesses related to waste processing.

 

CarbonMeta Research Ltd. (‘CMR”) was incorporated in England and Wales on August 12, 2021 and its principal business is the development of technologies and solutions for processing organic wastes and generating economically sustainable hydrogen and high-value carbon products.  Using proprietary and patented technologies, it plans to implement new industrial methods using inexpensive, environmentally friendly catalysts that process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes.

 

AriCon, LLC (“AriCon) was a joint venture that was intended to develop mobile robot platforms, applications, and solutions for the construction industry. In October 2016, AriCon ceased operations of all subsidiary business operations when the Company’s losses became unsustainable, and the Company was not able to obtain investment financing.

 

F-6
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE A – ORGANIZATION (continued)

 

In 2021, the Company began investigating emerging technologies, strategic intellectual property partnerships, and sustainable growth business opportunities related to the production of hydrogen and high value carbon products from organic waste streams. Working cooperatively with Oxford University Innovation, CarbonMeta plans to implement proven and patented technologies to add value to organic waste streams. By utilizing these proven proprietary technologies, collected and captured plastic waste material can be upcycled to high value products such as carbon nanotubes (“CNTs”) and hydrogen gas.

 

CNTs can be used for improved electrical conduction and reinforcing materials that are used in a wide variety of industries including the automotive industry, aviation industry, medical industry, and construction. The number one growth driver is the increasing need for high performance batteries for the electric vehicle market.

 

Plastic waste is a cheap and abundant feedstock that will allow the Company to scale quickly and produce hydrogen gas for a competitive price.

 

License Agreements

 

On June 2, 2021, the Company (the “Licensee”) entered into a License Agreement (the “Agreement”) with Oxford University Innovation Limited (the “Licensor”). Under the terms of the Agreement, the Licensee will license the licensed technology (OUI Project- Hydrogen from plastics via microwave-initiated catalytic dehydrogenation). The Agreement is non-exclusive and includes the United States and European Union. Signing fees for the Agreement were £54,807. The Royalty Rate is 5% of gross sales. The Agreement comprises milestone fees as: (i) £20,000 upon the first commercial sale of a licensed product; (ii) £50,000 upon generating $1,000,000 in sales; (iii) £10,000 upon the successful grant of the US patent; and (iv) £10,000 upon the successful grant of the EU patent.

 

On December 2, 2021, the Company (“Licensee”) entered into a License of Agreement (the “Agreement”) with Ecomena Limited (an entity located in the United Kingdom) (“Licensor”). Under the terms of the Agreement, the Licensee will license the Licensed Technology to recycle industrial byproduct into cement free pavers and mortars that are environmentally friendly and continuously absorb carbon dioxide. The signing fees payable to the Licensor under the Agreement are £20,000 cash (approximately $27,247 at February 17, 2022) which has not yet been paid by the Licensee, and 160,000,000 shares of the Company’s common stock, which was delivered to the Licensor on February 17, 2022. The royalty rate payable to the Licensor is 5% of product sales, subject to a minimum of £5,000 per year for license years 1 and 2, £3,000 for license year 3 and £1,000 for license year 4 and each license year thereafter. The term of the Agreement is five years from December 2, 2021 to December 2, 2026. The Licensee may terminate the Agreement for any reason at any time provided it gives Licensor six (6) months written notice to terminate expiring after December 2, 2024. If requested by the Licensee, the Licensor shall agree to the Agreement continuing in force after December 2, 2026.

 

Production Agreement

 

On January 11, 2022, the Company entered into an Interim Joint Product Development and Sales Representation Agreement (the “Agreement”) with Salvum Corporation. Under the terms of the Agreement, the parties agree to work together to develop both CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” and Salvum’s proprietary concrete alternative products known as “Earthcrete.” During the Term, Salvum agrees to manufacture CarbonMeta’s proprietary cementless paver products known as “Cementless Paver”. CarbonMeta reserves the right to appoint other manufacturers of the products and/or to engage other sales representatives for CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” outside the United States of America.

 

Service Award

 

On June 10, 2022, our subsidiary, CarbonMeta Research Ltd. (“CMR”), was granted a Service Award (entitled “Waste Plastic Catalysis Proof of Concept”) from Repsol S.A., a business company located in Spain. The award provides for CMR to provide Repsol with an initial prototype process for converting mixed waste plastic to hydrogen and solid carbon and for Repsol to pay CMR a total of 50,000 Euros in four installments as certain milestones are met. As of June 30, 2022, the first milestone entitling CMR to a payment of 20,000 Euros (approximately $20,744 at June 30, 2022) had been met and CMR’s invoice dated June 24, 2022 for 20,000 Euros was collected in July 2022.

 

F-7
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE A – ORGANIZATION (continued)

 

In order to further grow its business, the Company plans to:

 

  ● Develop and patent new microwave catalysis processes that can yield high value hydrogen and carbon products;
     
  ● Work closely with commercial building and solar farm general contractors that want to purchase “carbon negative” construction materials that can generate carbon credits;
     
  ● Acquire or develop patents that will help the Company generate royalty revenues with potential customers and partners, and protect the Company’s competitive position against potential competitors;
     
  ● Develop new proprietary and patented technologies to implement new industrial methods that can use inexpensive, environmentally friendly catalysts to process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes;
     
  ● seek out government programs in the United Kingdom, European Union and United States that encourage the development of high value production of hydrogen and high value carbon products from organic waste streams; and
     
  ● Attract investment funds who will actively work with the Company to achieve these goals and help the Company grow rapidly during the next 3 years.

 

We have unrestricted discretion in seeking and participating in a business opportunity, subject to the availability of such opportunities, economic conditions, and other factors.

 

The selection of a business opportunity in which to participate is complex and risky. Additionally, we have only limited resources and may find it difficult to locate good opportunities. There can be no assurance that we will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to us and our shareholders. We will select any potential business opportunity based on our management’s best business judgment.

 

Our activities are subject to several significant risks, which arise primarily as a result of the fact that we have no specific business and may acquire or participate in a business opportunity based on the decision of management, which potentially could act without the consent, vote, or approval of our shareholders. The risks faced by us are further increased as a result of our lack of resources and our inability to provide a prospective business opportunity with significant capital.

 

F-8
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE A – ORGANIZATION (continued)

 

Principal Products or Services and Markets

 

The Company is in the business of developing and marketing technologies and solutions that can process organic and construction wastes into economically high-value and ecologically sustainable products.

 

The Company is partnering with a microwave reactor manufacturer in the United States to “scale up” the patented waste plastics microwave processes that the Company licensed from Oxford University Innovation, and with a university partner in the United States to separate, purify and characterize carbon nanotubes that the UK and US developers shall produce.

 

The principal products that the Company intends to market comprise:

 

  ● amorphous carbon, graphite, nano-graphite, graphene, carbon nanotubes, and hydrogen
  ● carbon-negative building products that help alleviate climate change by capturing carbon dioxide (CO2) for renewable energy projects

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES

 

Interim Financial Statements

 

The accompanying unaudited financial statements are presented in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the six months ended June 30, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, 2022.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of CarbonMeta Technologies, Inc. and its wholly-owned subsidiaries, CoroWare Technologies, Inc., CoroWare Robotics Solutions, Inc., Robotic Workspace Technologies, Inc., Carbon Source, Inc., CoroWare Treasury, Inc., and CarbonMeta Research Ltd., as well as its 51% interest in ARiCon, LLC (collectively, the “Company”). All significant inter-company balances and transactions have been eliminated in the consolidated financial statements.

  

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses all available information and appropriate techniques to develop its estimates. However, actual results could differ from its estimates.

 

Foreign Currency Translation

 

The accompanying consolidated financial statements are presented in United States dollars (“$”), which is the reporting currency of the Company. The functional currency of CarbonMeta Research Ltd. (“CMR”) is the Great Britain pound (“GBP”); the functional currency of the Company and its other subsidiaries is the United States dollar. The assets and liabilities of CMR are translated at the GBR currency exchange rate at the end of the period ($1.216007 at June 30, 2022), the revenues and expenses of CMR are translated at the GBP average exchange rates during the period ($1.263580 for the six months ended June 30, 2022), and stockholders’ equity (deficit) of CMR is translated at the historical exchange rates. The resulting translation adjustments are included in determining other comprehensive income (loss). Transaction gains and losses, which were not significant for the periods presented, are reflected in the consolidated statements of operations.

 

Cash and Cash Equivalents

 

The Company considers highly liquid investments with original maturities of three months or less when purchased as cash equivalents. The Company had no cash equivalents as of June 30, 2022 and December 31, 2021. At times throughout the year, the Company might maintain bank balances that may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits. Periodically, the Company evaluates the credit worthiness of the financial institutions and has not experienced any losses in such accounts. As of June 30, 2022 and December 31, 2021, the Company did not have bank balances that exceeded the FDIC insured limits.

 

Property and Equipment

 

Property and equipment are recorded at cost. Expenditures for major renewals and improvements are capitalized while expenditures for minor replacements, maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and the related gain or loss, if any, is reflected in loss on disposal of assets in the unaudited condensed consolidated statement of income and comprehensive income.

 

At least annually, the Company evaluates, and adjusts when necessary, the estimated useful lives. There were no changes in estimated useful lives for the periods presented. The estimated useful lives are:

Computer equipment and software   5 years
Filament production equipment   3 years

 

F-9
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Licenses

 

The licenses acquired from Oxford University Innovation Limited and Ecomena Limited (see Note A) are stated at cost less accumulated amortization. For the Oxford license, amortization is calculated using the straight-line method over the 10-year estimated life of the license. For the Ecomena license, amortization is calculated using the straight-line method over the 5-year term of the license.

 

Impairment of Long-lived Assets

 

The Company evaluates the carrying value and recoverability of its long-lived assets when circumstances warrant such evaluation by applying the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-35, Property, Plant and Equipment, Subsequent Measurement (“ASC 360-35”). ASC 360-35 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

 

Income Taxes

 

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Additionally, taxes are calculated and expensed in accordance with applicable tax code.

 

Segment Reporting

 

FASB ASC 280-10, Segment Reporting, defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief decision maker in deciding how to allocate resources and in assessing performance. The Company reports according to one main segment.

 

Fair Value of Financial Instruments

 

The Company follows FASB ASC 820-10-35-37 (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

  

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
   
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
   
Level 3 Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts reported in the Company’s unaudited condensed consolidated financial statements for accounts receivable and accounts payable and accrued expenses approximate their fair value because of the immediate or short-term nature of these financial instruments. The carrying amounts reported in the balance sheet for its notes and loans payable approximates fair value as the contractual interest rate and features are consistent with similar instruments of similar risk in the marketplace.

 

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

 

F-10
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)

 

It is not, however, practical to determine the fair value of advances from stockholders, if any, due to their related party nature.

 

The following table presents assets and liabilities that are measured and recognized at fair value as of June 30, 2022 and December 31, 2021, on a recurring basis:

Assets and liabilities measured at fair value on a recurring basis at June 30, 2022   Level 1     Level 2     Level 3     Total Carrying Value  
                                 
Derivative liabilities   $          -     $ (17,756,391 )   $              -     $ (17,756,391 )

 

Assets and liabilities measured at fair value on a recurring basis at December 31, 2021   Level 1     Level 2     Level 3     Total
Carrying
Value		  
                                 
Derivative liabilities   $            -     $ (11,904,070 )   $            -     $ (11,904,070 )

 

Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for FASB ASC 815, Derivatives and Hedging (“ASC 815”).

 

Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards under “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the preferred stock transaction and the effective conversion price embedded in the preferred stock. ASC 815 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

 

Stock Based Compensation

 

The Company follows FASB ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the unaudited condensed consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity–based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

 

Through newly issued restricted common stock, the Company pays qualified contractors and advisors common shares in lieu of compensation for services provided including business development, management, technology development, consulting, legal services and accounting services.

 

F-11
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue Recognition

 

The Company will recognize revenue for its sales of energy products pursuant to the License Agreements with Oxford University Innovation Limited and Ecomena Limited (see Note A) when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is probable. Product sales will be recognized by us generally at the time product is shipped. Shipping and handling costs will be included in cost of goods sold.

 

Research and Development

 

Research and development costs relate to the development of new products, including significant improvements and refinements to existing products, and are expensed as incurred. Research and development expenses for the six months ended June 30, 2022 and 2021 were $8,644 and $0, respectively.

  

Basic and Diluted Loss per Common Share

 

The Company computes basic and diluted earnings per common share amounts in accordance with FASB ASC 260, Earnings per Share. Basic earnings per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

 

For the three and six months ended June 30, 2022 and 2021, the effect of common stock equivalents has been excluded from the calculation of diluted earnings per common share as their effect would be anti-dilutive.

 

The Company currently has convertible debt and preferred stock, which, if converted, as of June 30, 2022 and December 31, 2021, would have caused the Company to issue diluted shares totaling 38,041,114,549 and 32,963,937,306, respectively.

 

Dividend Policy

 

The Company has never declared or paid any cash dividends on its common stock. The Company anticipates that any earnings will be retained for development and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future. Additionally, as of June 30, 2022 and December 31, 2021, the Company has issued, and has outstanding, shares of Series B Preferred Stock which are entitled, prior to the declaration of any dividends on common stock, to earn a 5% dividend, payable in either cash or common stock of the Company. The Board of Directors has sole discretion to declare dividends based on the Company’s financial condition, results of operations, capital requirements, contractual obligations and other relevant factors. At June 30, 2022 and December 31, 2021, there were cumulative undeclared dividends to Preferred Series B shareholders of $123,742 and $119,750, respectively, the obligation for which is contingent on declaration by the board of directors. At June 30, 2022 and December 31, 2021, there were accrued unpaid declared dividends of $15,969 and $15,969, respectively (which are included in accounts payable and accrued expenses).

 

Recent Accounting Pronouncements

 

Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.

 

F-12
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE C – GOING CONCERN

 

The Company incurred a net loss in the amount of $6,773,273 during the six months ended June 30, 2022 compared to a net loss of $49,955,221 for the six months ended June 30, 2021. The Company has a working capital deficit of $32,105,798 and $26,006,260 as of June 30, 2022 and December 31, 2021, respectively. The Company has accumulated deficits of $71,177,661 and $64,404,388 as of June 30, 2022 and December 31, 2021, respectively. Because of these and other factors, the Company will require additional working capital to develop its business operations. The Company intends to raise additional working capital through the use of private placements, public offerings and/or bank financing.

 

There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placements, public offerings and/or bank financing necessary to support the Company’s working capital requirements. To the extent that funds generated from operations, any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company.

 

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

F-13
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE D – PROPERTY AND EQUIPMENT, NET

 

Property and equipment consists of the following at June 30, 2022 and December 31, 2021:

 

SCHEDULE OF PROPERTY AND EQUIPMENT

           
   June 30,   December 31, 
   2022   2021 
Computer equipment and software  $1,325   $1,325 
Filament production equipment   45,799    45,799 
Subtotal   47,124    47,124 
Less: accumulated depreciation   (10,406)   (2,704)
Property and equipment, net  $36,718   $44,420 

 

Depreciation expense for the six months ended June 30, 2022 and 2021 was $7,702 and $-0-, respectively.

 

NOTE E - LICENSES, NET

 

The licenses, net, consists of the following at June 30, 2022 and December 31, 2021:

   June 30,   December 31, 
   2022   2021 
License acquired from Oxford University Innovation Limited on June 2, 2021 (see Note A)  $79,256   $79,256 
License acquired from Ecomena Limited effective February 17, 2022 (see Note A)   91,247    - 
Subtotal   170,503    79,256 
Accumulated amortization   (19,034)   (4,603)
Licenses, net  $151,469   $74,653 

 

Amortization of licenses expense for the six months ended June 30, 2022 and 2021 was $14,430 and $0, respectively.

 

At June 30, 2022, the expected future amortization of licenses expense was:

Fiscal year ending December 31:    
2022 (excluding the six months ended June 30, 2022)  $13,145 
2023   26,175 
2024   26,176 
2025   26,175 
2026   26,176 
Thereafter   33,622 
Total  $151,469 

 

NOTE F – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consists of the following at June 30, 2022 and December 31, 2021:

   June 30,   December 31, 
   2022   2021 
Accounts payable  $1,381,033   $1,344,631 
Accrued interest   5,864,036    5,422,526 
Accrued CEO compensation   799,500    874,500 
Accrued payroll   110,335    111,368 
Deferred compensation to Chief Technology Officer of Company subsidiary, CoroWare Technologies, Inc.   230,993    230,993 
Payroll taxes payable   1,998,735    1,998,735 
Commissions payable   221,188    221,188 
Accrued consulting fees relating to the Mutual Release and Settlement Agreement dated July 19, 2021 with Y.A. Global Investments, LP (Note H)   50,000    350,000 
Accrued dividends on Series B Preferred Stock   15,969    15,969 
License fee payable to Ecomena Limited   27,247    - 
Other   140,109    71,954 
Total  $10,839,145   $10,641,864 

 

F-14
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

The accounts payable of $1,381,033 at June 30, 2022, which largely relate to year 2016 and prior, are liabilities of:

   June 30, 
   2022 
CarbonMeta Technologies, Inc.  $177,899 
CoroWare Technologies, Inc.   1,156,327 
CoroWare Robotics Solutions, Inc.   34,353 
Carbon Source, Inc.   3,197 
AriCon, LLC   9,257 
Total  $1,381,033 

 

The payroll taxes payable of $1,998,735 and commissions payable of $221,188 at June 30, 2022, which substantially all relate to year 2016 and prior, are all liabilities of CoroWare Technologies, Inc. On October 28, 2021, the Company CEO submitted an Offer in Compromise with the Internal Revenue Service to satisfy the trust fund portion (approximately $1,400,000) of the liability for $534,457 and paid $106,891 to the Internal Revenue Service with the offer. To date, the Internal Revenue Service has not yet accepted or declined this Offer in Compromise.

The accounts payable of $1,344,631 at December 31, 2021, which substantially all relate to year 2016 and prior, are liabilities of:

The payroll taxes payable of $1,998,735 and commissions payable of $221,188 at December 31, 2021, which also substantially all relate to year 2016 and prior, are all liabilities of CoroWare Technologies, Inc. On October 28, 2021, the Company CEO submitted an Offer in Compromise with the Internal Revenue Service to satisfy the trust fund portion (approximately $1,400,000) of the liability for $534,457 and paid $106,891 to the Internal Revenue Service with the offer. To date, the Internal Revenue Service has not yet accepted or declined this Offer in Compromise.

 

NOTE G – OBLIGATIONS COLLATERALIZED BY RECEIVABLES

 

Obligations collateralized by receivables consist of:

   June 30,   December 31, 
   2022   2021 
Quick Fix Capital August 17, 2015 arrangement  $48,907   $48,907 
Power Up January 8, 2016 arrangement   14,232    14,232 
Power Up April 12, 2016 arrangement   67,645    67,645 
Power Up April 28, 2016 arrangement   29,696    29,696 
Power Up June 2, 2016 arrangement   45,756    45,756 
Total  $206,236   $206,236 

 

The financing arrangements relating to the above liabilities were entered into between CoroWare Technologies, Inc. (“CTI”), a subsidiary of the Company, and lenders in 2015 and 2016. The agreements provided for financing plus debt discounts for CTI to repay to the lenders. The terms of repayment require CTI to remit to the lenders certain percentages of future receivables collections until such time as the balances are paid in full.

 

F-15
 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE H – CONVERTIBLE DEBT, NET

 

Convertible debt, net, consists of:

 

SCHEDULE OF CONVERTIBLE DEBT, NET

            Principal Balance at  Accrued Interest
Balance at
Lender 

Interest

Rate

 

Default

Rate

 

Conversion

Price

 

June 30,

2022

  December 31,
2021		  June 30,
2022		  December 31,
2021
                      
Westmount Holdings International, Ltd – loan date January 12, 2010 due on demand   14.00%   14.00%   (2)  $537,317   $537,317   $930,347   $893,044 
Tangiers Investment Group, LLC – loan date March 9, 2013 and due date of March 9, 2014, in technical default   10.00%   20.00%   (3)   -    -    891    891 
Tangiers Investment Group, LLC – loan date March 27, 2014 and due date of March 27, 2015, in technical default   10.00%   20.00%   (3)   75,000    75,000    114,657    107,219 
Tangiers Investment Group, LLC – due on demand   0.00%   15.00%   (3)   47,000    47,000    62,892    62,892 
Tangiers Investment Group, LLC – loan date October 11, 2016 and due date of October 20, 2017, in technical default   0.00%   20.00%   0.0001    10,000    10,000    6,663    6,663 
Tangiers Investment Group, LLC – loan date January 30, 2017 and due date of January 30, 2018, in technical default   10.00%   20.00%   0.001    30,910    30,910    18,445    18,445 
Tangiers Investment Group, LLC – loan date July 19, 2021 and due date of July 19, 2022   10.00%   20.00%  $0.001    105,000    105,000    9,982    4,775 
Tangiers Investment Group, LLC – loan date September 8, 2021 and due date of September 8, 2022   10.00%   20.00%  $0.001    105,000    105,000    8,486    3,279 
Tangiers Investment Group, LLC – loan date March 21, 2022 and due date of March 21, 2023   12.00%   16.00%   0.0002    55,000    -    1,826    - 
Lloyd T. Spencer (the Company’s sole officer and director) – loan date March 7, 2022 and due date of March 7, 2023   12.00%   16.00%   0.0002    66,000    -    2,495    - 
Dakota Capital Pty, Ltd – loan date April 8, 2014 and due date of December 31, 2014, in technical default   14.00%   14.00%   (4)   200,000    200,000    230,367    216,482 
Zoom Marketing – loan date August 23, 2013 and due date of January 23, 2014, in technical default   5.00%   10.00%   (9)   65,000    65,000    59,042    55,819 

Burrington

Capital, LLC – loan date April 2, 2014 and due date of October 1, 2014, in technical default

   10.00%   15.00%   (13)   25,000    25,000    58,389    52,447 
Patrick Ferro – loan date April 3, 2014 and due date of December 31, 2014, in technical default   14.00%   14.00%   (14)   26,825    26,825    36,810    34,948 
Barry Liben – loan date April 3, 2014 and due date of December 31, 2014, in technical default   0.00%   0.00%   (14)   52,800    52,800    -    - 
Jared Robert – loan date December 10, 2014 and due date of June 10, 2015, in technical default   10.00%   15.00%   (13)   20,000    20,000    40,171    35,883 
Raphael Cariou – loan date August 3, 2012 and due date of February 3, 2013, in technical default   10.00%   15.00%   (5)   7,000    7,000    22,894    20,763 
Raphael Cariou – loan date March 12, 2015 and due date of September 12, 2015, in technical default   24.00%   29.00%   (5)   82,178    82,178    581,024    493,167 
Raphael Cariou - loan date March 12, 2015 and due date of September 12, 2015, in technical default   24.00%   29.00%   (5)   94,178    94,178    650,952    552,242 
Redwood Management, LLC – loan date of March 21, 2011 and due date of March 18, 2013, in technical default   14.00%   14.00%   (2)   123,936    123,936    161,933    153,329 
AGS Capital Group, LLC – loan date of February 25, 2013 and due date of February 25, 2014, in technical default   14.00%   14.00%   (10)   8,640    8,640    109,355    101,485 
AGS Capital Group, LLC – loan date of February 25, 2013 and due date of February 25, 2014, in technical default   14.00%   14.00%   (10)   42,000    42,000    112,227    101,941 
Tim Burgess – loan date of July 8, 2003 and due date of January 8, 2004, in technical default   8.00%   15.00%  $1.00    50,000    50,000    140,633    136,914 
Azriel Nagar – loan date of July 8, 2003 and due date of January 8, 2004, in technical default   8.00%   15.00%  $1.00    50,000    50,000    140,633    136,914 
Kelburgh, Ltd – loan date of February 12, 2012 and due date of March 22, 2012, in technical default   10.00%   15.00%   (9)   13,000    13,000    47,631    43,311 
Premier IT Solutions – loan date of October 5, 2011 and due date of March 5, 2012, in technical default   10.00%   15.00%   (8)   21,962    21,962    84,672    77,073 
LG Capital Funding, LLC – loan date of March 11, 2014 and due date of March 11, 2015, in technical default   12.00%   24.00%   (12)   32,000    32,000    59,946    56,137 
LG Capital Funding, LLC – loan date of January 7, 2015 and due date of January 7, 2016, in technical default   12.00%   24.00%   (12)   20,625    20,625    34,548    32,094 
LG Capital Funding, LLC – loan date of March 11, 2014 and due date of March 11, 2015, in technical default   12.00%   24.00%   (12)   24,000    24,000    44,960    42,103 
Barclay Lyons – loan date of January 28, 2011 and due date of July 28, 2011 in technical default   21.00%   36.00%   (7)   10,750    10,750    43,403    41,484 
Blackridge Capital, LLC – loan date of April 2, 2011 and due date of July 28, 2011 in technical default   10.00%   15.00%   (8)   6,985    6,985    115,660    106,920 
Blackridge Capital, LLC – loan date of February 21, 2014 and due date of September 21, 2014 in technical default   8.00%   8.00%   (11)   5,000    5,000    4,521    4,152 
Julian Herskowitz – loan date of July 8, 2003 and due date of January 8, 2004 in technical default   8.00%   15.00%   (18)   -    -    16,287    16,287 
Patrick Tuohy – loan date of April 1, 2014 and due date of December 31, 2014 in technical default   14.00%   14.00%   (13)   -    -    153    153 
Richard Wynns – loan date July 22, 2005 and due date of December 31, 2006, in technical default   5.00%   5.00%  $0.15    7,500    7,500    7,313    7,127 
Richard Wynns - loan date July 26, 2010 and due date of December 31, 2011, in technical default   10.00%   10.00%   (6)   93,997    93,997    112,772    108,072 
MacRab LLC – loan date May 10, 2022 and due date of May 10, 2023   12.00%   16.00%  $0.0002    33,056    -    554    - 
Total                  2,147,659    1,993,603    4,073,534    3,724,455 
Less debt discounts                  (114,642)   (6,178)   -    - 
Net                 $2,033,017   $1,987,425   $4,073,534   $3,724,455 

 

F-16

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE H – CONVERTIBLE DEBT, NET (continued)

 

(1) n/a
(2) Lesser of (a) $0.02 or (b) 85% of the lowest closing price during the 30-day trading period prior to conversion.
(3) 50% of the lowest closing price during the 20-day trading period prior to conversion.
(4) Lesser of (a) $0.02 or (b) 50% of the lowest closing price during the 30-day trading period prior to conversion.
(5) 86.9565% of the average prices of the five trading days prior to the conversion date.
(6) 75% of the average of the three lowest closing prices during the 10-day trading period prior to conversion.
(7) 50% of the lesser of (i) the closing price on the day prior to conversion, or (ii) the volume-weighted-average closing price of the five-day trading period prior to conversion, though in no instance shall the conversion price be less than $0.0001.
(8) Average of the five trading days prior to the applicable conversion date, with the number of conversion shares multiplied by 115%.
(9) 85% of the average of the five trading days prior to the applicable conversion date.
(10) 35% of the lowest closing price during the 20-day trading period prior to conversion.
(11) 60% of the lowest closing price during the 30-day trading period prior to conversion
(12) 50% of the lowest closing price during the 10-day trading period prior to, and including the date of, conversion
(13) 60% of the lowest closing price during the 20-day trading period prior to conversion, or $0.01, whichever is lower.
(14) 50% of the average of the three lowest closing prices during the 30-day trading period prior to conversion, or $0.02, whichever is lower, with the conversion rate being rounded to $0.0001 or whole share.
(15) 45% of the lowest closing price during the 20-day trading period prior to, and including the date of, conversion.
(16) 50% of the average of the three lowest closing prices during the 20-day trading period prior to conversion.
(17) 85% of the average of the three lowest closing prices during the 20-day trading period prior to conversion.
(18) 65% of the lowest closing price during the 7-day trading period prior to conversion

 

F-17

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE I – NOTES PAYABLE

 

Notes payable consist of:

 

SCHEDULE OF NOTES PAYABLE

   Principal Balance   Accrued Interest Balance 
Description (i) 

June 30,

2022

  

December 31,

2021

  

June 30,

2022

  

December 31,

2021

 
                 
Total  $124,873   $127,873   $635,590   $578,661 
Gary Sumner June 29, 2017 note, interest at 5% compounded (default simple interest at 18%), due March 31, 2018  $45,000   $45,000   $110,172   $106,155 
LTC International Corp July 3, 2018 note, interest at 20.8% (default interest at 41.6%), due December 17, 2018   4,732    4,732    29,715    28,739 
Richard Wynns July 27, 2010 note, interest at 18% compounded (default compounded interest at 21%), due January 23, 2011   25,000    25,000    273,284    240,877 
William Rittman May 10, 2016 note, interest at 16% compounded, due August 29, 2016   -    3,000    -    - 
Barclay Lyons March 15, 2011 note, interest at 18.99% (default interest at 28.99%), due March 25, 2011   15,000    15,000    49,079    46,922 
John Kroon March 17, 2010 note, interest at 18% compounded (default compounded interest at 21%), due September 13, 2010   10,000    10,000    116,748    104,704 
Walter Jay Bell October 18, 2013 note, interest at 10%, due November 29, 2013   10,000    10,000    8,759    8,257 
Walter Jay Bell April 24, 2016 note, interest at 10%, due June 30, 2016   8,641    8,641    2,699    2,483 
George Ferch March 29, 2011 note, interest at 0% (default compounded interest at 21%), due June 27, 2011   5,000    5,000    44,145    39,572 
Blackridge, LLC April 11, 2012 note, interest at 5% (default interest at 5%), due May 25, 2012   1,500    1,500    989    952 
Total  $124,873   $127,873   $635,590   $578,661 

 

  (i) Unless otherwise noted, interest is simple interest.

 

NOTE J – NOTES PAYABLE, RELATED PARTIES

 

As of June 30, 2022 and December 31, 2021, the Company had an aggregate total of $0 and $199,415, respectively, in related party notes payable. These notes bear simple interest at rates ranging from 10% to 18% per annum, with default simple interest at rates ranging from 10% to 24% per annum. Accrued interest on related party notes payable totaled $447,581 and $426,110 at June 30, 2022 and December 31, 2021, respectively.

 

NOTE K – SMALL BUSINESS ADMINISTRATION LOAN

 

On April 17, 2002, the Company borrowed $989,100 under a note agreement with the Small Business Administration. The note bears interest at 4% and is secured by the equipment and machinery assets of the Company. The balance outstanding at June 30, 2022 and December 31, 2021 was $979,950 and $979,950, respectively. The note calls for monthly installments of principal and interest of $4,813 beginning September 17, 2002 and continuing until April 17, 2032.

 

F-18

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE K – SMALL BUSINESS ADMINISTRATION LOAN (continued)

 

The Company and the Small Business Administration reached an agreement in November 2010, whereby the Small Business Administration would accept $500 per month for 12 months with payment reverting back to $4,813 in November 2011. The Company only made four payments under the modification agreement. The Company continues to carry the loan as a current term liability because current payments are not being made, resulting in a default. Accrued interest payable on the note totaled $712,737 and $693,299 as of June 30, 2022 and December 31, 2021, respectively.

 

NOTE L – DERIVATIVE LIABILITIES

 

Effective July 31, 2009, the Company adopted ASC 815, which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The conversion price of certain convertible notes and convertible preferred stock are variable and subject to the fair value of the Company’s common stock on the date of conversion. As a result, the Company has determined that the conversion features are not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion of the instruments to be recorded as a derivative liability.

 

ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as items of other income or expense. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with convertible notes payable and preferred stock.

 

At origination and subsequent revaluations, the Company valued the derivative liabilities using the Black-Scholes options pricing model under the following assumptions as of June 30, 2022 and December 31, 2021:

  

June 30, 2022

  

December 31, 2021

 
         
Risk-free interest rate   

2.86

%   0.73%
Expected options life   

549 days

    

730 days

 
Expected dividend yield   -    - 
Expected price volatility   360.83%   341.14%

 

For the six months ended June 30, 2022, the Company’s derivative liabilities increased from $11,904,070 at December 31, 2021 to $17,756,391 at June 30, 2022 and the Company recognized a loss from derivative liabilities of $5,855,627. For the six months ended June 30, 2021, the Company’s derivative liabilities increased from $21,713,986 at December 31, 2020 to $71,074,787 at June 30, 2021 and the Company recognized a loss from derivative liabilities of $49,360,801.

 

NOTE M – PREFERRED STOCK

 

a) Series A Preferred Stock

 

The Company has authorized 125,000 shares of Series A Preferred Stock. Each share of Series A Preferred Stock (i) pays a dividend of 5%, payable at the discretion of the Company in cash or common stock, (ii) is convertible immediately after issuance into the Company’s common stock at the lesser of $3.00 per share or 75% of the average closing bid prices over the 20 trading days immediately preceding the date of conversion, (iii) has a liquidation preference of $1.00 per share, (iv) may be redeemed by the Company at any time up to five years after the issuance date for $1.30 per share plus accrued and unpaid dividends, and (v) has no voting rights except as provided by Delaware law.

 

There were no issuances, conversions or redemptions of Series A Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. At June 30, 2022 and December 31, 2021, the Company had 0 and 0 shares of Series A Preferred Stock issued and outstanding, respectively.

 

F-19

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE M – PREFERRED STOCK (continued)

 

b) Series B Preferred Stock

 

The Company has authorized 525,000 shares of Series B Preferred Stock. Each share of Series B Preferred Stock (i) pays a dividend of 5%, payable at the discretion of the Company in cash or common stock, (ii) is convertible immediately after issuance into the Company’s common stock at the lesser of $3,000 per share or 75% of the average closing bid prices over the 20 trading days immediately preceding the date of conversion, (iii) has a liquidation preference of $1.00 per share, (iv) may be redeemed by the Company at any time up to five years after the issuance date for $1.30 per share plus accrued and unpaid dividends, and (v) has no voting rights except as provided by Delaware law.

 

There were no issuances, conversions or redemptions of Series B Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. At June 30, 2022 and December 31, 2021, the Company had 159,666 and 159,666 shares of Series B Preferred Stock issued and outstanding, respectively.

 

Based upon the Company’s evaluation of the terms and conditions of the Series B Preferred Stock, the embedded conversion feature related to the Series B Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series B Preferred Stock of $254,677 and $177,743 as of June 30, 2022 and December 31, 2021, respectively. These amounts are included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $57,500, $131,783, $76,934, and ($142,471) were charged (credited) to derivative expense (income) for the three and six months ended June 30, 2022 and 2021, respectively.

 

c) Series C Preferred Stock

 

The Company has authorized 500,000 shares of Series C Preferred Stock. During 2007, the Company initiated a private offering under Regulation D of the Securities Act of 1933 (the “Private Offering”), of an aggregate 500,000 units (collectively referred to as the “Units”) at a price of $1.00 per Unit, with each Unit consisting of one share of Series C Preferred Stock at the lesser of 85% of the average closing bid price of the common stock over the 20 trading days immediately preceding the date of conversion, or $2,400 per share and stock purchase warrants equal to the number of shares of common stock converted from the Series C Preferred Stock, exercisable at $3,600 per share and which expire five years from the conversion date.

 

There were no issuances, conversions or redemptions of Series C Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. At June 30, 2022 and December 31, 2021, the Company had 0 and 0 shares of Series C Preferred Stock issued and outstanding, respectively.

 

d) Series D Preferred Stock

 

On November 10, 2011 the Board approved by unanimous written consent an amendment to the Company’s Certificate of Incorporation to designate the rights and preferences of Series D Preferred Stock. There are 500,000 shares of Series D Preferred Stock authorized with a par value of $0.001. Each share of Series D Preferred Stock has a stated value equal to $1.00. These preferred shares rank higher than all other securities. Each outstanding share of Series D Preferred Stock shall be convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price which is defined as 85% of the average closing bid price of the common stock over the twenty trading days immediately preceding the date of conversion, but no less than par value of the common stock. Mandatory conversion could have been demanded by the Company prior to October 1, 2013. Each share of the Series D Preferred Stock shall have voting rights equal to 100,000 votes of common stock.

 

F-20

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE M – PREFERRED STOCK (continued)

 

There were no issuances, conversions or redemptions of Series D Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. At June 30, 2022 and December 31, 2021 there were 100,000 shares of Series D Preferred Stock issued and outstanding.

 

Based upon the Company’s evaluation of the terms and conditions of the Series D Preferred Stock, the embedded conversion feature related to the Series D Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series D Preferred Stock of $394,939 and $396,956 as of June 30, 2022 and December 31, 2021, respectively. These amounts are included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $47,844, $1,292,033, ($2,017) and $1,792,033 were charged (credited) to derivative expense (income) for the three and six months ended June 30, 2022 and 2021, respectively.

 

e) Series E Preferred Stock

 

On March 9, 2012, the Company filed the Certificate of Designation of the Rights and Preferences of Series E Preferred Stock of the Company with the Delaware Secretary of the State pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 1,000,000 authorized shares of Series E Preferred Stock, par value $0.001 per share. The Series E Preferred Stock is convertible into common stock at 50% of the lowest closing bid price of the common stock over the 20 days immediately prior the date of conversion, but no less than the par value of the common stock.

 

There were no issuances, conversions or redemptions of Series E Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. At June 30, 2022 and December 31, 2021, there were 821,377 and 791,567 shares of Series E Preferred Stock issued and outstanding, respectively.

 

Based upon the Company’s evaluation of the terms and conditions of the Series E Preferred Stock, the embedded conversion feature related to the Series E Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series E Preferred Stock of $3,126,203 and $2,469,349 as of June 30, 2022 and December 31, 2021, respectively. These amounts are included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $275,240, $8,378,095, $656,854 and $11,723,554 were charged to derivative expense for the three and six months ended June 30, 2022 and 2021, respectively.

 

f) Series F Preferred Stock

 

On October 4, 2013, the Company filed the certificate of designation pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 500,000 authorized shares of Series F Preferred Stock, par value $0.001 per share.

 

F-21

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE M – PREFERRED STOCK (continued)

 

The shares of Series F Preferred Stock have a stated value of $1.00, have no voting rights, are entitled to no dividends due or payable and are convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price, which is defined as 85% of the average closing bid price of the common stock over the five trading days immediately preceding the date of conversion, but no less than the par value of the common stock. At any time after the issuance date through the fifth anniversary of the issuance of the Series F Preferred Stock, the Company shall have the option to redeem any unconverted shares at an amount equal to 130% of the stated value of the Series F Preferred Stock plus accrued and unpaid dividends, if any. Redemption shall be established by the Company in its sole and absolute discretion and no holder of Series F Preferred Stock may demand that the Series F Preferred Stock be redeemed.

 

There were no issuances, conversions or redemptions of Series F Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. At June 30, 2022 and December 31, 2021, the Company had 190,000 and 180,000 shares of Series F Preferred Stock issued and outstanding, respectively.

 

Based upon the Company’s evaluation of the terms and conditions of the Series F Preferred Stock, the embedded conversion feature related to the Series F Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series F Preferred Stock of $710,889 and $754,217 as of June 30, 2022 and December 31, 2021, respectively. These amounts are included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $51,408, ($771,901), ($43,328) and $178,099 were charged (credited) to derivative expense (income) for the three and six months ended June 30, 2022 and 2021, respectively.

 

g) Series G Preferred Stock

 

On April 17, 2014, the Company filed the certificate of designation pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 500,000 authorized shares of Series G Preferred Stock, par value $0.001 per share.

 

The shares of Series G Preferred Stock have a stated value of $1.00, have voting rights equal to 5,000,000 votes of common stock, are entitled to no dividends due or payable, are non-redeemable, and are convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price, which is defined as 85% of the average closing bid price of the common stock over the twenty trading days immediately preceding the date of conversion, but no less than par value of the common stock.

 

There were no issuances, conversions or redemptions of Series G Preferred Stock during the six months ended June 30, 2022 and during the year ended December 31, 2021. At June 30, 2022 and December 31, 2021, the Company had 25,000 and 25,000 shares of Series G Preferred Stock issued and outstanding, respectively.

 

Based upon the Company’s evaluation of the terms and conditions of the Series G Preferred Stock, the embedded conversion feature related to the Series G Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series G Preferred Stock of $98,735 and $99,239 as of June 30, 2022 and December 31, 2021, respectively. These amounts are included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $11,961, ($101,566), ($504) and $23,434 were charged (credited) to derivative expense (income) for the three and six months ended June 30, 2022 and 2021, respectively.

 

F-22

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE N – COMMON STOCK AND TREASURY STOCK

 

Common Stock

 

The Company is authorized to issue up to 35,000,000,000 shares of $0.0001 par value common stock, of which 18,499,705,254 and 17,403,876,165 shares were outstanding as of June 30, 2022 and December 31, 2021, respectively.

 

Issuances during the six months ended June 30, 2022:

 

On January 21, 2022, the Company issued 206,896,552 shares of common stock to a consultant for accrued consulting fees in connection with negotiating and arranging for the entry by the Company into a Mutual Release and Settlement Agreement with Y.A. Global Investments, LP dated July 19, 2021.

 

On January 21, 2022, the Company issued its sole officer and director, Lloyd Spencer, 428,571,428 shares of common stock for past due compensation in the amount of $150,000.

 

On February 14, 2022, the Company issued 83,333,334 shares of common stock to Salvum Corporationas per the terms of the Memorandum of Understanding to an Interim Joint Product Development and Sales Representation Agreement dated January 11, 2022 (see Note A, Production Agreement).

 

On February 14, 2022, the Company issued its sole officer and director, Lloyd Spencer, 30,000,000 shares of common stock as compensation for serving on the Board of Directors of CarbonMeta Research Ltd.

 

On February 14, 2022, the Company issued a total of 90,000,000 shares (30,000,000 shares each) of common stock to three other individuals as compensation for serving on the Board of Directors of CarbonMeta Research Ltd.

 

On February 17, 2022, the Company issued 160,000,000 shares of its common stock to Ecomena Limited (an entity located in the United Kingdom) pursuant to a License of Agreement dated December 2, 2021 between Ecomena Limited and CarbonMeta Technologies, Inc. (see Note A, License Agreements).

 

On March 7, 2022, the Company issued 33,000,000 shares of its common stock to Lloyd Spencer in connection with a $66,000 convertible note financing.

 

On March 21, 2022, the Company issued 27,500,000 shares of its common stock to Tangiers Investment Group, LLC in connection with a $55,000 convertible note financing.

 

On April 4, 2022, the Company issued 20,000,000 shares of its common stock to Bill Elder, a third-party contractor, as compensation for his business development services.

 

On May 10, 2022, the Company issued 16,527,775 shares of its common stock to MacRab, LLC in connection with a $33,056 convertible note financing.

 

Treasury Stock

 

As of June 30, 2022 and December 31, 2021, the Company held 188,181,000 and 188,181,000 shares of common stock in treasury, respectively.

 

F-23

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE O – STOCK OPTIONS AND WARRANTS

 

At June 30, 2022, the Company has outstanding a total of 864,375,000 warrants/options to the persons and upon the terms below:

 

Name  Date of Issuance 

Shares upon

Exercise of

warrants or

options

  

Exercise

Price

  

Expiration

Date

Lloyd Spencer (i)  March 7, 2022   165,000,000   $0.0004   March 7, 2027
Tangiers Investment Group, LLC (ii)  March 21, 2022   125,000,000    0.0004   March 21, 2027
MacRab, LLC (iii)  April 14, 2022   500,000,000    0.0004   April 14, 2027
MacRab, LLC (iv)  May 10, 2022   74,375,000    0.0004   May 10, 2027

Total

      

864,375,000

         

 

(i) On March 7, 2022, the Company issued Lloyd Spencer (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the amount of $66,000. The Note has a term of one (1) year (Maturity date of March 7, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. The transaction closed on March 7, 2022. In connection with this note, the Holder was issued warrants to purchase 165,000,000 shares of the Company’s Common Stock at $0.0004 per share.
   
(ii) On March 21, 2022, the Company issued Tangiers Investment Group, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the amount of $55,000. The Note has a term of one (1) year (Maturity date of March 21, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. The transaction closed on March 21, 2022. In connection with this note, the Holder was issued warrants to purchase 125,000,000 shares of the Company’s Common Stock at $0.0004 per share.
   
(iii) On April 14, 2022, the Company and MacRab, LLC (the “Investor”) entered into a Standby Equity Commitment Agreement (the “Agreement”) whereby the Company shall issue and sell to the Investor, from time to time, up to $5,000,000 of the Company’s common stock. Under the terms of the Agreement, the Purchase Price of the Company’s common stock shall be 88% of the Market Price on the date the Purchase Price is calculated. The Market Price shall mean the average of the two lowest volume weighted average prices of the Company’s common stock during the Valuation Period. The transaction closed on April 14, 2022. In connection with this note, the Holder was issued warrants to purchase 500,000,000 shares of the Company’s Common Stock at $0.0004 per share.
   
(iv) On May 10, 2022, the Company issued MacRab, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the amount of $33,056. The Note has a term of one (1) year (Maturity date of May 10, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. The transaction closed on May 10, 2022. In connection with this Note, the Holder was issued five-year warrants to purchase 74,375,000 shares of common stock at an exercise price of $0.0004 per share and 16,527,775 shares of common stock as commitment shares.

 

F-24

 

 

CARBONMETA TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2022 and 2021

(Unaudited)

 

NOTE P – SUBSEQUENT EVENTS

 

On July 14, 2022, the Company issued BHP Capital NY, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 14, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 62,500,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 212,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

On July 14, 2022, the Company issued Quick Capital, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 14, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 62,500,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 212,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

On July 15, 2022, the Company issued the Robert Papiri Defined Benefit Plan (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $10,000. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 25,000,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 85,000,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

On July 15, 2022, the Company issued the Robert Papiri Defined Contribution Plan (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $2,500. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 6,250,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 21,250,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

On July 15, 2022, the Company issued RGP Capital Partners, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $2,500. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 6,250,000 shares of the Company’s stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 21,250,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

On August 4, 2022, the Company issued RGP Capital Partners, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 27, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 25,000,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 85,000,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on August 4, 2022.

 

On September 12, 2022, the Company issued RGP Capital Partners, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $15,000. The Note has a term of one (1) year (Maturity date of September 12, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 37,500,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 127,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on September 12, 2022.

 

F-25

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  

To the Board of Directors and Stockholders of CarbonMeta Technologies, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of CarbonMeta Technologies, Inc. (the “Company”) as of December 31, 2021 and December 31, 2020 and the related consolidated statements of operations, stockholders’ 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 CarbonMeta Technologies, Inc. as of December 31, 2021 and December 31, 2020 and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

 

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 audit 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.

 

Emphasis of Matter Regarding Going Concern

 

The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note C to the financial statements, the Company’s present financial situation raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note C. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Critical Audit Matter

 

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

Derivative liability – Refer to Note L to the consolidated financial statements

 

As described in Note L to the consolidated financial statements, the Company’s consolidated balance sheet at December 31, 2021 included a derivative liability relating to certain convertible debt and convertible preferred stock of $11,904,070. The determination of the fair value of the derivative liability was calculated using a Black-Scholes option pricing model and required management to make significant estimates and assumptions and involved a high degree of subjectivity.

 

The principal considerations for our determination that performing procedures relating to the valuation of the derivative liability is a critical audit matter are (i) the significant judgement by management when developing the valuations and (ii) a high degree of auditor judgement, subjectivity, and effort in performing procedures relating to the valuations.

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among other things, evaluating the appropriateness of the assumptions used and the estimation methodology applied in the valuations.

 

/s/ Michael T. Studer CPA P.C.

Michael T. Studer CPA P.C.

 

Freeport, New York

July 29, 2022

 

We have served as the Company’s auditor since 2022.

 

F-26

 

 

CARBONMETA TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

 

   December 31,   December 31, 
   2021   2020 
         
ASSETS          
           
CURRENT ASSETS:          
Cash  $10,573   $- 
Prepaid consulting fees   30,000    - 
Total Current Assets   40,573    - 
           
Property and equipment, net of accumulated depreciation of $2,704 at December 31, 2021   44,420    - 
License, net of accumulated amortization of $4,603 at December 31, 2021   74,653    - 
TOTAL ASSETS  $159,646   $- 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES:          
Accounts payable and accrued expenses  $10,641,864   $11,944,374 
Obligations collateralized by receivables   206,236    295,811 
Convertible debt, net   1,987,425    4,549,479 
Notes payable   127,873    136,123 
Notes payable - related parties   199,415    157,854 
Small business administration loan   979,950    979,950 
Derivative liability   11,904,070    21,713,986 
Total Current Liabilities   26,046,833    39,777,577 
TOTAL LIABILITIES  $26,046,833   $39,777,577 
           
Commitments and contingencies   -    - 
           
STOCKHOLDERS’ DEFICIT:          
Redeemable convertible preferred stock, Series A, $0.001 par value, 125,000 shares authorized, 0 shares issued and outstanding   -    - 
Redeemable convertible preferred stock, Series B, $0.001 par value, 525,000 shares authorized, 159,666 and 159,666 shares issued and outstanding   160    160 
Redeemable convertible preferred stock, Series C, $0.001 par value, 500,000 shares authorized, 0 and 0 shares issued and outstanding   -    - 
Redeemable convertible preferred stock, Series D, $0.001 par value, 500,000 shares authorized, 100,000 and 100,000 shares issued and outstanding   100    100 
Redeemable convertible preferred stock, Series E, $0.001 par value, 1,000,000 shares authorized, 791,567 and 791,567 shares issued and outstanding, respectively   791    791 
Redeemable convertible preferred stock, Series F, $0.001 par value, 500,000 shares authorized, 180,000 and 180,000 shares issued and outstanding   180    180 
Redeemable convertible preferred stock, Series G, $0.001 par value, 500,000 shares authorized, 25,000 and 25,000 shares issued and outstanding   25    25 
Common stock; 35,000,000,000 and 35,000,000,000 shares authorized at $0.0001 par value, 17,592,057,165 and 13,701,742,065 shares issued, respectively; 17,403,876,165 and 13,513,561,065 shares outstanding, respectively   1,759,206    1,370,174 
Additional paid-in capital   36,775,736    31,543,325 
Treasury stock – 188,181,000 shares of common stock   (18,997)   (18,997)
Accumulated deficit   (64,404,388)   (72,673,335)
TOTAL STOCKHOLDERS’ DEFICIT   (25,887,187)   (39,777,577)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $159,646   $- 

 

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

 

F-27

 

 

CARBONMETA TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended December 31, 2021 and 2020

 

   December 31, 2021   December 31, 2020 
         
Revenues  $-  

$

- 
           
Operating expenses:          
Executive compensation   150,000    150,000 
Legal and professional fees   88,767    - 
Investor relations   53,334    - 
Consulting fees   75,170    - 
Sales and marketing   666    - 
Amortization of license   4,603    -
Depreciation of equipment   2,704    - 
Other operating expenses   

53,258

    - 
Total operating expenses   428,502    150,000 
           
Operating (loss)   (428,502)   (150,000)
           
Other income (expenses):          
Gain (loss) from derivative liability   9,809,916    (10,401,881)
Interest expense   (923,274)   (1,177,860)
Gain on extinguishment of debt   160,807    - 
Consulting fees relating to the Mutual Release and Settlement Agreement dated July 19, 2021 with Y.A. Global Investments, LP (Note H)    (350,000)   - 
Total other income (expenses) - net   8,697,449    (11,579,741)
           
Income (loss) before income taxes   8,268,947    (11,729,741)
Income tax provision   -    - 
Net income (loss)  $8,268,947   $(11,729,741)
           

Net income (loss) per common share – basic and diluted

  $0.00  $(0.00)
Basic and diluted weighted-average common shares outstanding   14,804,048,985    13,513,561,065 

 

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

 

F-28

 

 

CARBONMETA TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)

For the years ended December 31, 2021 and 2020

 

   Series B   Series D   Series E   Series F   Series G   Amount   Shares   Amount   Capital    Stock   Deficit   Total 
   Preferred Stock   Common Stock   Additional Paid-In    Treasury   Accumulated     
   Series B   Series D   Series E   Series F   Series G   Amount   Shares   Amount   Capital    Stock   Deficit   Total 
                                                  
Balances, December 31, 2019       159,666       100,000      791,567      180,000        25,000   $    1,256    13,701,742,065   $1,370,174   $31,543,325    $(18,997)  $(60,943,594)  $(28,047,836)
                                                              
Net loss for year ended December 31, 2020   -    -    -    -    -    -    -    -    -     -    (11,729,741)   (11,729,741)
                                                              
Balances, December 31, 2020   159,666    100,000    791,567    180,000    25,000   $1,256    13,701,742,065   $1,370,174   $31,543,325    $(18,997)  $(72,673,335)  $(39,777,577)
                                                              
Common stock issued for convertible debt   -    -    -    -    -    -    3,150,315,100    315,032    4,942,492     -    -    5,257,524 
                                                              
Sale of common stock, net of stock issue costs of $6,081   -    -    -    -    -    -    740,000,000    74,000    289,919     -    -    363,919 
                                                              
Net income for year ended December 31, 2021   -    -    -    -    -    -    -    -    -     -    8,268,947    8,268,947 
                                                              
Balances, December 31, 2021   159,666    100,000    791,567    180,000    25,000   $1,256    17,592,057,165   $1,759,206   $36,775,736    $(18,997)  $(64,404,388)  $(25,887,187)

 

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

 

F-29

 

 

CARBONMETA TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2021 and 2020

 

   December 31, 2021   December 31, 2020 
         
OPERATING ACTIVITIES:          
Net income (loss) for the period  $8,268,947   $(11,729,741)
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Depreciation of equipment   2,704    - 
Amortization of license   

4,603

    - 
Amortization of debt discounts   

3,822

    - 
Gain on extinguishment of debt   (160,807)   - 
Loss (gain) from derivative liability   (9,809,916)   10,401,881 
Changes in operating assets and liabilities:          
Accounts payable and accrued expenses   1,291,255    1,323,057 
Prepaid consulting fees   (30,000)   - 

NET CASH (USED IN) OPERATING ACTIVITIES

   (429,392)   (4,803)
           
INVESTING ACTIVITIES:          
Purchase of equipment   (47,124)   - 
Acquisition of license   (79,256)   - 

NET CASH USED IN INVESTING ACTIVITIES

   (126,380)   - 
           
FINANCING ACTIVITIES:          
Proceeds from obligations collateralized by receivables   -    4,803 
Payments towards obligations collateralized by receivables   (15,000)   - 
Proceeds from convertible debt financings   200,000    - 
Payments towards convertible debt   (17,886)     
Proceeds from sales of common stock   363,919    - 
Payments towards notes payable   (6,250)   - 
Proceeds from related party loans   112,061    - 
Payments towards related party loans   (70,500)   - 

NET CASH PROVIDED BY FINANCING ACTIVITIES

   566,344    4,803 
           
NET INCREASE (DECREASE) IN CASH   10,572    - 
           
CASH, BEGINNING OF PERIOD   -    - 
CASH, END OF PERIOD  $10,572   $- 
           

SUPPLEMENTAL CASH FLOW INFORMATION:

          
Cash paid during the year for:          
Interest  $-   $- 
Income taxes  $-   $- 

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

          
Conversion of convertible notes and accrued interest through the issuance of common stock  $5,257,524   $- 

 

 

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

 

F-30

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE A – ORGANIZATION

 

CarbonMeta Technologies, Inc. (f/k/a CoroWare, Inc.) (“CarbonMeta”, the “Company”, “we”, “us”, or “our”) is a publicly quoted environmental research and development company that is commercializing technologies for processing organic wastes into hydrogen and high-value carbon products economically and sustainably.

 

The Company was incorporated on June 8, 2001 under the laws of the State of Nevada as SRM Networks, Inc. In connection with the acquisition of Hy-Tech Computer Systems, Inc. on January 31, 2003, the Company changed its name to Hy-Tech Technology Group, Inc. In connection with the Agreement and Plan of Merger of Robotics Workspace Technology, Inc., Innova Holdings, Inc. and the Company’s wholly owned subsidiary, RWT Acquisition, Inc., dated July 21, 2004, the Company’s named changed to Innova Holdings, Inc. Subsequently, the Company redomiciled in the State of Delaware and on November 20, 2006, the Company changed its name to Innova Robotics and Automation, Inc. and then on April 23, 2008, the Company changed its name to CoroWare, Inc. On or about July 28, 2021, the Company filed Articles of Amendment to its Amended and Restated Certificate of Incorporation with the State of Delaware to reflect a name change from CoroWare, Inc. to CarbonMeta Technologies, Inc.

 

The Company has six wholly-owned subsidiaries: CoroWare Technologies, Inc. (“CTI”), CoroWare Robotics Solutions, Inc. (“CRS”), Robotic Workspace Technologies, Inc. (“RWT”), Carbon Source, Inc. (“CS”), CoroWare Treasury, Inc. (“CWT”), and CarbonMeta Research Ltd. (“CMR”) and a 51% interest in AriCon, LLC (“AriCon”).

 

CoroWare Technologies, Inc. (“CTI”) was incorporated in the State of Florida on May 16, 2006, was administratively dissolved on November 19, 2016, and its principal business was a software professional services company with a strong focus on information technology integration and robotics integration, business automation solutions, and unmanned systems solutions to its customers in North America and Europe.

 

CoroWare Robotics Solutions, Inc. (“CRS”) was incorporated in the State of Texas on February 27, 2015, and its principal business was as a technology incubation company whose focus was on the delivery of mobile robotics and IOT products, solutions and services for university, government and corporate researchers, and enterprise customers. CRS’s business operations were discontinued in October 2016 when the Company’s gross margins and financing costs became unsustainable.

 

Robotic Workspace Technologies, Inc. (“RWT”) was incorporated in the State of Florida on July 1, 1994, was administratively dissolved on September 25, 2009, and its principal business was developing and marketing open-architecture PC controls and related products that could improve the performance, applicability, and productivity of robots and other automated equipment. RWT’s business operations were discontinued in September 2007 when the Company’s losses became unsustainable.

 

F-31

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE A – ORGANIZATION (continued)

 

Carbon Source, Inc. (“CS”) was incorporated in the State of Wyoming on June 14, 2021 and its principal business is waste reclamation technologies and processing.

 

CoroWare Treasury, Inc. (“CWT”) was incorporated in the State of Wyoming on July 8, 2021 and its principal business is acquisitions related to acquiring technologies and subsidiary businesses related to waste processing.

 

CarbonMeta Research Ltd. (‘CMR”) was incorporated in England and Wales on August 12, 2021 and its principal business will focus on the development of technologies and solutions for processing organic wastes and generating economically sustainable hydrogen and high-value carbon products.  Using proprietary and patented technologies, it

plans to implement new industrial methods using inexpensive, environmentally friendly catalysts that process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes.

 

AriCon, LLC (“AriCon) was a joint venture that was intended to develop mobile robot platforms, applications, and solutions for the construction industry. In October 2016, AriCon ceased operations of all subsidiary business operations when the Company’s losses became unsustainable, and the Company was not able to obtain investment financing.

 

In 2021, the Company began investigating emerging technologies, strategic intellectual property partnerships, and sustainable growth business opportunities related to the production of hydrogen and high value carbon products from organic waste streams. Working cooperatively with Oxford University Innovation Limited, CarbonMeta plans to implement proven and patented technologies to add value to organic waste streams. By utilizing these proven proprietary technologies, collected and captured plastic waste material can be upcycled to high value products such as carbon nanotubes (“CNTs”) and hydrogen gas.

 

CNTs can be used for improved electrical conduction and reinforcing materials that are used in a wide variety of industries including the automotive industry, aviation industry, medical industry, and construction. The number one growth driver is the increasing need for high performance batteries for the electric vehicle market.

 

Plastic waste is a cheap and abundant feedstock that will allow the Company to scale quickly and produce hydrogen gas for a competitive price.

 

License Agreements

 

On June 2, 2021, the Company (the “Licensee”) entered into a License Agreement (the “Agreement”) with Oxford University Innovation Limited (the “Licensor”). Under the terms of the Agreement, the Licensee will license the licensed technology (OUI Project- Hydrogen from plastics via microwave-initiated catalytic dehydrogenation). The Agreement is non-exclusive and includes the United States and European Union. Signing fees for the Agreement were $55,713 (approximately $79,256 at June 2, 2021) and were paid on October 31, 2021. The Royalty Rate is 5% of gross sales. The Agreement comprises milestone fees as: (i) £20,000 upon the first commercial sale of a licensed product; (ii) £50,000 upon generating $1,000,000 in sales; (iii) £10,000 upon the successful grant of the US patent; and (iv) £10,000 upon the successful grant of the EU patent.

 

On December 2, 2021, the Company (“Licensee”) entered into a License of Agreement (the “Agreement”) with Ecomena Limited (an entity located in the United Kingdom) (“Licensor”). Under the terms of the Agreement, the Licensee will license the Licensed Technology to recycle industrial byproduct into cement free pavers and mortars that are environmentally friendly and continuously absorb carbon dioxide. The signing fees payable to the Licensor under the Agreement are £20,000 cash (approximately $27,247 at February 17, 2022) which has not yet been paid by the Licensee, and 160,000,000 shares of the Company’s common stock, which was delivered to the Licensor on February 17, 2022. The royalty rate payable to the Licensor is 5% of product sales, subject to a minimum of £5000 per year for license years 1 and 2, £3000 for license year 3 and £1000 for license year 4 and each license year thereafter. The term of the Agreement is five years from December 2, 2021 to December 2, 2026. The Licensee may terminate the Agreement for any reason at any time provided it gives Licensor six (6) months written notice to terminate expiring after December 2, 2024. If requested by the Licensee, the Licensor shall agree to the Agreement continuing in force after December 2, 2026.

 

In order to further grow its business, the Company plans to:

 

  ● Develop and patent new microwave catalysis processes that can yield high value hydrogen and carbon products;
     
  ● Work closely with commercial building and solar farm general contractors that want to purchase “carbon negative” construction materials that can generate carbon credits;
     
  ● Acquire or develop patents that will help the Company generate royalty revenues with potential customers and partners, and protect the Company’s competitive position against potential competitors;
     
  ● Develop new proprietary and patented technologies to implement new industrial methods that can use inexpensive, environmentally friendly catalysts to process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes;
     
  ● seek out government programs in the United Kingdom, European Union and United States that encourage the development of high value production of hydrogen and high value carbon products from organic waste streams; and
     
  ● Attract investment funds who will actively work with the Company to achieve these goals and help the Company grow rapidly during the next 3 years.

 

F-32

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE A – ORGANIZATION (continued)

 

Some potential merger/acquisition candidate have been identified and discussions initiated. These candidates are within the Company’s core business model, serving commercial properties, accretive to cash flow, and geographically favorable. While seeking to identify acquisition candidates, the Company seeks to identify target entities with a similar core business model or a model which naturally integrates with its own, and which are situated in opportunistic geographic locations.

 

We have unrestricted discretion in seeking and participating in a business opportunity, subject to the availability of such opportunities, economic conditions, and other factors.

 

The selection of a business opportunity in which to participate is complex and risky. Additionally, we have only limited resources and may find it difficult to locate good opportunities. There can be no assurance that we will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to us and our shareholders. We will select any potential business opportunity based on our management’s best business judgment.

 

Our activities are subject to several significant risks, which arise primarily as a result of the fact that we have no specific business and may acquire or participate in a business opportunity based on the decision of management, which potentially could act without the consent, vote, or approval of our shareholders. The risks faced by us are further increased as a result of its lack of resources and our inability to provide a prospective business opportunity with significant capital.

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of CarbonMeta Technologies, Inc. and its wholly-owned subsidiaries, CoroWare Technologies, Inc., CoroWare Robotics Solutions, Inc., Robotic Workspace Technologies, Inc., Carbon Source, Inc., CoroWare Treasury, Inc., and CarbonMeta Research Ltd., as well as its 51% interest in ARiCon, LLC (collectively, the “Company”). All significant inter-company balances and transactions have been eliminated in the consolidated financial statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses all available information and appropriate techniques to develop its estimates. However, actual results could differ from its estimates.

 

Cash and Cash Equivalents

 

The Company considers highly liquid investments with original maturities of three months or less when purchased as cash equivalents. The Company had no cash equivalents as of December 31, 2021 and 2020. At times throughout the year, the Company might maintain bank balances that may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits. Periodically, the Company evaluates the credit worthiness of the financial institutions and has not experienced any losses in such accounts. As of December 31, 2021 and 2020, the Company did not have bank balances that exceeded the FDIC insured limits.

 

F-33

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Expenditures for major renewals and improvements are capitalized while expenditures for minor replacements, maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and the related gain or loss, if any, is reflected in the consolidated statement of operations.

 

At least annually, the Company evaluates, and adjusts when necessary, the estimated useful lives. The changes in estimated useful lives did not have a material impact on depreciation in any period. The estimated useful lives are:

 

Computer equipment and software  5 years
Filament production equipment  3 years

 

License

 

The license acquired from Oxford University Innovation Limited (see Note A) is stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the 10-year estimated life of the license.

 

Impairment of Long-lived Assets

 

The Company evaluates the carrying value and recoverability of its long-lived assets when circumstances warrant such evaluation by applying the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-35, Property, Plant and Equipment, Subsequent Measurement (“ASC 360-35”). ASC 360-35 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

 

Income Taxes

 

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Additionally, taxes are calculated and expensed in accordance with applicable tax code.

 

F-34

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Segment Reporting

 

FASB ASC 280-10, Segment Reporting, defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief decision maker in deciding how to allocate resources and in assessing performance. The Company reports according to one main segment.

 

Fair Value of Financial Instruments

 

The Company follows FASB ASC 820-10-35-37 (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of its financial instruments.

Paragraph 820-10-35-37 establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
   
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
   
Level 3 Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts reported in the Company’s consolidated financial statements for cash and accounts payable and accrued expenses approximate their fair value because of the immediate or short-term nature of these financial instruments. The carrying amounts reported in the balance sheet for its notes and loans payable approximates fair value as the contractual interest rate and features are consistent with similar instruments of similar risk in the marketplace.

 

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

 

It is not, however, practical to determine the fair value of advances from stockholders, if any, due to their related party nature.

 

F-35

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)

 

The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2021 and 2020, on a recurring basis:

 

Assets and liabilities measured at fair value on a recurring basis at December 31, 2021  Level 1   Level 2   Level 3   Total Carrying Value 
                     
Derivative liabilities  $-   $(11,904,070)  $-   $(11,904,070)

 

Assets and liabilities measured at fair value on a recurring basis at December 31, 2020  Level 1   Level 2   Level 3   Total Carrying Value 
                     
Derivative liabilities  $-   $(21,713,986)  $-   $(21,713,986)

 

Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for FASB ASC 815, Derivatives and Hedging (“ASC 815”).

 

Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards under “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the preferred stock transaction and the effective conversion price embedded in the preferred stock. ASC 815 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

 

Stock Based Compensation

 

The Company follows FASB ASC 718, Compensation – Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity–based Payments to Non-Employees.  Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable:  (a) the goods or services received; or (b) the equity instruments issued.  The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.  

 

F-36

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Through newly issued restricted common stock, the Company pays qualified contractors and advisors common shares in lieu of compensation for services provided including business development, management, technology development, consulting, legal services and accounting services.

 

Revenue Recognition

 

The Company will recognize revenue for its sales of energy products pursuant to the License Agreement with Oxford University Innovation Limited (see Note A) when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is probable. Product sales will be recognized by us generally at the time product is shipped. Shipping and handling costs will be included in cost of goods sold.

 

Research and Development

 

Research and development costs relating to the development of new products, including significant improvements and refinements to existing products, will be expensed as incurred. Research and development expenses for the years ended December 31, 2021 and 2020 were $0 and $0, respectively.

 

F-37

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Basic and Diluted Income (Loss) per Common Share

 

The Company computes basic and diluted earnings per common share amounts in accordance with FASB ASC 260, Earnings per Share. Basic earnings per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

 

For the years ended December 31, 2021 and 2020, the effect of common stock equivalents has been excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive.

 

The Company currently has convertible debt and preferred stock, which, if converted, as of December 31, 2021 and 2020, would have caused the Company to issue diluted shares totaling 32,963,937,306 and 106,376,994,454 shares, respectively.

 

Dividend Policy

 

The Company has never declared or paid any cash dividends on its common stock. The Company anticipates that any earnings will be retained for development and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future. Additionally, as of December 31, 2021 and 2020, the Company has issued, and has outstanding, shares of Series B Preferred Stock which are entitled, prior to the declaration of any dividends on common stock, to earn a 5% dividend, payable in either cash or common stock of the Company. The Board of Directors has sole discretion to declare dividends based on the Company’s financial condition, results of operations, capital requirements, contractual obligations and other relevant factors. At December 31, 2021 and 2020, there were cumulative undeclared dividends to Preferred Series B shareholders of $119,750 and $111,767, respectively, the obligation for which is contingent on declaration by the board of directors. At December 31, 2021 and 2020, there were accrued unpaid declared dividends of $15,969 and $15,969, respectively (which are included in accounts payable and accrued expenses).

 

Recent Accounting Pronouncements

 

Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.

 

F-38

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE C – GOING CONCERN

 

The Company realized net income in the amount of $8,268,947 during the year ended December 31, 2021 compared to a net loss of $11,729,741 for the year ended December 31, 2020. The Company has a working capital deficit of $26,006,260 and $39,777,577 as of December 31, 2021 and 2020, respectively. The Company has accumulated deficits of $64,404,388 and $72,673,335 as of December 31, 2021 and 2020, respectively. Additionally, the Company is in default of substantially all of its debt and other obligations (see Notes F, H, I and K). Because of these and other factors, the Company will require additional working capital to develop its business operations. The Company intends to raise additional working capital through the use of private placements, public offerings and/or bank financing.

 

There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placements, public offerings and/or bank financing necessary to support the Company’s working capital requirements. To the extent that funds generated from operations, any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company.

 

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE D – PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net, consists of the following at December 31, 2021 and December 31, 2020:

 

   December 31,   December 31, 
   2021   2020 
Computer equipment and software  $

1,325

   $              - 
Filament production equipment   45,799    - 
Subtotal   47,124    - 
Less: accumulated depreciation   (2,704)   - 
Property and equipment, net  $44,420   $- 

 

Depreciation of equipment expense for the years ended December 31, 2021 and 2020 was $2,704 and $0, respectively.

 

NOTE E – LICENSE, NET

 

 

The license, net, consists of the following at December 31, 2021 and 2020:

 

 

    2021     2020  
    December 31,     December 31,  
    2021     2020  
License acquired from Oxford University Innovation Limited on June 2, 2021 (see Note A)   $ 79,256     $               -  
Accumulated amortization     (4,603 )      -  
License, net   $  74,653     $  -  

 

Amortization of license expense for the years ended December 31, 2021 and 2020 was $4,603 and $0, respectively.

 

At December 31, 2021, the expected future amortization of license expense was:

 

Fiscal year ending December 31:        
2022   $  7,926  
2023     7,925  
2024     7,926  
2025     7,925  
2026     7,926  
Thereafter     35,025  
Total   $ 74,653  

 

F-39

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE F – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consists of the following at December 31, 2021 and 2020:

   December 31,   December 31, 
   2021   2020 
Accounts payable  $1,344,631   $1,327,167 
Accrued interest   5,422,526    7,012,529 
Accrued CEO compensation   874,500    750,000 
Accrued payroll   

111,368

    111,368 
Deferred compensation to Chief Technology Officer of Company subsidiary, CoroWare Technologies, Inc.   

230,993

    230,993 
Payroll taxes payable   

1,998,735

    2,104,551 
Commissions payable   

221,188

    221,188 
Accrued consulting fees relating to the Mutual Release and Settlement Agreement dated July 19, 2021 with Y.A. Global Investments, LP (Note H)    350,000    - 
Accrued dividends on Series B Preferred Stock   

15,969

    15,969 
Credit cards payable   -    81,048 
Other   71,954    89,561 
Total  $10,641,864   $11,944,374 

 

The accounts payable of $1,344,631 at December 31, 2021, which substantially all relate to year 2016 and prior, are liabilities of:

 

    December 31,  
    2021  
CarbonMeta Technologies, Inc.   $ 139,409  
CoroWare Technologies, Inc.     1,156,327  
CoroWare Robotics Solutions, Inc.     34,353  
CoroWare Treasury, Inc.     5,285  
AriCon, LLC     9,257  
Total   $  1,344,631  

 

The payroll taxes payable of $1,998,735 and commissions payable of $221,188 at December 31, 2021, which also substantially all relate to year 2016 and prior, are all liabilities of CoroWare Technologies, Inc. On October 28, 2021, the Company CEO submitted an Offer in Compromise with the Internal Revenue Service to satisfy the trust fund portion (approximately $1,400,000) of the liability for $534,457 and paid $106,891 to the Internal Revenue Service with the offer. To date, the Internal Revenue Service has not yet accepted or declined this Offer in Compromise.

 

NOTE G –OBLIGATIONS COLLATERALIZED BY RECEIVABLES, NET

 

Obligations collateralized by receivables consist of:

    December 31,     December 31,  
    2021     2020  
Knight Capital July 16, 2015 arrangement   $ -     $ 76,317  
Quick Fix Capital August 17, 2015 arrangement     48,907       48,907  
Power Up January 8, 2016 arrangement     14,232       14,232  
Power Up April 12, 2016 arrangement     67,645       67,645  
Power Up April 28, 2016 arrangement     29,696       29,696  
Power Up June 2, 2016 arrangement     45,756       45,756  
Total   $  206,236     $  282,553  

 

The financing arrangements relating to the above liabilities were entered into between CoroWare Technologies, Inc. (“CTI”), a subsidiary of the Company, and lenders in 2015 and 2016. The agreements provided for financing plus debt discounts for CTI to repay to the lenders. The terms of repayment require CTI to remit to the lenders certain percentages of future receivables collections until such time as the balances are paid in full.

 

F-40

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE H – CONVERTIBLE DEBT, NET

CONVERTIBLE DEBT, NET

Convertible debt, net, consists of:

 

SCHEDULE OF CONVERTIBLE DEBT, NET

    Interest     Default     Conversion    Principal Balance at
December 31,		   

Accrued Interest Balance

at December 31,

  
Lender  Rate   Rate   Price   2021   2020    2021     2020  
YA Global Investments, LP - loan date February 5, 2016 and due date of April 30, 2016, in technical default    6.00%   18.00%   (1)  $-   $2,715,990    $ -      $

2,298,634
Westmount Holdings International, Ltd - loan date January 12, 2010 due on demand    14.00%   14.00%   (2)   537,317    537,317     

893,044

      

817,819

  
Tangiers Investment Group, LLC – loan date March 9, 2013 and due date of March 9, 2014, in technical default   

10.00

%   

20.00

%   

(3

)   -    -     

891

      

891

  
Tangiers Investment Group, LLC - loan date November 13, 2013 and due date of November 13, 2014, in technical default   10.00%   20.00%   (3)   -    17,000      -       

22,547

  
Tangiers Investment Group, LLC – loan date March 27, 2014 and due date of March 27, 2015, in technical default    10.00%   20.00%   (3)   75,000    75,000     

107,219

      

92,219

  
Tangiers Investment Group, LLC – due on demand   0.00%   15.00%   (3)   47,000    72,000     

62,892

      

61,264

  
Tangiers Investment Group, LLC – loan date October 11, 2016 and due date of October 20, 2017, in technical default   0.00%   20.00%   0.0001    10,000    10,000     

6,663

      

6,411

  
Tangiers Investment Group, LLC – loan date January 30, 2017 and due date of January 30, 2018, in technical default   10.00%   20.00%   0.001    30,910    30,910     

18,445

      

21,129

  
Tangiers Investment Group, LLC – loan date July 19, 2021 and due date of July 19, 2022   10.00%   20.00%  $0.001    105,000    -     

4,775

       -   
Tangiers Investment Group, LLC – loan date September 8, 2021 and due date of September 8, 2022   10.00%   20.00%  $0.001    105,000    -       3,279       -   
Dakota Capital Pty, Ltd – loan date April 8, 2014 and due date of December 31, 2014, in technical default    14.00%   14.00%   (4)   200,000    200,000     

216,482

      

188,842

  
Zoom Marketing – loan date August 23, 2013 and due date of January 23, 2014, in technical default   5.00%   10.00%   (9)   

65,000

    

65,000

     

55,819

       49,319  
Burrington Capital, LLC – loan date April 2, 2014 and due date of October 1, 2014, in technical default   10.00%   15.00%   (13)   

25,000

    

25,000

     

52,447

      

41,721

  
Patrick Ferro – loan date April 3, 2014 and due date of December 31, 2014, in technical default   14.00%   14.00%   (14)   

26,825

    

26,825

     

34,948

      

31,193

  
Barry Liben – loan date April 3, 2014 and due date of December 31, 2014, in technical default   0.00%   0.00%   (14)   

52,800

    

52,800

      -       -  
Jared Robert – loan date December 10, 2014 and due date of June 10, 2015, in technical default   10.00%   15.00%   (13)   

20,000

    

20,000

     

35,883

      

28,144

  
Raphael Cariou – loan date August 3, 2012 and due date of February 3, 2013, in technical default   10.00%   15.00%   (5)   7,000    7,000     

20,763

        16,918  
Raphael Cariou – loan date March 12, 2015 and due date of September 12, 2015, in technical default   24.00%   29.00%   (5)   82,178    82,178     

493,167

      

349,820

  
Raphael Cariou - loan date March 12, 2015 and due date of September 12, 2015, in technical default    24.00%   29.00%   (5)   94,178    94,178     

552,242

      

391,187

  
Redwood Management, LLC – loan date of March 21, 2011 and due date of March 18, 2013, in technical default    14.00%   14.00%   (2)   123,936    123,936     

153,329

      

135,978

  
AGS Capital Group, LLC – loan date of February 25, 2013 and due date of February 25, 2014, in technical default     14.00 %     14.00 %     (10 )     8,640       8,640       101,485       87,176   
AGS Capital Group, LLC – loan date of February 25, 2013 and due date of February 25, 2014, in technical default    

14.00

 %    

14.00

 %    

(10

 )      42,000       42,000       101,941       83,278  
Tim Burgess – loan date of July 8, 2003 and due date of January 8, 2004, in technical default     8.00 %     15.00 %   $ 1.00       50,000       50,000       136,914       129,414   
Azriel Nagar – loan date of July 8, 2003 and due date of January 8, 2004, in technical default     8.00 %     15.00 %   $ 1.00       50,000       50,000       136,914       129,414   
Kelburgh, Ltd – loan date of February 12, 2012 and due date of March 22, 2012, in technical default     10.00 %     15.00 %     (9 )     13,000       13,000       43,311      

35,512

  
Premier IT Solutions – loan date of October 5, 2011 and due date of March 5, 2012, in technical default     10.00 %     15.00 %     (8 )     21,962       21,962       77,073      

63,358

  
LG Capital Funding, LLC – loan date of March 11, 2014 and due date of March 11, 2015, in technical default     12.00 %     24.00 %     (12 )     32,000       32,000      

56,137

      

48,457

  
LG Capital Funding, LLC – loan date of January 7, 2015 and due date of January 7, 2016, in technical default     12.00 %     24.00 %     (12 )     20,625       20,625       32,094      

27,144

  
LG Capital Funding, LLC – loan date of March 11, 2014 and due date of March 11, 2015, in technical default     12.00 %     24.00 %     (12 )     24,000       24,000      

42,103

      

36,343

  
Barclay Lyons – loan date of January 28, 2011 and due date of July 28, 2011 in technical default     21.00 %     36.00 %     (7 )     10,750       10,750       41,484      

37,614

  
Blackridge Capital, LLC – loan date of April 2, 2011 and due date of July 28, 2011 in technical default     10.00 %     15.00 %     (8 )     6,985       6,985       106,920      

94,596

  
Blackridge Capital, LLC – loan date of February 21, 2014 and due date of September 21, 2014 in technical default     8.00 %     8.00 %     (11 )     5,000       5,000       4,152      

3,451

  
RBB Capital, LLC – loan date of June 2, 2011 and due date of June 1, 2012 in technical default     8.00 %     15.00 %     (16 )     -      

7,683

       -      

21,271

  
RBB Capital, LLC – loan date of June 29, 2011 and due date of June 29, 2012 in technical default     8.00 %     8.00 %     (17 )     -      

202

       -      

5,531

  
Julian Herskowitz – loan date of July 8, 2003 and due date of January 8, 2004 in technical default    

8.00

 %    

15.00

 %    

(18

 )    

-

      

-

      

16,287

      

16,287

  
Patrick Tuohy – loan date of April 1, 2014 and due date of December 31, 2014 in technical default    

14.00

 %    

14.00

 %    

(13

 )     

-

      

-

      

153

      

153

  
Richard Wynns – loan date July 22, 2005 and due date of December 31, 2006, in technical default   5.00%   5.00%  $0.15    7,500    7,500     

7,127

      

6,752

  
Richard Wynns - loan date July 26, 2010 and due date of December 31, 2011, in technical default    10.00%   10.00%   (6)   93,998    93,998     

108,072

      

98,672

  
Total                  1,993,603    4,549,479      3,724,455       5,474,608  
Less debt discounts                  (6,178)   -      -        -   
Net                 $1,987,425   $4,549,479    $ 3,724,455     $ 5,474,608  

 

(1) Lesser of (a) $0.0003 or (b) 50% of the lowest closing price during the 20-day trading period prior to conversion.
(2) Lesser of (a) $0.02 or (b) 85% of the lowest closing price during the 30-day trading period prior to conversion.
(3) 50% of the lowest closing price during the 20-day trading period prior to conversion.
(4) Lesser of (a) $0.02 or (b) 50% of the lowest closing price during the 30-day trading period prior to conversion.
(5) 86.9565% of the average prices of the five trading days prior to the conversion date.
(6) 75% of the average of the three lowest closing prices during the 10-day trading period prior to conversion.
(7) 50% of the lesser of (i) the closing price on the day prior to conversion, or (ii) the volume-weighted-average closing price of the five-day trading period prior to conversion, though in no instance shall the conversion price be less than $0.0001.
(8) Average of the five trading days prior to the applicable conversion date, with the number of conversion shares multiplied by 115%.
(9) 85% of the average of the five trading days prior to the applicable conversion date.
(10) 35% of the lowest closing price during the 20-day trading period prior to conversion.
(11) 60% of the lowest closing price during the 30-day trading period prior to conversion
(12) 50% of the lowest closing price during the 10-day trading period prior to, and including the date of, conversion
(13) 60% of the lowest closing price during the 20-day trading period prior to conversion, or $0.01, whichever is lower.
(14) 50% of the average of the three lowest closing prices during the 30-day trading period prior to conversion, or $0.02, whichever is lower, with the conversion rate being rounded to $0.0001 or whole share.
(15) 45% of the lowest closing price during the 20-day trading period prior to, and including the date of, conversion.
(16) 50% of the of the average of the three lowest closing prices during the 20-day trading period prior to conversion.
(17) 85% of the of the average of the three lowest closing prices during the 20-day trading period prior to conversion.
(18) 65% of the lowest closing price during the 7-day trading period prior to conversion

 

On July 19, 2021, the Company entered into a Settlement Agreement with Y.A. Global Investments, LP (“YA Global”). Pursuant to the Settlement Agreement, the Company issued a total of 2,225,000,000 shares of its common stock to YA Global from September 24, 2021 to October 13, 2021 (see Note N) in full settlement of its then $5,192,492 ($2,715,910 principal plus $2,476,582 accrued interest) liability to YA Global.

 

In the Company’s evaluation of each convertible debt instrument in accordance with FASB ASC 815, Derivatives and Hedging, based on the variable conversion price, it was determined that the conversion features were not afforded the exemption as a conventional convertible instrument and did not otherwise meet the conditions for equity classification. As such, the conversion and other features were compounded into one instrument, bifurcated from the debt instrument and carried as a derivative liability, at fair value (Please see NOTE L – DERIVATIVE LIABILITY for further information). As of December 31, 2021 and December 31, 2020, debt discounts related to convertible notes payable totaled $6,178 and $0, respectively.

 

NOTE I – NOTES PAYABLE

 

Notes payable consist of:

   Principal Balance   Accrued Interest Balance 
   December 31,   December 31, 
Description (i)  2021   2020   2021   2020 

 

 

  $   $   $    

$

 
Gary Sumner June 29, 2017 note, interest at 5% compounded (default simple interest at 18%), due March 31, 2018  $45,000   $45,000   $106,155    

$

98,055  
LTC International Corp July 3, 2018 note, interest at 20.8% (default interest at 41.6%), due December 17, 2018   4,732    4,732    28,739    26,770  
Richard Wynns July 27, 2010 note, interest at 18% compounded (default compounded interest at 21%), due January 23, 2011   25,000    25,000    240,877    190,908  
William Rittman May 10, 2016 note, interest at 16% compounded, due August 29, 2016   3,000    11,250    -    8,545  
Barclay Lyons March 15, 2011 note, interest at 18.99% (default interest at 28.99%), due March 25, 2011   15,000    15,000    46,922    42,574  
John Kroon March 17, 2010 note, interest at 18% compounded (default compounded interest at 21%), due September 13, 2010   10,000    10,000    104,704    83,146  
Walter Jay Bell October 18, 2013 note, interest at 10%, due November 29, 2013   10,000    10,000    8,257    7,246  
Walter Jay Bell April 24, 2016 note, interest at 10%, due June 30, 2016   8,641    8,641    2,483    2,046  
George Ferch March 29, 2011 note, interest at 0% (default compounded interest at 21%), due June 27, 2011   5,000    5,000    39,572    31,195  
Blackridge, LLC April 11, 2012 note, interest at 5% (default interest at 5%), due May 25, 2012   1,500    1,500    952    877  
Total  $127,873   $136,123  

$

578,661   $491,362  

 

(i)Unless otherwise noted, interest is simple interest.

 

F-41

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE J – NOTES PAYABLE, RELATED PARTIES

 

As of December 31, 2021 and 2020, the Company had an aggregate total of $199,415 and $157,854, respectively, in related party notes payable. These notes bear simple interest at rates ranging from 10% to 18% per annum, with default simple interest at rates ranging from 10% to 24% per annum. Accrued interest on related party notes payable totaled $426,110 and $390,342 at December 31, 2021 and 2020, respectively.

 

NOTE K – SMALL BUSINESS ADMINISTRATION LOAN

 

On April 17, 2002, the Company borrowed $989,100 under a note agreement with the Small Business Administration. The note bears interest at 4% and is secured by the equipment and machinery assets of the Company. The balance outstanding at December 31, 2021 and 2020 was $979,950 and $979,950, respectively. The note calls for monthly installments of principal and interest of $4,813 beginning September 17, 2002 and continuing until April 17, 2032.

 

The Company and the Small Business Administration reached an agreement in November 2010, whereby the Small Business Administration would accept $500 per month for 12 months with payment reverting back to $4,813 in November 2011. The Company only made four payments under the modification agreement. The Company continues to carry the loan as a current term liability because current payments are not being made, resulting in a default. Accrued interest payable on the note totaled $693,299 and $654,101 as of December 31, 2021 and 2020, respectively.

 

NOTE L – DERIVATIVE LIABILITY

 

Effective July 31, 2009, the Company adopted ASC 815, which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The conversion price of certain convertible notes and convertible preferred stock are variable and subject to the fair value of the Company’s common stock on the date of conversion. As a result, the Company has determined that the conversion features are not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion features of the instruments to be recorded as a derivative liability.

 

F-42

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE L – DERIVATIVE LIABILITY (continued)

 

ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as items of other income or expense. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with convertible notes payable and preferred stock.

 

At origination and subsequent revaluations, the Company valued the derivative liabilities using the Black-Scholes options pricing model under the following assumptions as of December 31, 2021 and 2020:

 

  
December 31, 2021		  


December 31, 2020

 
         
Risk-free interest rate   0.73%   0.13-0.36% 
Expected options life   1 - 2 yrs    

1-3 yrs

Expected dividend yield   -    - 
Expected price volatility   341%   693%

 

For the year ended December 31, 2021, the Company’s derivative liability decreased from $21,713,986 at December 31, 2020 to $11,904,070 at December 31, 2021, and the Company recognized a gain from derivative liability of $9,809,916. For the year ended December 31, 2020, the Company’s derivative liability increased from $11,312,105 at December 31, 2019 to $21,713,986 at December 31, 2020 and the Company recognized a loss from derivative liability of $10,401,881.

 

NOTE M – PREFERRED STOCK

 

a) Series A Preferred Stock

 

The Company has authorized 125,000 shares of Series A Preferred Stock. Each share of Series A Preferred Stock (i) pays a dividend of 5%, payable at the discretion of the Company in cash or common stock, (ii) is convertible immediately after issuance into the Company’s common stock at the lesser of $3,000 per share (as adjusted for the November 20, 2006 1 for 10, the April 8, 2009 1 for 300 and the July 12, 2012 1 for 200 reverse stock splits) or 75% of the average closing bid prices over the 20 trading days immediately preceding the date of conversion, (iii) has a liquidation preference of $1.00 per share, (iv) may be redeemed by the Company at any time up to five years after the issuance date for $1.30 per share plus accrued and unpaid dividends, and (v) has no voting rights except as provided by Delaware law.

 

There were no issuances, conversions or redemptions of Series A Preferred Stock during the years ended December 31, 2021 and December 31, 2020. At December 31, 2021 and 2020, the Company had 0 and 0 shares of Series A Preferred Stock issued and outstanding, respectively.

 

b) Series B Preferred Stock

 

The Company has authorized 525,000 shares of Series B Preferred Stock. Each share of Series B Preferred Stock (i) pays a dividend of 5%, payable at the discretion of the Company in cash or common stock, (ii) is convertible immediately after issuance into the Company’s common stock at the lesser of $3,000 per share (as adjusted for the November 20, 2006 1 for 10, the April 8, 2009 1 for 300 and the July 12, 2012 1 for 200 reverse stock splits) or 75% of the average closing bid prices over the 20 trading days immediately preceding the date of conversion, (iii) has a liquidation preference of $1.00 per share, (iv) may be redeemed by the Company at any time up to five years after the issuance date for $1.30 per share plus accrued and unpaid dividends, and (v) has no voting rights except as provided by Delaware law.

 

F-43

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE M – PREFERRED STOCK (continued)

 

There were no issuances, conversions or redemptions of Series B Preferred Stock during the years ended December 31, 2021 and December 31, 2020. At December 31, 2021 and 2020, the Company had 159,666 and 159,666 shares of Series B Preferred Stock issued and outstanding, respectively.

 

Based upon the Company’s evaluation of the terms and conditions of the Series B Preferred Stock, the embedded conversion feature related to the Series B Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series B Preferred Stock of $177,743 and $425,776 as of December 31, 2021 and 2020, respectively. These amounts are included as a derivative liability on the Company’s consolidated balance sheet. Fair value adjustments of $248,033 and ($212,888) were credited (charged) to derivative income (expense) for the years ended December 31, 2021 and 2020, respectively.

 

c) Series C Preferred Stock

 

The Company has authorized 500,000 shares of Series C Preferred Stock. During 2007, the Company initiated a private offering under Regulation D of the Securities Act of 1933 (the “Private Offering”), of an aggregate 500,000 units (collectively referred to as the “Units”) at a price of $1.00 per Unit, with each Unit consisting of one share of Series C Preferred Stock convertible at the lesser of 85% of the average closing bid price of the common stock over the 20 trading days immediately preceding the date of conversion, or $0.04 per share and stock purchase warrants equal to the number of shares of common stock converted from the Series C Preferred Stock, exercisable at $0.06 per share and which expire five years from the conversion date.

 

There were no issuances, conversions or redemptions of Series C Preferred Stock during the years ended December 31 2021 and 2020. At December 31, 2021 and 2020, the Company had 0 and 0 shares of Series C Preferred Stock issued and outstanding, respectively.

 

d) Series D Preferred Stock

 

On November 10, 2011, the Board approved by unanimous written consent an amendment to the Company’s Certificate of Incorporation to designate the rights and preferences of Series D Preferred Stock. There are 500,000 shares of Series D Preferred Stock authorized with a par value of $0.001. Each share of Series D Preferred Stock has a stated value equal to $1.00. These preferred shares rank higher than all other securities. Each outstanding share of Series D Preferred Stock shall be convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price which is defined as 85% of the average closing bid price of the common stock over the twenty trading days immediately preceding the date of conversion, but no less than par value of the common stock. Mandatory conversion can be demanded by the Company prior to October 1, 2013. Each share of the Series D Preferred Stock shall have voting rights equal to 100,000 votes of common stock.

 

There were no issuances, conversions or redemptions of Series D Preferred Stock during the years ended December 31, 2021 and 2020. At December 31, 2021 and 2020, there were 100,000 and 100,000 shares of Series D Preferred Stock issued and outstanding, respectively.

 

F-44

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE M – PREFERRED STOCK (continued)

 

Based upon the Company’s evaluation of the terms and conditions of the Series D Preferred Stock, the embedded conversion feature related to the Series D Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series D Preferred Stock of $396,956 and $200,000 as of December 31, 2021 and 2020, respectively. These amounts are included as a derivative liability on the Company’s consolidated balance sheet. Fair value adjustments of ($196,956) and ($100,000) were charged to derivative income (expense) for the years ended December 31, 2021 and 2020, respectively.

 

e) Series E Preferred Stock

 

On March 9, 2012, the Company filed the Certificate of Designation of the Rights and Preferences of Series E Preferred Stock of the Company with the Delaware Secretary of the State pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 1,000,000 authorized shares of Series E Preferred Stock, par value $0.001 per share. The Series E Preferred Stock is convertible into common stock at 50% of the lowest closing bid price of the common stock over the 20 days immediately prior to the date of conversion, but no less than the par value of the common stock.

 

There were no issuances, conversions or redemptions of Series E Preferred Stock during the years ended December 31, 2021 and 2020. At December 31, 2021 and 2020, there were 791,567 and 791,567 shares of Series E Preferred Stock issued and outstanding, respectively.

 

Based upon the Company’s evaluation of the terms and conditions of the Series E Preferred Stock, the embedded conversion feature related to the Series E Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series E Preferred Stock of $2,469,349 and $1,388,822 as of December 31, 2021 and 2020, respectively. These amounts are included as a derivative liability on the Company’s consolidated balance sheet. Fair value adjustments of ($1,080,527), and ($622,071) were charged to derivative income (expense) for the years ended December 31, 2021 and 2020, respectively.

 

f) Series F Preferred Stock

 

On October 4, 2013, the Company filed the certificate of designation pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 500,000 authorized shares of Series F Preferred Stock, par value $0.001 per share.

 

F-45

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE M – PREFERRED STOCK (continued)

 

The shares of Series F Preferred Stock have a stated value of $1.00, have no voting rights, are entitled to no dividends due or payable and are convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price, which is defined as 85% of the average closing bid price of the common stock over the five trading days immediately preceding the date of conversion, but no less than the par value of the common stock. At any time after the issuance date through the fifth anniversary of the issuance of the Series F Preferred Stock, the Company shall have the option to redeem any unconverted shares at an amount equal to 130% of the stated value of the Series F Preferred Stock plus accrued and unpaid dividends, if any. Redemption shall be established by the Company in its sole and absolute discretion and no holder of Series F Preferred Stock may demand that the Series F Preferred Stock be redeemed.

 

There were no issuances, conversions or redemptions of Series F Preferred Stock during the years ended December 31, 2021 and 2020. At December 31, 2021 and 2020, the Company had 180,000 and 180,000 shares of Series F Preferred Stock issued and outstanding, respectively.

 

Based upon the Company’s evaluation of the terms and conditions of the Series F Preferred Stock, the embedded conversion feature related to the Series F Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series F Preferred Stock of $754,217 and $380,000 as of December 31, 2021 and 2020, respectively. These amounts are included as a derivative liability on the Company’s consolidated balance sheet. Fair value adjustments of ($374,217), and ($190,000) were charged to derivative income (expense) for the years ended December 31, 2021 and 2020, respectively.

 

g) Series G Preferred Stock

 

On April 17, 2014, the Company filed the certificate of designation pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 500,000 authorized shares of Series G Preferred Stock, par value $0.001 per share.

 

The shares of Series G Preferred Stock have a stated value of $1.00, have voting rights equal to 5,000,000 votes of common stock, are entitled to no dividends due or payable, are non-redeemable, and are convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price, which is defined as 85% of the average closing bid price of the common stock over the twenty trading days immediately preceding the date of conversion, but no less than par value of the common stock.

 

There were no issuances, conversions or redemptions of Series G Preferred Stock during the years ended December 31, 2021 and 2020. At December 31, 2021 and 2020, the Company had 25,000 and 25,000 shares of Series G Preferred Stock issued and outstanding, respectively.

 

Based upon the Company’s evaluation of the terms and conditions of the Series G Preferred Stock, the embedded conversion feature related to the Series G Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.

 

F-46

 

 

CARBONMETA TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2021 and 2020

 

NOTE M – PREFERRED STOCK (continued)

 

The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series G Preferred Stock of $99,239 and $50,000 as of December 31, 2021 and 2020, respectively. These amounts are included as a derivative liability on the Company’s consolidated balance sheet. Fair value adjustments of ($49,239) and ($25,000) were charged to derivative income (expense) for the years ended December 31, 2021 and 2020, respectively.

 

NOTE N – COMMON STOCK AND TREASURY STOCK

 

Common Stock

 

The Company is authorized to issue up to 35,000,000,000 shares of $0.0001 par value common stock, of which 17,403,876,165 and 13,513,561,065 shares were outstanding as of December 31, 2021 and 2020, respectively.

 

Issuances during the year ended December 31, 2021:

 

On March 9, 2021, the Company issued 7,500,000,000 shares of its common stock to its sole officer and director, Lloyd Spencer, as compensation for accrued wages of $750,000 for fiscal years 2016, 2017, 2018, 2019 and 2020.

 

On May 28, 2021, the Company issued 400,315,100 shares of common stock to a noteholder (Tangiers Investment Group, LLC) in satisfaction of $17,000 principal and $23,032 interest.

 

On June 4, 2021, the Company’s sole officer and director, Lloyd Spencer, returned 7,500,000,000 shares of common stock previously issued to Mr. Spencer on March 9, 2021 (see second preceding paragraph) for accrued compensation so that the shares may be used for future business transactions.

 

On August 10, 2021, the Company issued 250,000,000 shares of common stock to a noteholder (Y.A. Global Investments, LP) in satisfaction of $25,000 principal against a convertible note.

 

On September 14, 2021, the Company issued 250,000,000 shares of common stock to a noteholder (Tangiers Investment Group, LLC) in satisfaction of $25,000 principal against a convertible note.

 

On September 24, 2021, the Company issued 666,666,666 shares of common stock to a noteholder (YA Global Investments, LP) in satisfaction of $200,000 principal against a convertible note.

 

On September 27, 2021, the Company issued 666,666,666 shares of common stock to a noteholder (YA Global Investments, LP) in satisfaction of $200,000 principal against a convertible note.

 

On October 7, 2021, the Company issued 458,333,333 shares of common stock to a noteholder (YA Global Investments, LP) in satisfaction of $137,500 principal against a convertible note.

 

On October 13, 2021, the Company issued 458,333,335 shares of common stock to a noteholder (YA Global Investments, LP) in satisfaction of $137,500 principal against a convertible note.

 

On October 21, 2021, the Company issued 200,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On October 22, 2021, the Company issued 120,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On October 22, 2021, the Company issued 20,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On November 4, 2021, the Company issued 200,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On November 10, 2021, the Company issued 100,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

On November 12, 2021, the Company issued 100,000,000 shares of common stock to an investor for shares purchased through the Company’s Regulation 1-A offering at $0.0005 per share.

 

Issuances during the year ended December 31, 2020:

 

None

 

F-47

 

 

Treasury Stock

 

As of December 31, 2021 and 2020, the Company held 188,181,000 shares of common stock in treasury.

 

NOTE O – STOCK OPTIONS AND WARRANTS

 

Employee Stock Options

 

None

 

Non-employee Stock Options

 

None

 

Stock Purchase Warrants

 

As of December 31, 2021 and 2020, the Company had 0 and 0 outstanding warrants, respectively. Please see NOTE Q – SUBSEQUENT EVENTS for further information.

 

NOTE P – INCOME TAXES

 

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes (“ASC 740”), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.

 

ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the consolidated financial statements.

 

Net deferred tax assets consist of the following components as of December 31, 2021 and 2020:

  

The sources of the differences follow:

 

   2021   2020 
   December 31, 
   2021   2020 
Loss carryforwards  $5,381,301   $5,057,697 
Valuation   (5,381,301)   (5,057,697)
Net deferred tax assets  $-   $- 

  

The income tax provision differs from the amount of income tax determined by applying the estimated U.S. federal tax rate of 21 percent to pretax income (loss) for the year ended December 31, 2021 and 2020 due to the following:

 

   2021   2020 
   For the years ended 
   December 31, 
   2021   2020 
Expected income tax (benefit) at 21%  $1,736,479   $(2,463,246)
Non-deductible (non-taxable) loss (gain) from derivative liability   (2,060,082)   2,184,395 
Change in valuation allowance   323,603    278,851 
Provision for income taxes  $-   $- 

 

At December 31, 2021, the Company had net operating loss carry forwards of approximately $25,000,000, of which a total of approximately $21,000,000 expires in varying amounts from 2027 to 2037. No tax benefit has been reported in the December 31, 2021 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

 

In accordance with generally accepted accounting principles, the Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns for the open tax years in such jurisdictions. The Company has identified its federal and state income tax returns for the previous ten years remain subject to examination. The Company currently believes that all significant filing positions are highly certain and that all of its significant income tax filing positions and deductions would be sustained upon audit. Therefore, the Company has no significant reserves for uncertain tax positions, and no adjustments to such reserves were required by generally accepted accounting principles. No interest or penalties have been levied against the Company and none are anticipated; therefore no interest or penalty has been included in the provision for income taxes in the consolidated statements of operations.

 

F-48

 

 

NOTE Q – SUBSEQUENT EVENTS

 

On January 11, 2022, the Company entered into an Interim Joint Product Development and Sales Representation Agreement (the “Agreement”) with Salvum Corporation. Under the terms of the Agreement, the parties agree to work together to develop both CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” and Salvum’s proprietary concrete alternative products known as “Earthcrete.”  During the Term, Salvum agrees to manufacture CarbonMeta’s proprietary cementless paver products known as “Cementless Paver”. CarbonMeta reserves the right to appoint other manufacturers of the products and/or to engage other sales representatives for CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” outside the United States of America.

 

On January 21, 2022, the Company issued 206,896,552 shares of common stock to a consultant for accrued consulting fees in connection with negotiating and arranging for the entry by the Company into a Mutual Release and Settlement Agreement with Y.A. Global Investments, LP (see Note H: Convertible Debt, Net).

 

On January 21, 2022, the Company issued its sole officer and director, Lloyd Spencer, 428,571,428 shares of common stock for past due compensation in the amount of $150,000.

 

On February 14, 2022, the Company issued 83,333,334 shares of common stock as per the terms of the Memorandum of Understanding to an Interim Joint Product Development and Sales Representation Agreement dated January 11, 2022 (see third preceding paragraph).

 

On February 14, 2022, the Company issued its sole officer and director, Lloyd Spencer, 30,000,000 shares of common stock as compensation for serving on the Board of Directors of CarbonMeta Research Ltd.

 

On February 14, 2022, the Company issued a total of 90,000,000 shares (30,000,000 shares each) of common stock to three other individuals as compensation for serving on the Board of Directors of CarbonMeta Research Ltd.

 

On February 17, 2022, the Company issued 160,000,000 shares of its common stock to Ecomena Limited (an entity located in the United Kingdom) pursuant to a License of Agreement (the “Agreement”) dated December 2, 2021 between Ecomena Limited (“Licensor”) and CarbonMeta Technologies, Inc. (“Licensee”). Under the terms of the Agreement, the Licensee will license the Licensed Technology to recycle industrial byproduct into cement free pavers and mortars that are environmentally friendly and continuously absorb carbon dioxide. The signing fees payable to the Licensor under the Agreement are £20,000 cash (approximately $27,247 at February 17, 2022) which has not yet been paid by the Licensee, and 160,000,000 shares of the Company’s common stock, which was delivered to the Licensor on February 17, 2022. The royalty rate payable to the Licensor is 5% of product sales, subject to a minimum of £5000 per year for license years 1 and 2, £3000 for license year 3 and £1000 for license year 4 and each license year thereafter. The term of the Agreement is five years from December 2, 2021 to December 2, 2026. The Licensee may terminate the Agreement for any reason at any time provided it gives Licensor six (6) months written notice to terminate expiring after December 2, 2024. If requested by the Licensee, the Licensor shall agree to the Agreement continuing in force after December 2, 2026.

 

On March 7, 2022, the Company received $66,000 from the Company Chief executive Officer Lloyd Spencer and issued to Lloyd T. Spencer (the “Holder”) a Promissory Note (the “Note”) in the principal amount of $66,000. The Note has a term of one (1) year (Maturity Date of March 7, 2023) and bears interest at 12% annually. The Holder shall have the right, on any calendar day, at any time on or following the Issue Date, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any Default Interest) into fully paid and non-assessable shares of Common Stock. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall equal $0.0002. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. In conjunction with the financing transaction, the Company issued the Holder a five-year Common Stock Purchase Warrant granting the Holder the right to purchase 165,000,000 shares of common stock at an exercise price of $0.0004 per share and 33,000,000 shares of common stock. The transaction closed on March 7, 2022.

 

On March 21, 2022, the Company issued to Tangiers Investment Group, LLC (the “Holder”) a Promissory Note (the “Note”) in the principal amount of $55,000. The Note has a term of one (1) year (Maturity Date of March 21, 2023) and bears interest at 12% annually. The Holder shall have the right, on any calendar day, at any time on or following the Issue Date, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any Default Interest) into fully paid and non-assessable shares of Common Stock. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall equal $0.0002. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. In conjunction with the financing transaction, the Company issued the Holder a five-year Common Stock Purchase Warrant granting the Holder the right to purchase 125,000,000 shares of common stock at an exercise price of $0.0004 per share and 27,500,000 shares of common stock as commitment shares. The transaction closed on March 21, 2022.

 

On April 14, 2022, the Company and MacRab, LLC (the “Investor”) entered into a Standby Equity Commitment Agreement (the “Agreement”) whereby the Company shall issue and sell to the Investor, from time to time, up to $5,000,000 of the Company’s common stock. Under the terms of the Agreement, the Purchase Price of the Company’s common stock shall be 88% of the Market Price on the date the Purchase Price is calculated. The Market Price shall mean the average of the two lowest volume weighted average prices of the Company’s common stock during the Valuation Period. In connection with this note, the Holder was issued warrants to purchase 500,000,000 shares of the Company’s Common Stock at $0.0004 per share.

 

On May 10, 2022, the Company issued MacRab, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the amount of $33,056. The Note has a term of one (1) year (Maturity date of May 10, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this Note, the Holder was issued five-year warrants to purchase 74,375,000 shares of common stock at an exercise price of $0.0004 per share and 16,527,775 shares of common stock as commitment shares. The transaction closed on May 10, 2022.

 

On July 14, 2022, the Company issued BHP Capital NY, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 14, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 62,500,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 212,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

F-49

 

 

On July 14, 2022, the Company issued Quick Capital, LLC (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $25,000. The Note has a term of one (1) year (Maturity date of July 14, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 62,500,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 212,500,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

On July 15, 2022, the Company issued the Robert Papiri Defined Benefit Plan (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $10,000. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 25,000,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 85,000,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

On July 15, 2022, the Company issued the Robert Papiri Defined Contribution Plan (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $2,500. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 6,250,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 21,250,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

On July 15, 2022, the Company issued the RGP Capital Partners, Inc. (the “Holder”) a Fixed Convertible Promissory Note (the “Note”) in the principal amount of $2,500. The Note has a term of one (1) year (Maturity date of July 15, 2023) and bears interest at 12% annually. The Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder at the Fixed Conversion Price of $0.0002 per share. Upon the event of default, the Note shall accrue interest at the rate equal to the lower of 16% per annum or the highest rate permitted by law. In connection with this note, the Holder was issued five-year warrants to purchase 6,250,000 shares of the Company’s common stock at an exercise price of $0.0004 per share. In addition, the Holder and the Company entered into a Registration Rights Agreement (“RRA”) whereby the Company agreed to register 21,250,000 shares of its common stock within 30 days of entry into the RRA for the benefit of the Holder. The transaction closed on July 18, 2022.

 

F-50

 

 

Item 16. Exhibits and Financial Statement Schedules.

 

Exhibits required by Item 601 of Regulation S-K

 

The following exhibits are filed with this registration statement:

 

Exhibit   Description
     
2.4  

Certificate of Merger of Sanjay Haryma and Hy-Tech Technology Group, Inc. (previously filed on Form 1-A with the Securities and exchange Commission on August 31, 2021)

2.5

   Certificate of Merger of SRM Networks, Inc. and Hy-Tech Technology Group, Inc. (previously filed on Form 1-A with the Securities and exchange Commission on August 31, 2021)

2.6

   Agreement and Plan of Merger among the Company, RWT Acquisition, Inc and Robotic Workspace Technologies, Inc. dated July 21, 2004. (previously filed on Form 8-K with the Securities and Exchange on August 8, 2004.)

2.7

   Certificate of Ownership and Merger of Innova Robotics and Automation, Inc. and Innova Holdings, Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.1   Articles of Incorporation (previously filed on Form SB-2 with the Securities and Exchange Commission on August 7, 2001)
3.2   Bylaws (previously filed on Form SB-2 with the Securities and Exchange Commission on August 7, 2001)
3.3   Amendment to Articles of Incorporation- Name change to SRM Networks, Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.4   Amendment to Articles of Incorporation- Name change to Hy-Tech Technology Group, Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.5  

Amendment to Articles of Incorporation- Increased authorized common stock (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)

3.6   Amendment to Articles of Incorporation- Name change to Innova Holdings, Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.7   Amendment to Articles of Incorporation- Name change to Innova Robotics and Automation, Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.8   Amendment to Articles of Incorporation- Name change to CoroWare, Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.9   Amendment to Articles of Incorporation- Capital structure (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.10   Amendment to Articles of Incorporation- Capital structure (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.11   Amendment to Articles of Incorporation- Capital structure (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.12   Amendment to Articles of Incorporation- Capital structure (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.13   Amendment to Articles of Incorporation- Capital structure (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.14   Amendment to Articles of Incorporation- Capital structure (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.15   Amendment to Articles of Incorporation- Name change to Open Road Shipping, Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)

3.16

   Articles of Incorporation for CoroWare Treasury, Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.17   Articles of Incorporation for Carbon Source Inc. (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
3.18  

Amendment to Articles of Incorporation- Name change to CarbonMeta Technologies, Inc.

3.19*

  

Articles of Organization of CarbonMeta Green Building Materials, LLC

3.20*   Restated Articles of CarbonMeta Technologies, Inc.
4.1   Form of Subscription Agreement (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
4.2   Certificate of Designation of Series A Convertible Preferred Stock (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
4.3   Certificate of Designation of Series B Convertible Preferred Stock (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
4.4   Certificate of Designation of Series D Convertible Preferred Stock (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)

 

55
 

 

4.5   Certificate of Designation of Series E Convertible Preferred Stock (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
4.6   Restated Certificate of Designation of Series E Convertible Preferred Stock (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
4.7   Certificate of Designation of Series F Convertible Preferred Stock (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
4.8   Certificate of Designation of Series G Convertible Preferred Stock (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
4.9*   Certificate of Designation of Series C Preferred Stock
5.1*   Legal Opinion of Law Offices of Gary L. Blum
10.1   Forbearance Agreement between CoroWare, Inc., CoroWare Technologies, Inc., Robotic Workspace Technologies, Inc. and YA Global Investments, L.P. dated February 5, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.2   Amended and Restated Intellectual Security Agreement dated between CoroWare, Inc., CoroWare Technologies, Inc., Robotic Workspace Technologies, Inc. and YA Global Investments, L.P. dated February 5, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.3   Common Stock Purchase Warrant Agreement between CoroWare, Inc. and YA Global Investments, L.P. dated February 5, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.4   Amended and Restated Global Security Agreement between CoroWare, Inc., CoroWare Technologies, Inc., Robotic Workspace Technologies, Inc. and YA Global Investments, L.P. dated February 5, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.5   Global Guaranty Agreement between CoroWare Technologies, Inc. and Robotic Workspace Technologies, Inc. in favor of YA Global Investments, L.P. dated February 5, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.6   Amended and Restated Intellectual Security Agreement between CoroWare, Inc., CoroWare Technologies, Inc., Robotic Workspace Technologies, Inc. and YA Global Investments, L.P. dated February 5, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.7   Consulting Agreement between CoroWare, Inc. and Global Technologies, Ltd dated May 10, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.8   Convertible Promissory Note between CoroWare, Inc. and Tangiers Investment Group, LLC dated July 19, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.9   Settlement Agreement between CoroWare, Inc., CoroWare Technologies, Inc., Robotics Workspace Technologies, Inc. and YA Global Investments, LP dated July 19, 2021 (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
10.10   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and Tangiers Investment Group, LLC dated March 21, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.11   Promissory Note between CarbonMeta Technologies, Inc. and Tangiers Investment Group, LLC dated March 21, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.12   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and Tangiers Investment Group, LLC dated March 21, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.13   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and Lloyd T. Spencer dated March 7, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.14   Promissory Note between CarbonMeta Technologies, Inc. and Lloyd T. Spencer dated March 7, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.15   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and Lloyd T. Spencer dated March 7, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.16   Debt Settlement Agreement between CoroWare, Inc. and RBB Capital, LLC dated October 25, 2021 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.17   Interim Joint Product Development and Sales Representation Agreement between the Company and Salvum Corporation dated January 11, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.18   Standby Equity Commitment Agreement between CarbonMeta Technologies, Inc. and MacRab, LLC dated April 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.19   Registration Rights Agreement between CarbonMeta Technologies, Inc. and MacRab, LLC dated April 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.20   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and MacRab, LLC dated April 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.21   Promissory Note between CarbonMeta Technologies, Inc. and MacRab, LLC dated May 10, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.22   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and MacRab, LLC dated May 10, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.23   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and MacRab, LLC dated May 10, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.24   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and RPG Capital Partners dated March 1, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.25   Master Subcontractor Agreement between CarbonMeta Technologies, Inc. and Elder and Associates, LLC dated January 24, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.26   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and BHP Capital NY, Inc. dated July 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.27   Promissory Note between CarbonMeta Technologies, Inc. and BHP Capital NY, Inc. dated July 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.28   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and BHP Capital NY, Inc. dated July 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.29   Registration Rights Agreement between CarbonMeta Technologies, Inc. and BHP Capital NY, Inc. dated July 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.30   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and Quick Capital, LLC dated July 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.31   Promissory Note between CarbonMeta Technologies, Inc. and Quick Capital, LLC dated July 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.32   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and Quick Capital, LLC dated July 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.33*   Registration Rights Agreement between CarbonMeta Technologies, Inc. and Quick Capital, LLC dated July 14, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.34   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and Robert Papiri Defined Benefit Plan dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.35   Promissory Note between CarbonMeta Technologies, Inc. and Robert Papiri Defined Benefit Plan dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.36   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and Robert Papiri Defined Benefit Plan dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.37   Registration Rights Agreement between CarbonMeta Technologies, Inc. and Robert Papiri Defined Benefit Plan dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.38   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and Robert Papiri Defined Contribution Plan dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.39   Promissory Note between CarbonMeta Technologies, Inc. and Robert Papiri Defined Contribution Plan dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.40   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and Robert Papiri Defined Contribution Plan dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.41   Registration Rights Agreement between CarbonMeta Technologies, Inc. and Robert Papiri Defined Contribution Plan dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.42   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and RGP Capital Partners, Inc. dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.43   Promissory Note between CarbonMeta Technologies, Inc. and RGP Capital Partners, Inc. dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.44   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and RGP Capital Partners, Inc. dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.45   Registration Rights Agreement between CarbonMeta Technologies, Inc. and RGP Capital Partners, Inc. dated July 15, 2022 (previously filed on Form S-1 with the Securities and Exchange Commission on July 29, 2022)
10.46*   License Agreement between CarbonMeta Technologies, Inc. and Ecomena Limited dated December 2, 2021
10.47*   License Agreement between CarbonMeta Technologies, Inc. and Oxford University Innovation Limited
10.48*   Operating Agreement of CarbonMeta Green Building Materials, LLC
10.49*   Convertible Note between the Company and Tim Burgess dated February 12, 2003
10.50*  

Convertible Note between the Company and Azriel Nagar dated February 13, 2003

10.51*   Convertible Note between the Company and Julian Herskowitz dated February 12, 2003

10.52*

   Promissory Note between the Company and Richard Wynns dated July 27, 2010
10.53*   Convertible Promissory Note between the Company and Richard Wynns dated July 22, 2005

10.54*

   Amended and Restated secured Convertible Debenture between the Company and Westmount Holdings international Limited dated August 22, 2009
10.55*   Convertible Promissory Note between the Company and Kelburgh Ltd dated February 21, 2012
10.56*   Convertible Promissory Note between the Company and Premier IT Solutions dated October 5, 2011
10.57*   Convertible Promissory Note between the Company and LG Capital Funding, LLC dated March 11, 2014

10.58*

   Convertible Promissory Note between the Company and LG Capital Funding, LLC dated January 7, 2015
10.59*   Convertible Promissory Note between the Company and LG Capital Funding, LLC dated March 11, 2014

10.60*

   Convertible Promissory Note between the Company and Barclay Lyons dated July 28, 2011
10.61*   Convertible Promissory Note between the Company and Blackridge Capital, LLC dated February 21, 2014
10.62*   Convertible Promissory Note between the Company and Patrick Tuohy dated April 1, 2014
10.63*   Convertible Promissory Note between the Company and Tangiers Investment Group, LLC dated March 9, 2013
10.64*   Convertible Promissory Note between the Company and Tangiers Investment Group, LLC dated March 27, 2014
10.65*   Convertible Promissory Note between the Company and Tangiers Investment Group, LLC dated October 11, 2016
10.66*   Convertible Promissory Note between the Company and Tangiers Investment Group, LLC dated January 30, 2017
10.67*   Convertible Promissory Note between the Company and AGS Capital Group, LLC dated February 25, 2013
10.68*   Convertible Promissory Note between the Company and AGS Capital Group, LLC dated February 25, 2013
10.69*   Convertible Promissory Note between the Company and Ralph Cariou dated March 12, 2015
10.70*   Convertible Promissory Note between the Company and Ralph Cariou dated March 12, 2015
10.71*   Convertible Note Purchase Agreement between the Company and Redwood Management, LLC dated March 21, 2011
10.72*   Convertible Promissory Note between the Company and Burrington Capital dated April 2, 2014
10.73*   Amended and Restated Secured Convertible Debenture between the Company and Patrick Ferro dated April 3, 2014
10.74*   Amended and Restated Secured Convertible Debenture between the Company and Patrick Ferro dated April 14, 2014
10.75*   Convertible Promissory Note between the Company and Ralph Cariou dated April 3, 2012
10.76*   Convertible Promissory Note between the Company and Zoom Marketing dated April 23, 2013
10.77*   Convertible Promissory Note between the Company and Jared Robert dated December 10, 2014
10.78*   Amended and Restated Secured Convertible Debenture between the Company and Dakota Capital Pty Limited dated April 8, 2014
10.79*   Convertible Promissory Note between the Company and Martin Harvey dated April 2, 2011
10.80*   Promissory Note between CarbonMeta Technologies, Inc. and RGP Capital Partners, Inc. dated September 12, 2022
10.81*   Registration Rights Agreement between CarbonMeta Technologies, Inc. and Robert Papiri Defined Contribution Plan dated September 12, 202
10.82*   Securities Purchase Agreement between CarbonMeta Technologies, Inc. and RGP Capital Partners, Inc. dated September 12, 2022
10.83*   Common Stock Purchase Warrant Agreement between CarbonMeta Technologies, Inc. and Robert Papiri Defined Contribution Plan dated September 12, 202
10.84*   Employment agreement between the Company and Lloyd Spencer dated May 15, 2006
14.1   Code of Ethics (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
21.1   List of Subsidiaries (previously filed on Form 1-A with the Securities and Exchange Commission on August 31, 2021)
23.1*   Consent of Law Offices of Gary L. Blum (included in Exhibit 5.1)
23.2*   Consent of Michael T. Studer, CPA
107*   Filing fees

 

* Filed herewith

 

56
 

 

Item 17. Undertakings.

 

The undersigned Company hereby undertakes to:

 

(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 Securities and Exchange 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, and
     
  (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.

 

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 Securities 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 Securities Act and will be governed by the final adjudication of such issue.

 

The undersigned registrant hereby undertakes:

 

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.

 

That, for the purpose of determining liability of the registrant 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;
     
  (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;
     
  (iii) 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
     
  (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

57
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Woodinville, State of Washington, on October 11, 2022.

 

CARBONMETA TECHNOLOGIES, INC.

 

Signatures   Title   Date
         
/s/ Lloyd Spencer   President (Principal Executive Officer), Director  

October 11, 2022

 

58

 

 

Exhibit 3.19

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 

 

 

Exhibit 3.20

 

RESTATED

CERTIFICATE OF INCORPORATION

OF

CARBONMETA TECHNOLOGIES, INC.

 

CARBONMETA TECHNOLOGIES, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

 

1. The name of this corporation is CARBONMETA TECHNOLOGIES, INC. CARBONMETA TECHNOLOGIES, Inc. was originally incorporated under the name of WECOMM LTD., and the original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on July 15, 2002.

 

2. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates the provisions of the Certificate of Incorporation of this corporation. The Restated Certificate of Incorporation was duly adopted by the Board of Directors of CARBONMETA TECHNOLOGIES, Inc.

 

3. The text of the Restated Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as follows:

 

FIRST: The name of the corporation is CarbonMeta Technologies, Inc.. (the “Corporation”).

 

SECOND: The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.

 

THIRD: The purpose or purposes of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

 

FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue shall be thirty-five billion ten million (35,010,000,000) shares, of which thirty-five billion (35,000,000,000) shares shall be common stock, par value $.0001 per share (the “Common Stock”) and ten million (10,000,000) shares shall be preferred stock, par value $.001 per share (the “Preferred Stock”). All of the shares of Common Stock shall be of one class and shall have the same rights and preferences. When consideration is received for each share of Common Stock and Preferred Stock issued, each share will be fully paid and nonassessable.

 

 
 

 

The shares of Preferred Stock shall be undesignated Preferred Stock and may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issuance and duly adopted by the Board of Directors of the Corporation, authority to do so being hereby expressly vested in the Corporation’s Board of Directors. The Board of Directors is further authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The Board of Directors of the Corporation, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares in any such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series.

 

The authority of the Board of Directors of the Corporation with respect to each such class or series of Preferred Stock shall include, without limitation of the foregoing, the right to determine and fix:

 

(i) the distinctive designation of such class or series and the number of shares to constitute such class or series;

 

(ii) the rate at which dividends on the shares of such class or series shall be declared and paid or set aside for payment, whether dividends at the rate so determined shall be cumulative or accruing, and whether the shares of such class or series shall be entitled to any participating or other dividends in addition to dividends at the rate so determined, and if so, on what terms;

 

(iii) the right or obligation, if any, of the Corporation to redeem shares of the particular class or series of Preferred Stock and, if redeemable, the price, terms and manner of such redemption;

 

(iv) the special and relative rights and preferences, if any, and the amount or amounts per share, which the shares of such class or series of Preferred Stock shall be entitled to receive upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

 

(v) the terms and conditions, if any, upon which shares of such class or series shall be convertible into, or exchangeable for, shares of capital stock of any other class or series, including the pnce or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any;

 

(vi) the obligation, if any, of the Corporation to retire, redeem or purchase shares of such class or series pursuant to a sinking fund or fund of a similar nature or otherwise, and the terms and conditions of such obligations;

 

(vii) voting rights, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock;

 

(viii) limitations, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock;

 

(ix) such other preferences, powers, qualifications, special or relative rights and privileges thereof as the Board of Directors of the Corporation, acting in accordance with these Articles of Incorporation, may deem advisable and are not inconsistent with the law and the provisions of these Articles of Incorporation.

 

 

 

 

CERTIFICATE OF DESIGNATION
OF THE RIGHTS AND PREFERENCES

OF

SERIES A CONVERTIBLE PREFERRED STOCK

OF

HY-TECH TECHNOLOGY GROUP, INC.

 

Hy-Tech Technology Group, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies that the following resolutions were adopted by the Board of Directors of the Company pursuant to the authority of the Board of Directors as required by Section 151 of the Delaware General Corporation Law (the “DGCL”).

 

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Company (the “Board of Directors” or the “Board”) in accordance with the provisions of its Articles of Incorporation and Bylaws, each as amended through the date hereof, the Board of Directors hereby authorizes a series of the Company’s previously authorized Preferred Stock, $.001 par value (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows:

 

I. CERTAIN DEFINITIONS

 

For purposes of this Certificate of Designation, capitalized terms are defined in this Certificate of Designation or shall have the following meanings:

 

“Change of Control” means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Company, excluding any acquisition arising from the conversion into Common Stock of Series A Preferred Stock.

 

“Common Stock” means the common stock of the Company, par value $.001 per share.

 

“Issuance Date” means the date of initial issuance of the Series A Preferred Stock.

 

“Per Share Market Value” of the Common Stock means on any particular date (a) the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, the closing bid price per share as reported by Nasdaq, or (c) if the Common Stock is not then listed or admitted to trading on the Nasdaq, the closing bid price per share of the Common Stock on such date as reported on the OTCBB or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (d) if the Common Stock is not quoted on the OTCBB, the closing bid price for a share of Common Stock on such date in the over-the-counter market as reported by the Pinksheets LLC (or similar organization or agency succeeding to its functions of reporting prices) or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (e) if the Common Stock is no longer publicly traded, the fair market value of a share of the Common Stock as determined by an Appraiser as defined in Paragraph IV(D) selected in good faith by the holders of a majority of the Series A Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser.

 

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

 

 

 

 

“Trading Day” means (a) a day on which the Common Stock is quoted on the OTCBB or principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. (“NASD”), or (c) if the Common Stock is not quoted on the NASD, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pinksheets LLC (or any similar organization or agency succeeding its functions of reporting prices).

 

II. DESIGNATION AND AMOUNT

 

The designation of this series, which consists of one hundred twenty five thousand (125,000) shares of Preferred Stock, is the Series A 5% Convertible Preferred Stock (the “Series A Preferred Stock”) and the stated value shall be U.S. one dollar ($1.00) per share (the “Stated Value”).

 

III. DIVIDENDS

 

The holder of the shares of Series A Preferred Stock shall be entitled to receive dividends at the rate of five percent (5%) per annum on the stated value of the Series A Preferred Stock before dividends are declared on any other outstanding shares of stock of the Company. The dividends so payable will be paid on each anniversary date of the Issuance Date to the person in whose name the Series A Preferred Stock is registered. At the time such dividends are declared and payable, the Company, in its sole discretion, may elect to pay the dividends in cash or in the form of Common Stock. If paid in the form of Common Stock, the amount of stock to be issued will be calculated as follows: the value of the stock shall be the Closing Bid Price on the date the dividend is declared and a number of shares of Common Stock with a value equal to the amount of the dividend shall be issued. No fractional shares will be issued; therefore, in the event that the value of the Common Stock per share does not equal the dividend, the Company will pay the balance in cash or round up to a whole share.

 

IV. CONVERSION

 

(a) Each outstanding share of Series A Preferred Stock shall be convertible into the number of shares of Common Stock determined by dividing the Stated Value by the Conversion Price as defined below, at the option of the Holder in whole or in part, at any time commencing on or after the Issuance Date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the Company files with the Securities and Exchange Commission any periodic report on form 10-QSB, 10-KSB or the equivalent form; provided further that, any conversion under this Section IV(a) shall be for a minimum Stated Value of $10,000.00 of Series A Preferred Stock. The Holder shall effect conversions by sending the form of conversion notice attached hereto as Appendix I (the “Notice of Conversion”) in the manner set forth in Section IV(j). Each Notice of Conversion shall specify the Stated Value of Series A Preferred Stock to be converted. The date on which such conversion is to be effected (the “Conversion Date”) shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof. Except as provided herein, each Notice of Conversion, once given, shall be irrevocable. Upon the entire conversion of the Series A Preferred Stock, the certificates for such Series A Preferred Stock shall be returned to the Company for cancellation.

 

 

 

 

(b) Not later than ten (10) Business Days after the Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of the Series A Preferred Stock and (ii) once received from the Company, the Series A Preferred Stock in principal amount equal to the principal amount of the Series A Preferred Stock not converted; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series A Preferred Stock until the Series A Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Series A Preferred Stock or Common Stock, or the Holder notifies the Company that such Series A Preferred Stock certificates have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Company to indemnify the Company from any loss incurred by it in connection therewith. In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates are not delivered by the date required under this Section IV(b), the Holder shall be entitled, by providing written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the Series A Preferred Stock tendered for conversion.

 

(c) The Conversion Price for each share of Series A Preferred Stock in effect on any Conversion Date shall be the lesser of (a) seventy five percent (75%) of the average closing bid price of the Common Stock over the twenty (20) trading days immediately preceding the date of conversion or (b) $0.05. For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the NASD OTC Bulletin Board, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices).

 

(d) (i) If the Company, at any time while any Series A Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities (as defined below) payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Conversion Price designated in Section IV(c) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section IV(d)(j) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

 

 

 

(ii) If the Company, at any time while Series A Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series A Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which each Series A Preferred Stock shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an “Appraiser”) selected in good faith by the Holders of a majority of the principal amount of the Series A Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series A Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

(iii) All calculations under this Article IV shall be made to the nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any calculation over 0.005 shall be rounded up to the nearest cent or share, and any calculation less than 0.005 shall be rounded down to the nearest cent or share.

 

(iv) Whenever the Conversion Price is adjusted pursuant to Section IV(d)(ii) or (iii), the Company shall within ten (10) days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series A Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

 

 

 

(v) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series A Preferred Stock then outstanding shall have the right thereafter to convert such Series A Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series A Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series A Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)(v) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vi) If:

 

  (A) the Company shall declare a dividend (or any other distribution) on its Common Stock; or
     
  (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or
     
  (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or
   
  (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or

 

 

 

 

  (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Company;

 

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Series A Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series A Preferred Stock at their last addresses as it shall appear upon the Series A Preferred stock register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

 

(e) In the event that the Holder converts any shares of Series A Preferred Stock, the Holder shall also have the right to acquire one (1) share of Common Stock for each share of Common Stock issued upon such conversion (the “Rights”). The Rights shall be exercisable for cash, at a price per share of Common Stock equal to the average closing Per Share Market Value of the Common Stock in the five (5) business days preceding the date of conversion. The rights shall expire one year after the date of conversion of the Series A Preferred Stock from which the Rights arose..

 

(f) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Series A Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of Series A Preferred Stock, such number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section IV(d) hereof) upon the conversion of all outstanding shares of Series A Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

 

(g) No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share. If a fractional share interest arises upon any conversion hereunder, the Company shall eliminate such fractional share interest by issuing the Holder an additional full share of Common Stock.

 

(h) The issuance of certificates for shares of Common Stock on conversion of Series A Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

 

 

 

(i) Series A Preferred Stock converted into Common Stock shall be canceled upon conversion.

 

(j) Each Notice of Conversion shall be given by facsimile to the Company no later than 4:00 pm EST. Any such notice shall be deemed given and effective upon the transmission of such facsimile at the facsimile telephone number specified in the Purchase Agreement. In the event that the Company receives the Notice of Conversion after 4:00 p.m. EST, the Conversion Date shall be deemed to be the next Business Day. In the event that the Company receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day.

 

V. REDEMPTION

 

At any time after the Issuance Date through the fifth (5th) anniversary of the Issuance Date, the Company shall have the option to redeem any unconverted shares of the Series A Preferred Stock, either in part or whole, upon no less than thirty (30) days written notice thereof given to the Holders thereof, at an amount equal to one hundred thirty percent (130%) of the stated value of the unconverted Series A Preferred Stock (the “Redemption Price”) plus accrued and unpaid dividends.

 

No holder of Series A Preferred Stock may demand that the Series A Preferred Stock be redeemed.

 

VI. RANK

 

The Series A Preferred Stock shall, as to distribution of assets upon liquidation, dissolution or winding up of the Company, rank (i) prior to the Company’s Common Stock (ii) prior to any class or series of capital stock of the Company hereafter created that, by its terms, ranks junior to the Series A Preferred Stock (“Junior Securities”); (iii) junior to the Series A Preferred Stock and Series B Preferred Stock and any class or series of capital stock of the Company hereafter created which by its terms ranks senior to the Series A Preferred Stock (“Senior Securities”); (iv) pari passu with any other series of preferred stock of the Company hereafter created which by its terms ranks on a parity (“Pari Passu Securities”) with the Series A Preferred Stock.

 

 

 

 

VII. LIQUIDATION PREFERENCE

 

If the Company shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Company shall liquidate, dissolve or wind up, or if the Company shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Company’s assets in one transaction or in a series of related transactions (a “Liquidation Event”), no distribution shall be made to the holders of any shares of capital stock of the Company (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series A Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series A Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution to the Series A Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other entity nor the sale or transfer by the Company of substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company. The “Liquidation Preference” with respect to a share of Series A Preferred Stock means an amount equal to the Stated Value thereof. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof.

 

VIII. VOTING RIGHTS

 

The Holders of the Series A Preferred Stock have no voting power whatsoever, except as provided by the DGCL. To the extent that under the DGCL the vote of the Holders of the Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series A Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the Holders of at least a majority of the then outstanding shares of Series A Preferred Stock (except as otherwise may be required under the DGCL) shall constitute the approval of such action by the class. To the extent that under the DGCL Holders of the Series A Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Series A Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Article IV) using the record date for the taking of such vote of shareholders as the date as of which the Conversion Price is calculated.

 

 

 

 

IX. MISCELLANEOUS

 

(a) If any shares of Series A Preferred Stock are converted pursuant to Article IV, the shares so converted shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series.

 

(b) Upon receipt by the Company of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Company, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock certificate(s), the Company shall execute and deliver new Preferred Stock certificate(s) of like tenor and date. However, the Company shall not be obligated to reissue such lost or stolen Preferred Stock certificate(s) if the Holder contemporaneously requests the Company to convert such Series A Preferred Stock.

 

(c) Upon submission of a Notice of Conversion by a Holder of Series A Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted shares of Series A Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of this Certificate of Designation. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Delivery Period with respect to a conversion of Series A Preferred Stock for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Company within five (5) business days after the expiration of such ten (10) business day period) the Holder shall regain the rights of a Holder of Series A Preferred Stock with respect to such unconverted shares of Series A Preferred Stock and the Company shall, as soon as practicable, return such unconverted shares to the Holder. In all cases, the Holder shall retain all of its rights and remedies for the Company’s failure to convert Series A Preferred Stock.

 

(d) The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Certificate of Designation. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders of Series A Preferred Stock and that the remedy at law for any such breach may be inadequate. The Company therefore agrees, in the event of any such breach or threatened breach, that the Holders of Series A Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

IN WITNESS WHEREOF, the undersigned, being the CEO of Hy-Tech Technology Group, Inc., hereby declares under penalty of perjury that the foregoing is a true and correct copy of the Certificate of Designation of the Rights and Preferences of the Series A Convertible Preferred Stock of Hy-Tech Technology Group, Inc. duly adopted by the Board of Directors of Hy-Tech Technology Group, Inc. on July 9, 2004, and this Certificate of Designation is executed by the undersigned on behalf of Hy-Tech Technology Group, Inc. this 9th day of July 2004.

 

  Hy-Tech Technology Group, Inc.
   
  By: /s/ Martin Nielson
    Martin Nielson, CEO

 

 

 

 

CERTIFICATE OF DESIGNATION,

OF THE RIGHTS AND PREFERENCES

OF

SERIES B CONVERTIBLE PREFERRED STOCK

OF

INNOVA HOLDINGS, INC.

 

Innova Holdings, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies that the following resolutions were adopted by the Board of Directors of the Company pursuant to the authority of the Board of Directors as required by Section 151 of the Delaware General Corporation Law (the “DGCL”).

 

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Company (the “Board of Directors” or the “Board”) in accordance with the provisions of its Articles of Incorporation and Bylaws, each as amended through the date hereof, the Board of Directors hereby authorizes a series of the Company’s previously authorized Preferred Stock, $.001 par value (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows:

 

I. CERTAIN DEFINITIONS

 

For purposes of this Certificate of Designation, capitalized terms are defined in this Certificate of Designation or shall have the following meanings:

 

“Change of Control” means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Company, excluding any acquisition arising from the conversion into Common Stock of Series B Preferred Stock.

 

“Common Stock” means the common stock of the Company, par value $.001 per share.

 

“Issuance Date” means the date of initial issuance of the Series B Preferred Stock.

 

“Per Share Market Value” of the Common Stock means on any particular date (a) the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, the closing bid price per share as reported by Nasdaq, or (c) if the Common Stock is not then listed or admitted to trading on the Nasdaq, the closing bid price per share of the Common Stock on such date as reported on the OTCBB or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (d) if the Common Stock is not quoted on the OTCBB, the closing bid price for a share of Common Stock on such date in the over-the-counter market as reported by the Pinksheets LLC (or similar organization or agency succeeding to its functions of reporting prices) or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (e) if the Common Stock is no longer publicly traded, the fair market value of a share of the Common Stock as determined by an Appraiser as defined in Paragraph selected in good faith by the holders of a majority of the Series B Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser.

 

 

 

 

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

 

“Trading Day” means (a) a day on which the Common Stock is quoted on the OTCBB or principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. (“NASD”), or (c) if the Common Stock is not quoted on the NASD, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pinksheets LLC (or any similar organization or agency succeeding its functions of reporting prices).

 

II. DESIGNATION AND AMOUNT

 

The designation of this series, which consists of five hundred twenty five thousand (525,000) shares of Preferred Stock, is the Series B 5% Convertible Preferred Stock (the “Series B Preferred Stock”) and the stated value shall be U.S. one dollar ($1.00) per share (the “Stated Value”).

 

III. DIVIDENDS

 

The holder of the shares of Series B Preferred Stock shall be entitled to receive dividends at the rate of five percent (5%) per annum on the stated value of the Series B Preferred Stock before dividends are declared on any other outstanding shares of stock of the Company. The dividends so payable will be paid on each anniversary date of the Issuance Date to the person in whose name the Series B Preferred Stock is registered. At the time such dividends are declared and payable, the Company, in its sole discretion, may elect to pay the dividends in cash or in the form of Common Stock. If paid in the form of Common Stock, the amount of stock to be issued will be calculated as follows: the value of the stock shall be the Closing Bid Price on the date the dividend is declared and a number of shares of Common Stock with a value equal to the amount of the dividend shall be issued. No fractional shares will be issued; therefore, in the event that the value of the Common Stock per share does not equal the dividend, the Company will pay the balance in cash.

 

 

 

 

IV. CONVERSION

 

(a) Each outstanding share of Series B Preferred Stock shall be convertible into the number of shares of Common Stock determined by dividing the Stated Value by the Conversion Price as defined below, at the option of the Holder in whole or in part, at any time commencing on or after the Issuance Date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the Company files with the Securities and Exchange Commission any periodic report on form 10-QSB, 10-KSB or the equivalent form; provided further that, any conversion under this Section IV(a) shall be for a minimum Stated Value of $500.00 of Series B Preferred Stock. The Holder shall effect conversions by sending the form of conversion notice attached hereto as Appendix I (the “Notice of Conversion”) in the manner set forth in Section IV(j). Each Notice of Conversion shall specify the Stated Value of Series B Preferred Stock to be converted. The date on which such conversion is to be effected (the “Conversion Date”) shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof. Except as provided herein, each Notice of Conversion, once given, shall be irrevocable. Upon the entire conversion of the Series B Preferred Stock, the certificates for such Series B Preferred Stock shall be returned to the Company for cancellation.

 

(b) Not later than ten (10) Business Days after the Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of the Series B Preferred Stock and (ii) once received from the Company, the Series B Preferred Stock in principal amount equal to the principal amount of the Series B Preferred Stock not converted; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series B Preferred Stock until the Series B Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Series B Preferred Stock or Common Stock, or the Holder notifies the Company that such Series B Preferred Stock certificates have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Company to indemnify the Company from any loss incurred by it in connection therewith. In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates are not delivered by the date required under this Section IV(b), the Holder shall be entitled, by providing written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the Series B Preferred Stock tendered for conversion.

 

(c) The Conversion Price for each share of Series B Preferred Stock in effect on any Conversion Date shall be the lesser of (a) seventy five percent (75%) of the average closing bid price of the Common Stock over the twenty (20) trading days immediately preceding the date of conversion or (b) $0.005. For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the NASD OTC Bulletin Board, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices).

 

 

 

 

(d) (i) If the Company, at any time while any Series B Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities (as defined below) payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Conversion Price designated in Section IV(a) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section IV(d)(j) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

(ii) If the Company, at any time while Series B Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series B Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which each Series B Preferred Stock shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an “Appraiser”) selected in good faith by the Holders of a majority of the principal amount of the Series B Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series B Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

(iii) All calculations under this Article IV shall be made to the nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any calculation resulting in a fraction shall be rounded up to the next cent or share.

 

 

 

 

(iv) Whenever the Conversion Price is adjusted pursuant to Section IV(d)(ii) or (iii), the Company shall within ten (10) days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series B Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(v) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series B Preferred Stock then outstanding shall have the right thereafter to convert such Series B Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series B Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series B Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)(v) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vi) If:

 

  (A) the Company shall declare a dividend (or any other distribution) on its Common Stock; or
     
  (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or
     
  (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or
     
  (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or
     
  (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Company;

 

 

 

 

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Series B Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series B Preferred Stock at their last addresses as it shall appear upon the Series B Preferred stock register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

 

(e) Intentionally omitted.

 

(f) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Series B Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of Series B Preferred Stock, such number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section IV(d) hereof) upon the conversion of all outstanding shares of Series B Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

 

(g) No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share. If a fractional share interest arises upon any conversion hereunder, the Company shall eliminate such fractional share interest by issuing the Holder an additional full share of Common Stock.

 

(h) The issuance of certificates for shares of Common Stock on conversion of Series B Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

 

 

 

(i) Series B Preferred Stock converted into Common Stock shall be canceled upon conversion.

 

(j) Each Notice of Conversion shall be given by facsimile to the Company no later than 4:00 pm EST. Any such notice shall be deemed given and effective upon the transmission of such facsimile at the facsimile telephone number specified in the Purchase Agreement. In the event that the Company receives the Notice of Conversion after 4:00 p.m. EST, the Conversion Date shall be deemed to be the next Business Day. In the event that the Company receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day.

 

V. REDEMPTION

 

At any time after the Issuance Date through the fifth (5th) anniversary of the Issuance Date, the Company shall have the option to redeem any unconverted shares of the Series B Preferred Stock, either in part or whole, upon no less than thirty (30) days written notice thereof given to the Holders thereof, at an amount equal to one hundred thirty percent (130%) of the stated value of the unconverted Series B Preferred Stock (the “Redemption Price”) plus accrued and unpaid dividends.

 

No holder of Series B Preferred Stock may demand that the Series B Preferred Stock be redeemed.

 

VI. RANK

 

The Series B Preferred Stock shall, as to distribution of assets upon liquidation, dissolution or winding up of the Company, rank (i) prior to the Company’s Common Stock (ii) prior to any class or series of capital stock of the Company hereafter created that, by its terms, ranks junior to the Series B Preferred Stock (“Junior Securities”); (iii) junior to the Series A Preferred Stock and any class or series of capital stock of the Company hereafter created which by its terms ranks senior to the Series B Preferred Stock (“Senior Securities”); (iv) pari passu with any other series of preferred stock of the Company hereafter created which by its terms ranks on a parity (“Pari Passu Securities”) with the Series B Preferred Stock.

 

 

 

 

VII. LIQUIDATION PREFERENCE

 

If the Company shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Company shall liquidate, dissolve or wind up, or if the Company shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Company’s assets in one transaction or in a series of related transactions (a “Liquidation Event”), no distribution shall be made to the holders of any shares of capital stock of the Company (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series B Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series B Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution to the Series B Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other entity nor the sale or transfer by the Company of substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company. The “Liquidation Preference” with respect to a share of Series B Preferred Stock means an amount equal to the Stated Value thereof. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof.

 

VIII. VOTING RIGHTS

 

The Holders of the Series B Preferred Stock have no voting power whatsoever, except as provided by the DGCL. To the extent that under the DGCLthe vote of the Holders of the Series B Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series B Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the Holders of at least a majority of the then outstanding shares of Series B Preferred Stock (except as otherwise may be required under the DGCL) shall constitute the approval of such action by the class. To the extent that under the DGCL Holders of the Series B Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Series B Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Article IV) using the record date for the taking of such vote of shareholders as the date as of which the Conversion Price is calculated.

 

 
 

 

IX. MISCELLANEOUS

 

(a) If any shares of Series B Preferred Stock are converted pursuant to Article IV, the shares so converted shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series.

 

(b) Upon receipt by the Company of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Company, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock certificate(s), the Company shall execute and deliver new Preferred Stock certificate(s) of like tenor and date. However, the Company shall not be obligated to reissue such lost or stolen Preferred Stock certificate(s) if the Holder contemporaneously requests the Company to convert such Series B Preferred Stock.

 

(c) Upon submission of a Notice of Conversion by a Holder of Series B Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted shares of Series B Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of this Certificate of Designation. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Delivery Period with respect to a conversion of Series B Preferred Stock for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Company within five (5) business days after the expiration of such ten (10) business day period) the Holder shall regain the rights of a Holder of Series B Preferred Stock with respect to such unconverted shares of Series B Preferred Stock and the Company shall, as soon as practicable, return such unconverted shares to the Holder. In all cases, the Holder shall retain all of its rights and remedies for the Company’s failure to convert Series B Preferred Stock.

 

(d) The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Certificate of Designation. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders of Series B Preferred Stock and that the remedy at law for any such breach may be inadequate. The Company therefore agrees, in the event of any such breach or threatened breach, that the Holders of Series B Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer and Secretary of Innova Holdings, Inc., hereby declare under penalty of perjury that the foregoing is a true and correct copy of the Certificate of Designation of the Rights and Preferences of the Series B Convertible Preferred Stock of Innova Holdings, Inc. duly adopted by the Board of Directors of Innova Holdings, Inc. on September 21, 2004, and this Certificate of Designation is executed by the undersigned on behalf of Innova Holdings, Inc. this 8th day of February, 2005.

 

  Innova Holdings, Inc.
   
  By: /s/ Walter Weisel
    Walter Weisel, CEO
   
  By: /s/ Sheri Aws
    Sheri Aws, Secretary

 

 

 

 

CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND

RIGHTS OF SERIES D CONVERTIBLE

PREFERRED STOCK, $0.001 PAR VALUE PER SHARE

 

CoroWare, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation (the “Board”) on November 10, 2011 in accordance with the provisions of its Certificate of Incorporation (as amended and restated through the date hereof, the “Certificate of Incorporation”) and Bylaws. The authorized series of the Corporation’s previously-authorized preferred stock shall have the following preferences, privileges, powers and restrictions thereof, as follows:

 

RESOLVED, that pursuant to the authority granted to and vested in the Board in accordance with the provisions of the Certificate of Incorporation and by-laws of the Corporation, each as amended or amended and restated through the date hereof, the Board hereby authorizes a series of the Corporation’s previously authorized preferred stock (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows:

 

I. NAME OF THE CORPORATION

 

CoroWare, Inc.

 

II. DESIGNATION AND AMOUNT; DIVIDENDS

 

A. Designation. The designation of said series of preferred stock shall be Series D Convertible Preferred Stock, $0.001 par value per share (the “ Series D Preferred Stock ”).

 

B. Number of Shares. The number of shares of Series D Preferred Stock authorized shall be five hundred thousand (500,000) shares. Each share of Series D Preferred Stock shall have a stated value equal to $1.00 (as may be adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series D Stated Value”).

 

C. Dividends: Initially, there will be no dividends due or payable on the Series D Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

 

 

 

 

III. LIQUIDATION PREFERENCE.

 

If the Corporation shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Corporation’s assets in one transaction or in a series of related transactions (a “Liquidation Event”), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series D Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series D Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Corporation legally available for distribution to the Series D Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity nor the sale or transfer by the Corporation of substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Corporation. The “Liquidation Preference” with respect to a share of Series D Preferred Stock means an amount equal to the Stated Value thereof. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof.

 

 

 

 

IV. CONVERSION.

 

(a) Each outstanding share of Series D Preferred Stock shall be convertible into the number of shares of the Corporation’s common stock (“Common Stock”) determined by dividing the Stated Value by the Conversion Price as defined below, at the option of the Holder in whole or in part, at any time commencing no earlier than six (6) months after the Issuance Date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the Corporation files with the Securities and Exchange Commission any periodic report on form 10-Q, 10-K or the equivalent form; provided further that, any conversion under this Section IV(a) shall be for a minimum Stated Value of $500.00 of Series D Preferred Stock. The Holder shall effect conversions by sending a conversion notice (the “Notice of Conversion”) in the manner set forth in Section IV(j). Each Notice of Conversion shall specify the Stated Value of Series D Preferred Stock to be converted. The date on which such conversion is to be effected (the “Conversion Date”) shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof. Except as provided herein, each Notice of Conversion, once given, shall be irrevocable. Upon the entire conversion of the Series D Preferred Stock, the certificates for such Series D Preferred Stock shall be returned to the Corporation for cancellation.

 

(b) Not later than ten (10) Business Days after the Conversion Date, the Corporation will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of the Series D Preferred Stock and (ii) once received from the Corporation, the Series D Preferred Stock in principal amount equal to the principal amount of the Series D Preferred Stock not converted; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series D Preferred Stock until the Series D Preferred Stock are either delivered for conversion to the Corporation or any transfer agent for the Series D Preferred Stock or Common Stock, or the Holder notifies the Corporation that such Series D Preferred Stock certificates have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith. In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates are not delivered by the date required under this Section IV(b), the Holder shall be entitled, by providing written notice to the Corporation at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Corporation shall immediately return the Series D Preferred Stock tendered for conversion.

 

 

 

 

(c) The Conversion Price for each share of Series D Preferred Stock in effect on any Conversion Date shall be (i) eighty five percent (85%) of the average closing bid price of the Common Stock over the twenty (20) trading days immediately preceding the date of conversion, (ii) but no less than Par Value of the Common Stock. For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the NASD OTC Bulletin Board, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices).

 

(d) (i) If the Corporation, at any time while any Series D Preferred Stock are outstanding, (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities (as defined below) payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of Common Stock any shares of capital stock of the Corporation, the Conversion Price designated in Section IV(c) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section IV(d) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

(ii) If the Corporation, at any time while Series D Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series D Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which each Series D Preferred Stock shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Corporation, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Corporation) (an “Appraiser”) selected in good faith by the Holders of a majority of the principal amount of the Series D Preferred Stock then outstanding; and provided, further, that the Corporation, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series D Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

 

 

 

(iii) All calculations under this Article IV shall be made to the nearest 1/1,000th of a cent or the nearest 1/1,000th of a share, as the case may be. Any calculation resulting in a fraction shall be rounded up to the next cent or share.

 

(iv) Whenever the Conversion Price is adjusted pursuant to Section IV(d)(ii) or (iii), the Corporation shall within ten (10) days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series D Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(v) In case of any reclassification of the Common Stock, any consolidation or merger of the Corporation with or into another person, the sale or transfer of all or substantially all of the assets of the Corporation or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series D Preferred Stock then outstanding shall have the right thereafter to convert such Series D Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series D Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series D Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)(v) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vi) If:

 

  (A) the Corporation shall declare a dividend (or any other distribution) on its Common Stock; or
     
  (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or
     
  (C) the Corporation shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or

 

 

 

 

  (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or
     
  (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Corporation;

 

then the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of Series D Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series D Preferred Stock at their last addresses as it shall appear upon the Series D Preferred stock register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

 

(e) Intentionally omitted.

 

(f) The Corporation covenants that all shares of Common Stock that shall be issuable hereunder shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

 

(g) No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share. If a fractional share interest arises upon any conversion hereunder, the Corporation shall eliminate such fractional share interest by issuing the Holder an additional full share of Common Stock.

 

 

 

 

(h) The issuance of certificates for shares of Common Stock on conversion of Series D Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Corporation shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

 

(i) Series D Preferred Stock converted into Common Stock shall be canceled upon conversion.

 

(j) Each Notice of Conversion shall be given by facsimile to the Corporation no later than 4:00 pm EST. Any such notice shall be deemed given and effective upon the transmission of such facsimile at the current facsimile telephone number of the Company. In the event that the Corporation receives the Notice of Conversion after 4:00 p.m. EST, the Conversion Date shall be deemed to be the next Business Day. In the event that the Corporation receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day.

 

V. MANDATORY CONVERSION

 

(a) Each share of Series D Preferred Stock shall convert (the “Mandatory Conversion”) into shares of Common Stock upon written demand of the Corporation (“Mandatory Conversion Notice”), which demand shall be made no later than October 1, 2013, unless otherwise agreed by the mutual consent of the parties in writing. The Mandatory Conversion Notice shall state the effective date of the Mandatory Conversion, which date shall be established by the Corporation in its sole and absolute discretion.

 

(b) Mechanics of Mandatory Conversion. The outstanding shares of Series D Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent. Upon the effective date of the Mandatory Conversion, the only rights that the holders of the Series D Preferred Stock shall have will be to receive stock certificates for Common Stock; provided that the holder of the Series D Preferred Stock surrenders or causes to be surrendered the original certificates representing the Series D Preferred Stock being converted (the “ Preferred Stock Certificates “), duly endorsed. The Corporation shall not be obligated to issue and deliver (issue and deliver to the holder of Series D Preferred Stock a stock certificate for the Common Stock into which the Series D Preferred Stock has been converted certificates evidencing the shares of Common Stock issuable upon such Mandatory Conversion) unless and until the certificates evidencing the shares of Series D Preferred Stock are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates.

 

 

 

 

VI. RANK

 

The Series D Preferred Stock shall, as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, rank (i) prior to the Corporation’s Common Stock (ii) prior to any class or series of capital stock of the Corporation hereafter created that, by its terms, ranks junior to the Series D Preferred Stock (“Junior Securities”); (iii) junior to the Series B Preferred Stock and any class or series of capital stock of the Corporation hereafter created which by its terms ranks senior to the Series D Preferred Stock (“Senior Securities”); (iv) pari passu with any other series of preferred stock of the Corporation hereafter created which by its terms ranks on a parity (“Pari Passu Securities”) with the Series D Preferred Stock.

 

VII. VOTING RIGHTS

 

Each one share of the Series D Preferred Stock shall have voting rights equal to one hundred thousand (100,000) votes of Common Stock. With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series D Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Corporation’s Certificate of Incorporation or by-laws.

 

VIII. PROTECTION PROVISIONS

 

So long as any shares of Series D Preferred Stock are outstanding, the Corporation shall not, without first obtaining the unanimous written consent of the holders of Series D Preferred Stock, alter or change the rights, preferences or privileges of the Series D Preferred so as to affect adversely the holders of Series D Preferred Stock.

 

 

 

 

IX. MISCELLANEOUS

 

A. Status of Converted or Redeemed Stock: In case any shares of Series D Preferred Stock shall be redeemed or otherwise repurchased or reacquired, the shares so redeemed, repurchased, or reacquired shall resume the status of authorized but unissued shares of preferred stock, and shall no longer be designated as Series D Preferred Stock.

 

B. Lost or Stolen Certificates: Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) and (ii) in the case of loss, theft or destruction, indemnity (with a bond or other security) reasonably satisfactory to the Corporation, or in the case of mutilation, the Preferred Stock Certificate(s) (surrendered for cancellation), the Corporation shall execute and deliver new Preferred Stock Certificates. However, the Corporation shall not be obligated to reissue such lost, stolen, destroyed or mutilated Preferred Stock Certificates if the holder of Series D Preferred Stock contemporaneously requests the Corporation to convert such holder’s Series D Preferred.

 

C. Waiver: Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any right of the holders of Series D Preferred granted hereunder may be waived as to all shares of Series D Preferred Stock (and the holders thereof) upon the unanimous written consent of the holders of the Series D Preferred Stock.

 

D. Notices: Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally, by nationally recognized overnight carrier or by confirmed facsimile transmission, and shall be effective five (5) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by nationally recognized overnight carrier or confirmed facsimile transmission, in each case addressed to a party as set forth below, or such other address and telephone and fax number as may be designated in writing hereafter in the same manner as set forth in this Section.

 

If to the Corporation:

 

CoroWare, Inc.

1410 Market Street

Kirkland, WA 98033

Attention: Lloyd Spencer;

Telephone: (800) 641-2676, x756

Facsimile: (425) 818-8990

 

If to the holders of Series D Preferred, to the address listed in the Corporation’s books and records.

 

 

 

 

IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer and Secretary of CoroWare, Inc., hereby declare under penalty of perjury that the foregoing is a true and correct copy of the Certificate of Designation of the Rights and Preferences of the Series D Convertible Preferred Stock of CoroWare, Inc. duly adopted by the Board of Directors of CoroWare, Inc. on November 10, 2011 and this Certificate of Designation is executed by the undersigned on behalf of CoroWare, Inc. this 10th day of November, 2011.

 

  CoroWare, Inc.
   
  By: /s/ Lloyd T. Spencer
    Lloyd Spencer, Chief Executive Officer
   
  By: /s/ Shanna Gerrard
    Shanna Gerrard, Corporate Secretary

 

 

 

 

AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF THE RIGHTS AND PREFERENCES

OF

SERIES E CONVERTIBLE PREFERRED STOCK OF

COROWARE, INC.

 

(Pursuant to Section 151 of the Delaware General Corporation Law)

 

The undersigned, Lloyd Spencer and Shanna Gerrard, certify that:

 

ONE: They are the Chief Executive Officer and Secretary, respectively, of CoroWare, Inc., a Delaware corporation (the “Company”).

 

TWO: The Certificate of Incorporation of this Company provides for a class of its authorized shares known as Preferred Stock comprised of 10,000,000 shares issuable from time to time in one or more series, of which 1,000,000 shares designated as Series E Convertible Preferred Stock are currently authorized.

 

THREE: Pursuant to and in accordance with the provisions of Section 151 of the Delaware General Corporation Law and the Certificate of Incorporation of this Corporation (“Certificate of Incorporation”), the Board of Directors of the Company (“Board of Directors”) has duly authorized and adopted resolutions amending the Certificate of Designation originally filed March 9, 2012 by modifying the Conversion Price (defined hereinbelow) of the Series E Convertible Preferred Stock to be 50% of the lowest closing bid price of the Common Stock on the principal trading exchange or market for the Common Stock for the twenty (20) trading days prior to but not including the Conversion Date, but in no case lower than the par value of Common Stock.

 

FOUR: The Board of Directors of the Company has duly authorized and adopted the following recitals and resolutions on October 4, 2012:

 

WHEREAS, the Board of Directors of this corporation is authorized to fix the number of shares of any series of Preferred Stock and to determine the designation of any such series and the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock; and

 

WHEREAS, The Board of Directors has previously fixed and determined the designation of, the number of shares constituting, and the rights, preferences, privileges and restrictions relating to a Series E Convertible Preferred Stock, pursuant to a Certificate of Designation as filed with the Delaware Secretary of State on March 9, 2012, and

 

 

 

 

WHEREAS, the Board of Directors wishes to amend and restate the Certificate of Designation originally filed March 9, 2012 by modifying the Conversion Price (defined hereinbelow) of the Series E Convertible Preferred Stock to be 50% of the loest closing bid price of the Common Stock on the principal trading exchange or market for the Common Stock for the twenty (20) trading days prior to but not including the Conversion Date, but in no case lower than the par value of Common Stock.

 

RESOLVED, that the Board Directors hereby amends and restates the Certificate of Designation filed March 9, 2012 in its entirety and designates the number of shares, and fixes the relative rights, powers and preferences thereof, and the limitations or restrictions of the Series E Convertible Preferred Stock (in addition to any provisions set forth in the Certificate of Incorporation that are applicable to the Preferred Stock of all classes and series), as follows:

 

I. CERTAIN DEFINITIONS

 

For purposes of this Certificate of Designation, capitalized terms are defined in this Certificate of Designation or shall have the following meanings:

 

“Change of Control” means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Company, excluding any acquisition arising from the conversion into Common Stock of Series E Preferred Stock.

 

“Common Stock” means the common stock of the Company, par value $.0001 per

 

“Issuance Date” means the date of initial issuance of the Series E Preferred

 

“Per Share Market Value” of the Common Stock means on any particular date (a) the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, the closing bid price per share as reported by Nasdaq, or (c) if the Common Stock is not then listed or admitted to trading on the Nasdaq, the closing bid price per share of the Common Stock on such date as reported on the OTCBB or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (d) if the Common Stock is not quoted on the OTCBB, the closing bid price for a share of Common Stock on such date in the over-the- counter market as reported by the OTC Markets Group Inc. (or similar organization or agency succeeding to its functions of reporting prices) or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (e) if the Common Stock is no longer publicly traded, the fair market value of a share of the Common Stock as determined by an Appraiser selected in good faith by the holders of a majority of the Series E Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser.

 

 

 

 

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

 

“Trading Day” means (a) a day on which the Common Stock is quoted on the OTCBB or principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the Financial Industry Regulatory Agency (“FINRA”), or (c) if the Common Stock is not quoted by FINRA, a day on which the Common Stock is quoted in the over-the-counter market as reported by the OTC Markets Group, Inc. (or any similar organization or agency succeeding its functions of reporting prices).

 

II. DESIGNATION AND AMOUNT

 

The designation of this series, which consists of one million (1,000,000) shares of Preferred Stock, is the Series E 5% Convertible Preferred Stock (the “Series E Preferred Stock”) and the stated value shall be U.S. one dollar ($1.00) per share (the “Stated Value”).

 

III. DIVIDENDS

 

The holder of the shares of Series E Preferred Stock shall be entitled to receive dividends at the rate of five percent (5%) per annum on the stated value of the Series E Preferred Stock before dividends are declared on any other outstanding shares of stock of the Company. The dividends so payable will be paid on each anniversary date of the Issuance Date to the person in whose name the Series E Preferred Stock is registered. At the time such dividends are declared and payable, the Company, in its sole discretion, may elect to pay the dividends in cash or in the form of Common Stock. If paid in the form of Common Stock, the amount of stock to be issued will be calculated as follows: the value of the stock shall be the Closing Bid Price on the date the dividend is declared and a number of shares of Common Stock with a value equal to the amount of the dividend shall be issued. No fractional shares will be issued; therefore, in the event that the value of the Common Stock per share does not equal the dividend, the Company will pay the balance in cash.

 

 

 

 

IV. CONVERSION

 

(a) Each outstanding share of Series E Preferred Stock shall be convertible into the number of shares of Common Stock determined by dividing the Stated Value by the Conversion Price as defined below, at the option of the Holder in whole or in part, atany time commencing on or after the Issuance Date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the Company files with the Securities and Exchange Commission any periodic report on form 10-Q, 10-K or the equivalent form; provided further that, any conversion under this Section IV(a) shall be for a minimum Stated Value of $500.00 of Series E Preferred Stock. The Holder shall effect conversions by sending the form of conversion notice attached hereto as Appendix I (the “Notice of Conversion”) in the manner set forth in Section IV(j). Each Notice of Conversion shall specify the Stated Value of Series E Preferred Stock to be converted. The date on which such conversion is to be effected (the “Conversion Date”) shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof. Except as provided herein, each Notice of Conversion, once given, shall be irrevocable. Upon the entire conversion of the Series E Preferred Stock, the certificates for such Series E Preferred Stock shall be returned to the Company for cancellation.

 

(b) Not later than ten (10) Business Days after the Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of the Series E Preferred Stock and (ii) once received from the Company, the Series E Preferred Stock in principal amount equal to the principal amount of the Series E Preferred Stock not converted; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series E Preferred Stock until the Series E Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Series E Preferred Stock or Common Stock, or the Holder notifies the Company that such Series E Preferred Stock certificates have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Company to indemnify the Company from any loss incurred by it in connection therewith. In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates are not delivered by the date required under this Section IV(b), the Holder shall be entitled, by providing written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the Series E Preferred Stock tendered for conversion.

 

(c) The Conversion Price for each share of Series E Preferred Stock in effect on any Conversion Date shall be 50% of the lowest closing bid price of the Common Stock on the principal trading exchange or market for the Common Stock for the twenty (20) trading days prior to but not including the Conversion Date, but in no case lower than the par value of the Common Stock.

 

 

 

 

(d) (i) If the Company, at any time while any Series E Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities (as defined below) payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Conversion Price designated in Section IV(a) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section IV(d)(j) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

(ii) If the Company, at any time while Series E Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series E Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which each Series E Preferred Stock shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an “Appraiser”) selected in good faith by the Holders of a majority of the principal amount of the Series E Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series E Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

(iii) All calculations under this Article IV shall be made to the nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any calculation resulting in a fraction shall be rounded up to the next cent or share.

 

(iv) Whenever the Conversion Price is adjusted pursuant to Section IV(d)(ii) or (iii), the Company shall within ten (10) days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series E Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

 

 

 

(v) consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series E Preferred Stock then outstanding shall have the right thereafter to convert such Series E Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series E Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series E Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)(v) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vi) If:

 

  (A) the Company shall declare a dividend (or any other distribution) on its Common Stock; or
     
  (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or
     
  (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or
   
  (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or
   
  (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Company;

 

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Series E Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series E Preferred Stock at their last addresses as it shall appear upon the Series E Preferred stock register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding- up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

 

 

 

 

(e) At any time after the Issuance Date, the Company shall have the option to repurchase any unconverted shares of the Series E Preferred Stock, either in part or whole, upon no less than thirty (30) days written notice thereof given to the Holders thereof, at an amount equal to one hundred thirty percent (130%) of the stated value of the unconverted Series E Preferred Stock (the “Redemption Price”) plus accrued and unpaid dividends.

 

(f) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Series E Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of Series E Preferred Stock, such number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section IV(d) hereof) upon the conversion of all outstanding shares of Series E Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

 

(g) No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share. If a fractional share interest arises upon any conversion hereunder, the Company shall eliminate such fractional share interest by issuing the Holder an additional full share of Common Stock.

 

(h) The issuance of certificates for shares of Common Stock on conversion of Series E Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(i) Series E Preferred Stock converted into Common Stock shall be canceled upon conversion.

 

 
 

 

(j) Each Notice of Conversion shall be given by facsimile or email to the Company no later than 4:00 pm EST. Any such notice shall be deemed given and effective upon the transmission of such facsimile at the facsimile telephone number or email mailbox of secretary@coroware.com as specified in the Purchase Agreement. In the event that the Company receives the Notice of Conversion after 4:00 p.m. EST, the Conversion Date shall be deemed to be the next Business Day. In the event that the Company receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day.

 

V. REDEMPTION

 

At any time after the Issuance Date through the fifth (5th) anniversary of the Issuance Date, the Company shall have the option to redeem any unconverted shares of the Series E Preferred Stock (the “Redemption”), either in part or whole, upon no less than thirty (30) days written notice (“Redemption Notice”) thereof given to the Holders thereof, at an amount equal to one hundred thirty percent (130%) of the stated value of the unconverted Series E Preferred Stock (the “Redemption Price”) plus accrued and unpaid dividends. The Redemption Notice shall state the effective date of the Redemption, which date shall be established by the Company in its sole and absolute discretion.

 

The outstanding shares of Series E Preferred Stock shall be redeemed automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent. Upon the effective date of the Redemption, the only rights that the holders of the Series E Preferred Stock shall have will be to receive the Redemption Price; provided that the holder of the Series E Preferred Stock surrenders or causes to be surrendered the original certificates representing the Series E Preferred Stock being redeemed, duly endorsed. The Company shall not be obligated to deliver the Redemption Price to the holder of Series E Preferred Stock unless and until the certificates evidencing the shares of Series E Preferred Stock are either delivered to the Company or its transfer agent, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates.

 

No holder of Series E Preferred Stock may demand that the Series E Preferred Stock be redeemed.

 

VI. RANK

 

The Series E Preferred Stock shall, as to distribution of assets upon liquidation, dissolution or winding up of the Company, rank (i) prior to the Company’s Common Stock (ii) prior to any class or series of capital stock of the Company hereafter created that, by its terms, ranks junior to the Series E Preferred Stock (“Junior Securities”); (iii) junior to the Series B and Series D and Series E Preferred Stock and any class or series of capital stock of the Company hereafter created which by its terms ranks senior to the Series E Preferred Stock (“Senior Securities”); (iv) pari passu with any other series of preferred stock of the Company hereafter created which by its terms ranks on a parity (“Pari Passu Securities”) with the Series E Preferred Stock.

 

 

 

 

VII. LIQUIDATION PREFERENCE

 

If the Company shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Company shall liquidate, dissolve or wind up, or if the Company shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Company’s assets in one transaction or in a series of related transactions (a “Liquidation Event”), no distribution shall be made to the holders of any shares of capital stock of the Company (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series E Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series E Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution to the Series E Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other entity nor the sale or transfer by the Company of substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company. The “Liquidation Preference” with respect to a share of Series E Preferred Stock means an amount equal to the Stated Value thereof. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof.

 

 

 

 

VIII. VOTING RIGHTS

 

The Holders of the Series E Preferred Stock have no voting power whatsoever, except as provided by the DGCL. To the extent that under the DGCL the vote of the Holders of the Series E Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series E Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the Holders of at least a majority of the then outstanding shares of Series E Preferred Stock (except as otherwise may be required under the DGCL) shall constitute the approval of such action by the class. To the extent that under the DGCL Holders of the Series E Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Series E Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Article IV) using the record date for the taking of such vote of shareholders as the date as of which the Conversion Price is calculated.

 

IX. MISCELLANEOUS

 

(a) If any shares of Series E Preferred Stock are converted pursuant to Article IV, the shares so converted shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series.

 

(b) Upon receipt by the Company of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Company, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock certificate(s), the Company shall execute and deliver new Preferred Stock certificate(s) of like tenor and date. However, the Company shall not be obligated to reissue such lost or stolen Preferred Stock certificate(s) if the Holder contemporaneously requests the Company to convert such Series E Preferred Stock.

 

(c) Upon submission of a Notice of Conversion by a Holder of Series E Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted shares of Series E Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of this Certificate of Designation. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Delivery Period with respect to a conversion of Series E Preferred Stock for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Company within five (5) business days after the expiration of such ten (10) business day period) the Holder shall regain the rights of a Holder of Series E Preferred Stock with respect to such unconverted shares of Series E Preferred Stock and the Company shall, as soon as practicable, return such unconverted shares to the Holder. In all cases, the Holder shall retain all of its rights and remedies for the Company’s failure to convert Series E Preferred Stock.

 

(d) The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Certificate of Designation. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders of Series E Preferred Stock and that the remedy at law for any such breach may be inadequate. The Company therefore agrees, in the event of any such breach or threatened breach, that the Holders of Series E Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer and Secretary of CoroWare, Inc., hereby declare under penalty of perjury that the foregoing is a true and correct copy of the Amended and Restated Certificate of Designation of the Rights and Preferences of the Series E Convertible Preferred Stock of CoroWare, Inc. duly adopted by the Board of Directors of CoroWare, Inc. on October 4, 2012, and this Certificate of Designation is executed by the undersigned on behalf of CoroWare, Inc. this 4th day of October, 2012.

 

  CoroWare, Inc.
   
  By: /s/ Lloyd T. Spencer
    Lloyd Spencer, Chief Executive Officer
   
  By: /s/ Shanna Gerrard
    Shanna Gerrard, Corporate Secretary

 

 

 

 

CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND

RIGHTS OF SERIES F CONVERTIBLE

PREFERRED STOCK, $0.001 PAR VALUE PER SHARE

 

CoroWare, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation (the “Board”) on October 4, 2013 in accordance with the provisions of its Certificate of Incorporation (as amended and restated through the date hereof, the “Certificate of Incorporation”) and Bylaws. The authorized series of the Corporation’s previously-authorized preferred stock shall have the following preferences, privileges, powers and restrictions thereof, as follows:

 

RESOLVED, that pursuant to the authority granted to and vested in the Board in accordance with the provisions of the Certificate of Incorporation and by-laws of the Corporation, each as amended or amended and restated through the date hereof, the Board hereby authorizes a series of the Corporation’s previously authorized preferred stock (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows:

 

I. NAME OF THE CORPORATION

 

CoroWare, Inc.

 

II. DESIGNATION AND AMOUNT; DIVIDENDS

 

A. Designation. The designation of said series of preferred stock shall be Series F Convertible Preferred Stock, $0.001 par value per share (the “ Series F Preferred Stock ”).

 

B. Number of Shares. The number of shares of Series F Preferred Stock authorized shall be five hundred thousand (500,000) shares. Each share of Series F Preferred Stock shall have a stated value equal to $1.00 (as may be adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series F Stated Value”).

 

 
 

 

C. Dividends: Initially, there will be no dividends due or payable on the Series F Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

 

III. LIQUIDATION PREFERENCE.

 

If the Corporation shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Corporation’s assets in one transaction or in a series of related transactions (a “Liquidation Event”), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series F Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series F Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Corporation legally available for distribution to the Series F Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity nor the sale or transfer by the Corporation of substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Corporation. The “Liquidation Preference” with respect to a share of Series F Preferred Stock means an amount equal to the Stated Value thereof. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof.

 

 
 

 

IV. CONVERSION.

 

(a) Each outstanding share of Series F Preferred Stock shall be convertible into the number of shares of the Corporation’s common stock (“Common Stock”) determined by dividing the Stated Value by the Conversion Price as defined below, at the option of the Holder in whole or in part, at any time commencing no earlier than six (6) months after the Issuance Date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the Corporation files with the Securities and Exchange Commission any periodic report on form 10-Q, 10-K or the equivalent form; provided further that, any conversion under this Section IV(a) shall be for a minimum Stated Value of $500.00 of Series F Preferred Stock. The Holder shall effect conversions by sending a conversion notice (the “Notice of Conversion”) in the manner set forth in Section IV(j). Each Notice of Conversion shall specify the Stated Value of Series F Preferred Stock to be converted. The date on which such conversion is to be effected (the “Conversion Date”) shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof. Except as provided herein, each Notice of Conversion, once given, shall be irrevocable. Upon the entire conversion of the Series F Preferred Stock, the certificates for such Series F Preferred Stock shall be returned to the Corporation for cancellation.

 

(b) Not later than ten (10) Business Days after the Conversion Date, the Corporation will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of the Series F Preferred Stock and (ii) once received from the Corporation, the Series F Preferred Stock in principal amount equal to the principal amount of the Series F Preferred Stock not converted; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series F Preferred Stock until the Series F Preferred Stock are either delivered for conversion to the Corporation or any transfer agent for the Series F Preferred Stock or Common Stock, or the Holder notifies the Corporation that such Series F Preferred Stock certificates have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith. In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates are not delivered by the date required under this Section IV(b), the Holder shall be entitled, by providing written notice to the Corporation at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Corporation shall immediately return the Series F Preferred Stock tendered for conversion.

 

(c) The Conversion Price for each share of Series F Preferred Stock in effect on any Conversion Date shall be (i) eighty five percent (85%) of the average closing price of the Common Stock over the five (5) trading days immediately preceding the date of conversion, (ii) but no less than Par Value of the Common Stock. For purposes of determining the closing price on any day, reference shall be to the closing price for a share of Common Stock on such date on the NASD OTC Bulletin Board, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices).

 

 

 

 

(d) (i) If the Corporation, at any time while any Series F Preferred Stock are outstanding, (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities (as defined below) payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of Common Stock any shares of capital stock of the Corporation, the Conversion Price designated in Section IV(c) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section IV(d) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

(ii) If the Corporation, at any time while Series F Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series F Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which each Series F Preferred Stock shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Corporation, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Corporation) (an “Appraiser”) selected in good faith by the Holders of a majority of the principal amount of the Series F Preferred Stock then outstanding; and provided, further, that the Corporation, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series F Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

 

 

 

(iii) All calculations under this Article IV shall be made to the nearest 1/1,000th of a cent or the nearest 1/1,000th of a share, as the case may be. Any calculation resulting in a fraction shall be rounded up to the next cent or share.

 

(iv) Whenever the Conversion Price is adjusted pursuant to Section IV(d)(ii) or (iii), the Corporation shall within ten (10) days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series F Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(v) In case of any reclassification of the Common Stock, any consolidation or merger of the Corporation with or into another person, the sale or transfer of all or substantially all of the assets of the Corporation or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series F Preferred Stock then outstanding shall have the right thereafter to convert such Series F Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series F Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series F Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)(v) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vi) If:

 

  (A) the Corporation shall declare a dividend (or any other distribution) on its Common Stock; or
     
  (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or
   
  (C) the Corporation shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or

 

  (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or

 

 

 

 

  (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Corporation;

 

then the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of Series F Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series F Preferred Stock at their last addresses as it shall appear upon the Series F Preferred stock register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

 

(e) Intentionally omitted.

 

(f) The Corporation covenants that all shares of Common Stock that shall be issuable hereunder shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

 

(g) No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share. If a fractional share interest arises upon any conversion hereunder, the Corporation shall eliminate such fractional share interest by issuing the Holder an additional full share of Common Stock.

 

(h) The issuance of certificates for shares of Common Stock on conversion of Series F Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Corporation shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

 

 

 

 

(i) Series F Preferred Stock converted into Common Stock shall be canceled upon conversion.

 

(j) Each Notice of Conversion shall be given by email to the Corporation at secretary@coroware.com no later than 4:00 pm EST. Any such notice shall be deemed given and effective upon the receipt of the email. In the event that the Corporation receives the Notice of Conversion after 4:00 p.m. EST, the Conversion Date shall be deemed to be the next Business Day. In the event that the Corporation receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day.

 

VI. REDEMPTION

 

At any time after the Issuance Date through the fifth (5th) anniversary of the Issuance Date, the Company shall have the option to redeem any unconverted shares of the Series F Preferred Stock (the “Redemption”), either in part or whole, upon no less than thirty (30) days written notice (“Redemption Notice”) thereof given to the Holders thereof, at an amount equal to one hundred thirty percent (130%) of the stated value of the unconverted Series F Preferred Stock (the “Redemption Price”) plus accrued and unpaid dividends, if any. The Redemption Notice shall state the effective date of the Redemption, which date shall be established by the Company in its sole and absolute discretion.

 

The outstanding shares of Series F Preferred Stock shall be redeemed automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent. Upon the effective date of the Redemption, the only rights that the holders of the Series F Preferred Stock shall have will be to receive the Redemption Price; provided that the holder of the Series F Preferred Stock surrenders or causes to be surrendered the original certificates representing the Series F Preferred Stock being redeemed, duly endorsed. The Company shall not be obligated to deliver the Redemption Price to the holder of Series F Preferred Stock unless and until the certificates evidencing the shares of Series F Preferred Stock are either delivered to the Company or its transfer agent, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates.

 

No holder of Series F Preferred Stock may demand that the Series F Preferred Stock be redeemed.

 

VI. RANK

 

The Series F Preferred Stock shall, as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, rank (i) prior to the Corporation’s Common Stock (ii) prior to any class or series of capital stock of the Corporation hereafter created that, by its terms, ranks junior to the Series F Preferred Stock (“Junior Securities”); (iii) junior to the Series B Preferred Stock and any class or series of capital stock of the Corporation hereafter created which by its terms ranks senior to the Series F Preferred Stock (“Senior Securities”); (iv) pari passu with any other series of preferred stock of the Corporation hereafter created which by its terms ranks on a parity (“Pari Passu Securities”) with the Series F Preferred Stock.

 

 

 

 

VII. VOTING RIGHTS

 

The Series F Preferred Stock shall have no voting rights.

 

VIII. PROTECTION PROVISIONS

 

So long as any shares of Series F Preferred Stock are outstanding, the Corporation shall not, without first obtaining the unanimous written consent of the holders of Series F Preferred Stock, alter or change the rights, preferences or privileges of the Series F Preferred so as to affect adversely the holders of Series F Preferred Stock.

 

IX. MISCELLANEOUS

 

A. Status of Converted or Redeemed Stock: In case any shares of Series F Preferred Stock shall be redeemed or otherwise repurchased or reacquired, the shares so redeemed, repurchased, or reacquired shall resume the status of authorized but unissued shares of preferred stock, and shall no longer be designated as Series F Preferred Stock.

 

B. Lost or Stolen Certificates: Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) and (ii) in the case of loss, theft or destruction, indemnity (with a bond or other security) reasonably satisfactory to the Corporation, or in the case of mutilation, the Preferred Stock Certificate(s) (surrendered for cancellation), the Corporation shall execute and deliver new Preferred Stock Certificates. However, the Corporation shall not be obligated to reissue such lost, stolen, destroyed or mutilated Preferred Stock Certificates if the holder of Series F Preferred Stock contemporaneously requests the Corporation to convert such holder’s Series F Preferred.

 

C. Waiver: Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any right of the holders of Series F Preferred granted hereunder may be waived as to all shares of Series F Preferred Stock (and the holders thereof) upon the unanimous written consent of the holders of the Series F Preferred Stock.

 

D. Notices: Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally, by nationally recognized overnight carrier or by confirmed facsimile transmission, and shall be effective five (5) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by nationally recognized overnight carrier or confirmed facsimile transmission, in each case addressed to a party as set forth below, or such other address and telephone and fax number as may be designated in writing hereafter in the same manner as set forth in this Section.

 

If to the Corporation:

 

CoroWare, Inc.

1410 Market Street

Kirkland, WA 98033

Attention: Lloyd Spencer;

Telephone: (800) 641-2676, x756

Facsimile: (425) 818-8990

 

If to the holders of Series F Preferred, to the address listed in the Corporation’s books and records.

 

 

 

 

IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer and Secretary of CoroWare, Inc., hereby declare under penalty of perjury that the foregoing is a true and correct copy of the Certificate of Designation of the Rights and Preferences of the Series F Convertible Preferred Stock of CoroWare, Inc. duly adopted by the Board of Directors of CoroWare, Inc. on October 4, 2013 and this Certificate of Designation is executed by the undersigned on behalf of CoroWare, Inc. this 4th day of October, 2013

 

  CoroWare, Inc.
   
  By: /s/ Lloyd T Spencer
    Lloyd Spencer, Chief Executive Officer
   
  By: /s/ Shanna Gerrard
    Shanna Gerrard, Corporate Secretary

 

 

 

 

CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND

RIGHTS OF SERIES G CONVERTIBLE

PREFERRED STOCK, $0.001 PAR VALUE PER SHARE

 

CoroWare, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation (the “Board”) on April 17, 2014 in accordance with the provisions of its Certificate of Incorporation (as amended and restated through the date hereof, the “Certificate of Incorporation”) and Bylaws. The authorized series of the Corporation’s previously-authorized preferred stock shall have the following preferences, privileges, powers and restrictions thereof, as follows:

 

RESOLVED, that pursuant to the authority granted to and vested in the Board in accordance with the provisions of the Certificate of Incorporation and by-laws of the Corporation, each as amended or amended and restated through the date hereof, the Board hereby authorizes a series of the Corporation’s previously authorized preferred stock (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows:

 

I. NAME OF THE CORPORATION

 

CoroWare, Inc.

 

II. DESIGNATION AND AMOUNT; DIVIDENDS

 

A. Designation. The designation of said series of preferred stock shall be Series G Convertible Preferred Stock, $0.001 par value per share (the “Series G Preferred Stock”).

 

B. Number of Shares. The number of shares of Series G Preferred Stock authorized shall be one hundred thousand (100,000) shares. Each share of Series G Preferred Stock shall have a stated value equal to $1.00 (as may be adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series G Stated Value”).

 

C. Dividends: Initially, there will be no dividends due or payable on the Series G Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

 

 

 

 

III. LIQUIDATION PREFERENCE.

 

If the Corporation shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Corporation’s assets in one transaction or in a series of related transactions (a “Liquidation Event”), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series G Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series G Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Corporation legally available for distribution to the Series G Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity nor the sale or transfer by the Corporation of substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Corporation. The “Liquidation Preference” with respect to a share of Series G Preferred Stock means an amount equal to the Stated Value thereof. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof.

 

 

 

 

IV. CONVERSION.

 

(a) Each outstanding share of Series G Preferred Stock shall be convertible into the number of shares of the Corporation’s common stock (“Common Stock”) determined by dividing the Stated Value by the Conversion Price as defined below, at the option of the Holder in whole or in part, at any time commencing no earlier than six (6) months after the Issuance Date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the Corporation files with the Securities and Exchange Commission any periodic report on form 10-Q, 10-K or the equivalent form; provided further that, any conversion under this Section IV(a) shall be for a minimum Stated Value of $500.00 of Series G Preferred Stock. The Holder shall effect conversions by sending a conversion notice (the “Notice of Conversion”) in the manner set forth in Section IV(j). Each Notice of Conversion shall specify the Stated Value of Series G Preferred Stock to be converted. The date on which such conversion is to be effected (the “Conversion Date”) shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof. Except as provided herein, each Notice of Conversion, once given, shall be irrevocable. Upon the entire conversion of the Series G Preferred Stock, the certificates for such Series G Preferred Stock shall be returned to the Corporation for cancellation.

 

(b) Not later than ten (10) Business Days after the Conversion Date, the Corporation will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of the Series G Preferred Stock and (ii) once received from the Corporation, the Series G Preferred Stock in principal amount equal to the principal amount of the Series G Preferred Stock not converted; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series G Preferred Stock until the Series G Preferred Stock are either delivered for conversion to the Corporation or any transfer agent for the Series G Preferred Stock or Common Stock, or the Holder notifies the Corporation that such Series G Preferred Stock certificates have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith. In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates are not delivered by the date required under this Section IV(b), the Holder shall be entitled, by providing written notice to the Corporation at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Corporation shall immediately return the Series G Preferred Stock tendered for conversion.

 

(c) The Conversion Price for each share of Series G Preferred Stock in effect on any Conversion Date shall be (i) eighty five percent (85%) of the average closing bid price of the Common Stock over the twenty (20) trading days immediately preceding the date of conversion, (ii) but no less than Par Value of the Common Stock. For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the NASD OTC Bulletin Board, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices).

 

 

 

 

(d) (i) If the Corporation, at any time while any Series G Preferred Stock are outstanding, (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities (as defined below) payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of Common Stock any shares of capital stock of the Corporation, the Conversion Price designated in Section IV(c) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section IV(d) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

(ii) If the Corporation, at any time while Series G Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series G Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which each Series G Preferred Stock shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Corporation, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Corporation) (an “Appraiser”) selected in good faith by the Holders of a majority of the principal amount of the Series G Preferred Stock then outstanding; and provided, further, that the Corporation, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series G Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

(iii) All calculations under this Article IV shall be made to the nearest 1/1,000th of a cent or the nearest 1/1,000th of a share, as the case may be. Any calculation resulting in a fraction shall be rounded up to the next cent or share.

 

(iv) Whenever the Conversion Price is adjusted pursuant to Section IV(d)(ii) or (iii), the Corporation shall within ten (10) days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series G Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

 

 

 

(v) In case of any reclassification of the Common Stock, any consolidation or merger of the Corporation with or into another person, the sale or transfer of all or substantially all of the assets of the Corporation or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series G Preferred Stock then outstanding shall have the right thereafter to convert such Series G Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series G Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series G Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)(v) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vi) If:

 

  (A) the Corporation shall declare a dividend (or any other distribution) on its Common Stock; or
     
  (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or
     
  (C) the Corporation shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or
   
  (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or
     
  (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Corporation;

 

 
 

 

then the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of Series G Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series G Preferred Stock at their last addresses as it shall appear upon the Series G Preferred stock register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

 

(e) Intentionally omitted.

 

(f) The Corporation covenants that all shares of Common Stock that shall be issuable hereunder shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

 

(g) No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share. If a fractional share interest arises upon any conversion hereunder, the Corporation shall eliminate such fractional share interest by issuing the Holder an additional full share of Common Stock.

 

(h) The issuance of certificates for shares of Common Stock on conversion of Series G Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Corporation shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

 

(i) Series G Preferred Stock converted into Common Stock shall be canceled upon conversion.

 

(j) Each Notice of Conversion shall be given by facsimile to the Corporation no later than 4:00 pm EST. Any such notice shall be deemed given and effective upon the transmission of such facsimile at the current facsimile telephone number of the Company. In the event that the Corporation receives the Notice of Conversion after 4:00 p.m. EST, the Conversion Date shall be deemed to be the next Business Day. In the event that the Corporation receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day.

 

 

 

 

V. RANK

 

The Series G Preferred Stock shall, as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, rank (i) prior to the Corporation’s Common Stock (ii) prior to any class or series of capital stock of the Corporation hereafter created that, by its terms, ranks junior to the Series G Preferred Stock (“Junior Securities”); (iii) junior to the Series B Preferred Stock and any class or series of capital stock of the Corporation hereafter created which by its terms ranks senior to the Series G Preferred Stock (“Senior Securities”); (iv) pari passu with any other series of preferred stock of the Corporation hereafter created which by its terms ranks on a parity (“Pari Passu Securities”) with the Series G Preferred Stock.

 

VI. VOTING RIGHTS

 

Each one share of the Series G Preferred Stock shall have voting rights equal to five million (5,000,000) votes of Common Stock. With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series G Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Corporation’s Certificate of Incorporation or by-laws.

 

VII. PROTECTION PROVISIONS

 

So long as any shares of Series G Preferred Stock are outstanding, the Corporation shall not, without first obtaining the unanimous written consent of the holders of Series G Preferred Stock, alter or change the rights, preferences or privileges of the Series G Preferred so as to affect adversely the holders of Series G Preferred Stock.

 

VIII. MISCELLANEOUS

 

A. Status of Converted or Redeemed Stock: In case any shares of Series G Preferred Stock shall be redeemed or otherwise repurchased or reacquired, the shares so redeemed, repurchased, or reacquired shall resume the status of authorized but unissued shares of preferred stock, and shall no longer be designated as Series G Preferred Stock.

 

B. Lost or Stolen Certificates: Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) and (ii) in the case of loss, theft or destruction, indemnity (with a bond or other security) reasonably satisfactory to the Corporation, or in the case of mutilation, the Preferred Stock Certificate(s) (surrendered for cancellation), the Corporation shall execute and deliver new Preferred Stock Certificates. However, the Corporation shall not be obligated to reissue such lost, stolen, destroyed or mutilated Preferred Stock Certificates if the holder of Series G Preferred Stock contemporaneously requests the Corporation to convert such holder’s Series G Preferred.

 

 

 

 

C. Waiver: Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any right of the holders of Series G Preferred granted hereunder may be waived as to all shares of Series G Preferred Stock (and the holders thereof) upon the unanimous written consent of the holders of the Series G Preferred Stock.

 

D. Notices: Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally, by nationally recognized overnight carrier or by confirmed facsimile transmission, and shall be effective five (5) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by nationally recognized overnight carrier or confirmed facsimile transmission, in each case addressed to a party as set forth below, or such other address and telephone and fax number as may be designated in writing hereafter in the same manner as set forth in this Section.

 

If to the Corporation:

 

CoroWare, Inc.

601 108th Avenue NE

Suite 1900

Bellevue, WA 98004

Attention: Chief Executive Officer

Telephone: (800) 641-2676, x756

Facsimile: (425) 968-4671

 

If to the holders of Series G Preferred, to the address listed in the Corporation’s books and records.

 

 

 

 

IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer and Secretary of CoroWare, Inc., hereby declare under penalty of perjury that the foregoing is a true and correct copy of the Certificate of Designation of the Rights and Preferences of the Series G Convertible Preferred Stock of CoroWare, Inc. duly adopted by the Board of Directors of CoroWare, Inc. on April 17, 2014 and this Certificate of Designation is executed by the undersigned on behalf of CoroWare, Inc. this 17th day of April, 2014.

 

  CoroWare, Inc.
   
  By: /s/ Lloyd T. Spencer
    Lloyd Spencer, Chief Executive Officer
   
  By: /s/ Lloyd T. Spencer
    Lloyd Spencer, Interim Corporate Secretary

 

 

 

 

FIFTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the by-laws of the Corporation.

 

SIXTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit.

 

 

 

 

Exhibit 4.9

 

CERTIFICATE OF DESIGNATION,

OF THE RIGHTS AND PREFERENCES

OF

SERIES C CONVERTIBLE PREFERRED STOCK

OF

INNOVA ROBOTICS & AUTOMATION, INC.

 

Innova Robotics & Automation, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies that the following resolutions were adopted by the Board of Directors of the Company pursuant to the authority of the Board of Directors as required by Section 151 of the Delaware General Corporation Law (the “DGCL”).

 

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Company (the “Board of Directors” or the “Board”) in accordance with the provisions of its Articles of Incorporation and Bylaws, each as amended through the date hereof, the Board of Directors hereby authorizes a series of the Company’s previously authorized Preferred Stock, $.001 par value (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows:

 

I. CERTAIN DEFINITIONS

 

For purposes of this Certificate of Designation, capitalized terms are defined in this Certificate of Designation or shall have the following meanings:

 

“Change of Control” means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Company, excluding any acquisition arising from the conversion into Common Stock of Series C Preferred Stock.

 

“Common Stock” means the common stock of the Company, par value $.001 per share.

 

“Issuance Date” means the date of initial issuance of the Series C Preferred Stock.

 

“Per Share Market Value” of the Common Stock means on any particular date (a) the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, the closing bid price per share as reported by Nasdaq, or (c) if the Common Stock is not then listed or admitted to trading on the Nasdaq, the closing bid price per share of the Common Stock on such date as reported on the OTCBB or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (d) if the Common Stock is not quoted on the OTCBB, the closing bid price for a share of Common Stock on such date in the over-the-counter market as reported by the Pinksheets LLC (or similar organization or agency succeeding to its functions of reporting prices) or if there is no such price on such date, then the last bid price on the date nearest preceding such date, or (e) if the Common Stock is no longer publicly traded, the fair market value of a share of the Common Stock as determined by an Appraiser as defined in Paragraph IV(D) selected in good faith by the holders of a majority of the Series C Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser.

 

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“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

 

“Trading Day” means (a) a day on which the Common Stock is quoted on the OTCBB or principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. (“NASD”), or (c) if the Common Stock is not quoted on the NASD, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pinksheets LLC (or any similar organization or agency succeeding its functions of reporting prices).

 

II. DESIGNATION AND AMOUNT

 

The designation of this series, which consists of five hundred thousand (500,000) shares of Preferred Stock, is the Series C 5% Convertible Preferred Stock (the “Series C Preferred Stock”) and the stated value shall be U.S. one dollar ($1.00) per share (the “Stated Value”).

 

III. DIVIDENDS

 

The holder of the shares of Series C Preferred Stock shall be entitled to receive dividends at the rate of five percent (5%) per annum on the stated value of the Series C Preferred Stock before dividends are declared on any other outstanding shares of stock of the Company. The dividends so payable will be paid on each anniversary date of the Issuance Date to the person in whose name the Series C Preferred Stock is registered. At the time such dividends are declared and payable, the Company, in its sole discretion, may elect to pay the dividends in cash or in the form of Common Stock. If paid in the form of Common Stock, the amount of stock to be issued will be calculated as follows: the value of the stock shall be the Closing Bid Price on the date the dividend is declared and a number of shares of Common Stock with a value equal to the amount of the dividend shall be issued. No fractional shares will be issued; therefore, in the event that the value of the Common Stock per share does not equal the dividend, the Company will pay the balance in cash or round up to a whole share.

 

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IV. CONVERSION

 

(a) Each outstanding share of Series C Preferred Stock shall be convertible into the number of shares of Common Stock determined by dividing the Stated Value by the Conversion Price as defined below, at the option of the Holder in whole or in part, at any time commencing on or after the Issuance Date; provided that any conversion under this section must be made during the ten (10) day period immediately following the date on which the Company files with the Securities and Exchange Commission any periodic report on form 10-QSB, 10-KSB or the equivalent form; provided further that, any conversion under this Section IV(a) shall be for a minimum Stated Value of $500.00 of Series C Preferred Stock. The Holder shall effect conversions by sending the form of conversion notice attached hereto as Appendix I (the “Notice of Conversion”) in the manner set forth in Section IV(j). Each Notice of Conversion shall specify the Stated Value of Series C Preferred Stock to be converted. The date on which such conversion is to be effected (the “Conversion Date”) shall be on the date the Notice of Conversion is delivered pursuant to Section IV(j) hereof. Except as provided herein, each Notice of Conversion, once given, shall be irrevocable. Upon the entire conversion of the Series C Preferred Stock, the certificates for such Series C Preferred Stock shall be returned to the Company for cancellation.

 

(b) Not later than ten (10) Business Days after the Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of the Series C Preferred Stock and (ii) once received from the Company, the Series C Preferred Stock in principal amount equal to the principal amount of the Series C Preferred Stock not converted; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any Series C Preferred Stock until the Series C Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Series C Preferred Stock or Common Stock, or the Holder notifies the Company that such Series C Preferred Stock certificates have been lost, stolen or destroyed and provides an agreement reasonably acceptable to the Company to indemnify the Company from any loss incurred by it in connection therewith. In the case of a conversion pursuant to a Notice of Conversion, if such certificate or certificates are not delivered by the date required under this Section IV(b), the Holder shall be entitled, by providing written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the Series C Preferred Stock tendered for conversion.

 

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(c) The Conversion Price for each share of Series C Preferred Stock in effect on any Conversion Date shall be the lesser of (a) eighty five percent (85%) of the average closing bid price of the Common Stock over the twenty (20) trading days immediately preceding the date of conversion or (b) $0.04. For purposes of determining the closing bid price on any day, reference shall be to the closing bid price for a share of Common Stock on such date on the NASD OTC Bulletin Board, as reported on Bloomberg, L.P. (or similar organization or agency succeeding to its functions of reporting prices).

 

(d) (i) If the Company, at any time while any Series C Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities (as defined below) payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Conversion Price designated in Section IV(c) shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section IV(d)(j) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

(ii) If the Company, at any time while Series C Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to Holders of Series C Preferred Stock) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which each Series C Preferred Stock shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an “Appraiser”) selected in good faith by the Holders of a majority of the principal amount of the Series C Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Series C Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

4

 

 

(iii) All calculations under this Article IV shall be made to the nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any calculation resulting in a fraction shall be rounded up to the next cent or share.

 

(iv) Whenever the Conversion Price is adjusted pursuant to Section IV(d)(ii) or (iii), the Company shall within ten (10) days after the determination of the new Fixed Conversion Price mail and fax to the Holder and to each other Holder of Series C Preferred Stock, a notice setting forth the Fixed Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(v) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then each holder of Series C Preferred Stock then outstanding shall have the right thereafter to convert such Series C Preferred Stock only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange (except in the event the property is cash, then the Holder shall have the right to convert the Series C Preferred Stock and receive cash in the same manner as other stockholders), and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which such Series C Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder the right to receive the securities or property set forth in this Section IV(d)(v) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vi) If:

 

(A)the Company shall declare a dividend (or any other distribution) on its Common Stock; or
   
(B)the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or

5

 

 

(C)the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or
   
(D)the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or
   
(E)the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Company;

 

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Series C Preferred Stock, and shall cause to be mailed and faxed to the Holders of Series C Preferred Stock at their last addresses as it shall appear upon the Series C Preferred stock register, at least thirty (30) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

 

(e) Intentionally omitted.

 

(f) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Series C Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of Series C Preferred Stock, such number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section IV(d) hereof) upon the conversion of all outstanding shares of Series C Preferred Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

 

6

 

 

(g) No fractional shares of Common Stock shall be issuable upon a conversion hereunder and the number of shares to be issued shall be rounded up to the nearest whole share. If a fractional share interest arises upon any conversion hereunder, the Company shall eliminate such fractional share interest by issuing the Holder an additional full share of Common Stock.

 

(h) The issuance of certificates for shares of Common Stock on conversion of Series C Preferred Stock shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(i) Series C Preferred Stock converted into Common Stock shall be canceled upon conversion.

 

(j) Each Notice of Conversion shall be given by facsimile to the Company no later than 4:00 pm EST. Any such notice shall be deemed given and effective upon the transmission of such facsimile at the facsimile telephone number specified in the Purchase Agreement. In the event that the Company receives the Notice of Conversion after 4:00 p.m. EST, the Conversion Date shall be deemed to be the next Business Day. In the event that the Company receives the Notice of Conversion after the end of the Business Day, notice will be deemed to have been given the next Business Day.

 

V. REDEMPTION

 

At any time after the Issuance Date through the fifth (5th) anniversary of the Issuance Date, the Company shall have the option to redeem any unconverted shares of the Series C Preferred Stock, either in part or whole, upon no less than thirty (30) days written notice thereof given to the Holders thereof, at an amount equal to one hundred twenty percent (120%) of the stated value of the unconverted Series C Preferred Stock (the “Redemption Price”) plus accrued and unpaid dividends.

 

No holder of Series C Preferred Stock may demand that the Series C Preferred Stock be redeemed.

 

7

 

 

VI. RANK

 

The Series C Preferred Stock shall, as to distribution of assets upon liquidation, dissolution or winding up of the Company, rank (i) prior to the Company’s Common Stock (ii) prior to any class or series of capital stock of the Company hereafter created that, by its terms, ranks junior to the Series C Preferred Stock (“Junior Securities”); (iii) junior to the Series A Preferred Stock and Series B Preferred Stock and any class or series of capital stock of the Company hereafter created which by its terms ranks senior to the Series C Preferred Stock (“Senior Securities”); (iv) pari passu with any other series of preferred stock of the Company hereafter created which by its terms ranks on a parity (“Pari Passu Securities”) with the Series C Preferred Stock.

 

VII. LIQUIDATION PREFERENCE

 

If the Company shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Company shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Company shall liquidate, dissolve or wind up, or if the Company shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Company’s assets in one transaction or in a series of related transactions (a “Liquidation Event”), no distribution shall be made to the holders of any shares of capital stock of the Company (other than Senior Securities and Pari Passu Securities) upon liquidation, dissolution or winding up unless prior thereto the Holders of shares of Series C Preferred Stock shall have received the Liquidation Preference (as defined below) with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the Holders of the Series C Preferred Stock and Holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Company legally available for distribution to the Series C Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other entity nor the sale or transfer by the Company of substantially all of its assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company. The “Liquidation Preference” with respect to a share of Series C Preferred Stock means an amount equal to the Stated Value thereof. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof.

 

8

 

 

VIII. VOTING RIGHTS

 

The Holders of the Series C Preferred Stock have no voting power whatsoever, except as provided by the DGCL. To the extent that under the DGCL the vote of the Holders of the Series C Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the then outstanding shares of the Series C Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of the Holders of at least a majority of the then outstanding shares of Series C Preferred Stock (except as otherwise may be required under the DGCL) shall constitute the approval of such action by the class. To the extent that under the DGCL Holders of the Series C Preferred Stock are entitled to vote on a matter with holders of Common Stock, voting together as one class, each share of Series C Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (subject to the limitations contained in Article IV) using the record date for the taking of such vote of shareholders as the date as of which the Conversion Price is calculated.

 

IX. MISCELLANEOUS

 

(a) If any shares of Series C Preferred Stock are converted pursuant to Article IV, the shares so converted shall be canceled, shall return to the status of authorized, but unissued preferred stock of no designated series.

 

(b) Upon receipt by the Company of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity (without any bond or other security) reasonably satisfactory to the Company, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock certificate(s), the Company shall execute and deliver new Preferred Stock certificate(s) of like tenor and date. However, the Company shall not be obligated to reissue such lost or stolen Preferred Stock certificate(s) if the Holder contemporaneously requests the Company to convert such Series C Preferred Stock.

 

(c) Upon submission of a Notice of Conversion by a Holder of Series C Preferred Stock, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted shares of Series C Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company to comply with the terms of this Certificate of Designation. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Delivery Period with respect to a conversion of Series C Preferred Stock for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Company within five (5) business days after the expiration of such ten (10) business day period) the Holder shall regain the rights of a Holder of Series C Preferred Stock with respect to such unconverted shares of Series C Preferred Stock and the Company shall, as soon as practicable, return such unconverted shares to the Holder. In all cases, the Holder shall retain all of its rights and remedies for the Company’s failure to convert Series C Preferred Stock.

 

(d) The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Certificate of Designation. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders of Series C Preferred Stock and that the remedy at law for any such breach may be inadequate. The Company therefore agrees, in the event of any such breach or threatened breach, that the Holders of Series C Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

9

 

 

IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer and Secretary of Innova Robotics & Automation, Inc., hereby declare under penalty of perjury that the foregoing is a true and correct copy of the Certificate of Designation of the Rights and Preferences of the Series C Convertible Preferred Stock of Innova Robotics & Automation, Inc. duly adopted by the Board of Directors of Innova Robotics & Automation, Inc. on ___________, 2007 and this Certificate of Designation is executed by the undersigned on behalf of Innova Robotics & Automation, Inc. this ___ day of _________, 2007.

 

  Innova Robotics & Automation, Inc.
   
  By: /s/ Eugene V. Gartlan
    Eugene V. Gartlan, CEO
     
  By: /s/ Sheri Aws
    Sheri Aws, Secretary

 

10

 

 

APPENDIX I

 

NOTICE OF CONVERSION

AT THE ELECTION OF THE HOLDER

 

(To be Executed by the Registered Holder

in order to Convert the Series C Preferred Stock of Innova Robotics & Automation, Inc.)

 

The undersigned hereby irrevocably elects to convert the Series C Preferred Stock into shares of Common Stock, par value $.001 per share (the “Common Stock”), of Innova Robotics & Automation, Inc. (the “Company”) according to the provisions of the Certificate of Designation hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.

 

Conversion calculations:    
    Date to Effect Conversion
     
     
    Number of Shares to be Converted
     
     
    Applicable Conversion Price
     
     
    Number of Shares to be Issued Upon Conversion
     
     
    Signature
     
     
    Name
     
     
    Address

 

11

 

Exhibits 5.1 and 23.1

 

October 11, 2022

CarbonMeta Technologies, Inc.

13110 NE 177th Place, Suite 145

Woodinville, WA 98072

 

Re: Registration Statement on Form S-1, Amendment No. 2

 

Ladies and Gentlemen:

 

I am counsel for CarbonMeta Technologies, Inc., a Delaware corporation (the “Company”), in connection with the proposed public offering of up to 2,781,937,537 shares of the common stock, $0.0001 par value per share (“Common Stock”), of the Company by the selling shareholders listed in Exhibit A, attached hereto (collectively, the “Selling Shareholders”) under the Securities Act of 1933, as amended, through a Registration Statement on Form S-1 (the “Registration Statement”) as to which this opinion is a part, to be filed with the Securities and Exchange Commission on or about October 11, 2022.

 

In connection with rendering my opinion as set forth below, I have reviewed and examined originals or copies identified to my satisfaction of the following:

 

(1) Articles of Incorporation, of the Company as filed with the Secretary of State of Delaware;

 

(2) By-laws of the Company;

 

(3) Corporate minutes containing the written resolutions of the Board of Directors of the Company;

 

(4) The Registration Statement and the prospectus contained within the Registration Statement; and

 

(5) The other exhibits of the Registration Statement.

 

I have examined such other documents and records, instruments and certificates of public officials, officers and representatives of the Company, and have made such other investigations as I have deemed necessary or appropriate under the circumstances.

 

In my examination, I have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to me as original documents and the conformity to original documents of all documents submitted to me as certified, conformed, facsimile, electronic or photostatic copies. I have relied upon the statements contained in the Registration Statement and certificates of officers of the Company, and I have made no independent investigation with regard thereto.

 

Based upon the foregoing and in reliance thereon, it is my opinion that the 908,932,537 shares that are currently issued and outstanding and being offered by the Selling Shareholders are legally, issued, fully paid and non-assessable; and 1,308,630,000 shares of common stock issuable upon conversion of outstanding convertible notes and 564,375,000 shares of common stock issuable upon exercise of warrants will be legally issued, fully paid and non-assessable when offered by the Selling Shareholders under the Registration Statement, pursuant to the laws of the State of Delaware and the laws of the United States of America.

 

I hereby consent to this opinion being included as an exhibit to the Registration Statement and to the use of my name under the caption “EXPERTS” in the prospectus constituting a part thereof.
 

  Law Offices of Gary L. Blum
   
  /s/ Gary L. Blum, Esq.
  Gary L. Blum, Esq.

 

1

 

 

Exhibit A

 

Name   Shares
     
Lloyd Spencer   934,071,428
Tangiers Investment Group, LLC   527,500,000
MacRab, LLC   317,032,775
EcoMena Limited   160,000,000
Salvum Corporation   83,333,334
Mark Duiker   30,000,000
Mohamed Khalil   30,000,000
Bill Elder   20,000,000
BHP Capital NY Inc.   212,500,000
Quick Capital, LLC   212,500,000
Robert Papiri Defined Benefit Plan   85,000,000
Robert Papiri Defined Contribution Plan   21,250,000
RGP Capital Partners, Inc.   148,750,000
     
Total   2,781,937,537 common shares

 

2

 

 

Exhibit 10.46

 

DATED

 

December 2, 2021

 

  (1) ECOMENA LIMITED

 

and

 

  (2) CARBONMETA TECHNOLOGIES INC

 

LICENCE OF TECHNOLOGY

 

 
 

 

THIS AGREEMENT is made on

 

BETWEEN:

 

(1) ECOMENA LIMITED (Company No. 12408106) whose registered office is at 199 Roundhay Road, Leeds, United Kingdom, LS8 5AN, England (“Licensor”); and
   
(2) CARBONMETA TECHNOLOGIES INC, a registered Delaware Corporation whose office is 13110 NE 177th Place, #145, Woodinville, WA 98072, USA (“the Licensee”).

 

BACKGROUND:

 

The Licensed Technology is connected with Licensor’s trade secrets related to re-cycling industrial by product, construction and demolition materials into manufacturing cement free pavers and mortars that are environmentally friendly and continuously absorb carbon dioxide, entitled “CEMENTLESS MATERIALS”.

 

The Licensee wishes to acquire a licence to the Licensed Technology and Licensor is willing to license the Licensed Technology to the Licensee, on the terms of this agreement.

 

AGREEMENT:

 

1. Interpretation
   
  In this agreement (including its Schedules), any reference to a “clause” or “Schedule” is a reference to a clause of this agreement or a schedule to this agreement, as the case may be. Words and expressions used in this agreement have the meaning set out in Schedule 1.

 

2. Grant of Licence
   
2.1 In consideration of the payments required to be made under this agreement by the Licensee, Licensor grants to the Licensee a licence in the Territory in respect of the Licensed Technology to develop, make, have made, use and have used, import, export and Market the Licensed Product in the Field on and subject to the terms and conditions of this agreement. Subject to clause 4, the Licence is exclusive in the Field in respect of Licensed Intellectual Property Rights. The Licence is non-exclusive in relation to the Licensed Know-How. Licensor retains unrestricted rights to use and license others to use the Licensed Know-How, and to use and license the Licensed Technology outside the Field and the Territory.
   
2.2 As soon as is reasonably possible after the date of this agreement (and in any event within thirty (30) days of the date of this agreement), Licensor will, at Licensor’s cost, supply the Licensee with the Documents. Licensor shall, for a period of one (1) year from the date of this agreement, continue to provide the Licensee with such documents and materials as embody the Licensed Know-How generated during that period.
   
2.3 The Licensee may grant sub-licences with the prior written consent of Licensor, such consent not to be unreasonably withheld, conditioned or delayed, provided that:

 

  2.3.1 the sub-licensee has obligations to the Licensee commensurate with those which the Licensee has to Licensor under this agreement, except the financial terms of this agreement or where it is not legally possible to include such obligations in the sub-licence;

 

 
 

 

  2.3.2 the nature of the proposed sub-licensee is not likely in Licensor’s reasonable opinion to have any detrimental impact on the reputation of Licensor;
     
  2.3.3 as soon as reasonably practicable following the grant of each sub-licence, the Licensee provides a certified copy of that sub-licence to Licensor, such copy to be Confidential Information of the Licensee which may be redacted to the extent any information in such sub-licence does not relate to the Licensed Technology, Licensor and/or this agreement;
     
  2.3.4 the sub-licensee enters into a Deed of Covenant with Licensor in the form set out in Schedule 4; and
     
  2.3.5 no sub-licence will carry any right to sub-sub-license.

 

2.4 Licensor will be deemed to have consented to a sub-licence within thirty (30) Business Days of receipt of such written request by the Licensee to grant a sub-licence, provided it has not refused consent or requested reasonable further time or information to consider the request within such thirty (30) Business Days period.
   
2.5 Notwithstanding clause 2.3, no prior written consent from Licensor will be required for sub-licences if:

 

  2.5.1 the sub-licensee or an Affiliate of the sub-licensee, at the time of entering into a new sub-licence, is already a licensee or a sub-licensee of the Licensee in respect of all or part of the Licensed Technology; or
     
  2.5.2 the sub-licensee is an Affiliate of the Licensee;
     
  provided always that the sub-licence complies with provisions 2.3.1 and 2.3.4 but is not required to comply with the other provisions of that clause.

 

2.6 The Licensee will:

 

  2.6.1 ensure that the Licensed Technology will be developed and marketed in association with the Licensed Products fully in compliance with all applicable laws and regulations, including applicable construction regulations and any other regulations governing the certification of products to indicate conformity with health, safety, and environmental protection standards that are applicable in the United Kingdom, United States of America, European Union, and any other applicable countries in which the Licensed Technology is being marketed;
     
  2.6.2 comply with any United Nations trade sanctions or EU or UK legislation or regulation, from time to time in force, which impose arms embargoes or control the export from the United Kingdom of goods, technology or software, including weapons of mass destruction and arms, military, paramilitary and security equipment and dual-use items (items designed for civil use, but which can be used for military purposes) and certain drugs and chemicals; and

 

 
 

 

  2.6.3 not export, directly or indirectly, the Licensed Technology, Licensed Products or any technical data associated with the Licensed Technology to any country for which at the time of export an export licence or other governmental approval is required without first obtaining such licence or approval.

 

3. Improvements
   
3.1 The Licensed Technology covered by the Licence in clause 2 includes Inventor Improvements. Licensor will communicate in writing to the Licensee all Inventor Improvements within a reasonable amount of time after becoming aware of the Inventor Improvement.
   
3.2 The Licensee acknowledges and agrees that all Intellectual Property Rights in Inventor Improvements belong to Licensor.
   
3.3 The Licensee will communicate in writing to Licensor all Licensee Improvements within a reasonable amount of time after the Licensee becomes aware of, or after the completed development of, the Licensee Improvements.
   
3.4 Licensor acknowledges and agrees that all Intellectual Property Rights in the Licensee Improvements belong to the Licensee.

 

4. Rights Regarding Non-Commercial Use
   
4.1 Licensor has granted and in respect of Licensee Improvements, will grant, to those persons who at any time work or have worked on the Licensed Technology, a non-transferable, irrevocable, perpetual, royalty-free licence to use and to publish the Licensed Technology and the Licensee Improvements, in each case for Non-Commercial Use.

 

5. Infringement
   
5.1 Each party will notify the other in writing of any misappropriation or infringement of any rights in the Licensed Technology of which the party becomes aware.
   
5.2 The Licensee has the first right (but is not obliged) to take Legal Action at its own cost in relation to any misappropriation or infringement of any rights included in the Licensed Intellectual Property Rights in the Field and in the Territory. The Licensee must discuss any proposed Legal Action with Licensor prior to the Legal Action being commenced, and take due account of the legitimate interests of Licensor in the Legal Action it takes provided always that the Licensee may act without further consultation if rights in the Licensed Technology would otherwise be prejudiced or lost.
   
5.3 If the Licensee takes Legal Action under clause 6.2, the Licensee will:

 

  5.3.1 indemnify and hold Licensor harmless against all costs (including lawyers’ and patent agents’ fees and expenses), claims, demands and liabilities arising out of or consequent upon a Legal Action and will settle any invoice received from Licensor in respect of such costs, claims, demands and liabilities within thirty (30) days of receipt;

 

 
 

 

  5.3.2 treat any account of profits or damages (including, without limitation, punitive damages) awarded in or paid to the Licensee under any settlement of the Legal Action for any misappropriation or infringement of any rights included in the Licensed Technology as Net Sales for the purposes of clause 8, having first for these purposes deducted from the award or settlement an amount equal to any legal costs incurred by the Licensee in the Legal Action that are not covered by an award of legal costs; and
     
  5.3.3 keep Licensor regularly informed of the progress of the Legal Action, including, without limitation, any claims affecting the scope of the Licensed Technology.

 

5.4 Licensor may take any Legal Action at its own cost in relation to any misappropriation or infringement of any rights included in the Licensed Intellectual Property Rights where:

 

  5.4.1 the Licensee has notified Licensor in writing that it does not intend to take any Legal Action in relation to any misappropriation or infringement of any such rights; or
     
  5.4.2 if having received professional advice with regard to any Legal Action within fourteen (14) days of the notification under clause 6.1, and consulted with Licensor, the Licensee does not take reasonable steps to act upon an agreed process for dealing with such misappropriation or infringement (which may include, for the avoidance of doubt, seeking a second opinion in respect of such professional advice) within any timescale agreed between Licensor and the Licensee and in any event within forty-five (45) days of notification under clause 6.1,

 

provided it shall not settle any action without first consulting with the Licensee and taking account of the reasonable observations and requests of the Licensee.

 

5.5 Subject to clauses 6.2 and 6.3, if the Licensee takes Legal Action Licensor will provide such reasonable assistance as requested by the Licensee in relation to such Legal Action at the Licensee’s cost and authorises the Licensee to join Licensor as a party in any Legal Action where it is a legal requirement for the patent owner to be a plaintiff in the Legal Action, provided that the Licensee indemnifies Licensor under clause 6.3.1 for the costs of any legal representation in the Legal Action required by Licensor.

 

6. Confidentiality
   
6.1 Subject to clauses 7.2, 7.3 and 7.4, each party (being a receiving or disclosing party as the case may be) will keep confidential the Confidential Information of the other party and will not disclose or supply the Confidential Information to any third party or use it for any purpose, except in accordance with the terms and objectives of this agreement.
   
6.2 The Licensee may disclose to sub-licensees of the Licensed Technology such of the Confidential Information as is necessary for the exercise of any rights sub-licensed, provided that the Licensee shall ensure that such sub-licensees accept a continuing obligation of confidentiality on substantially the same terms as this clause and giving third party enforcement rights to Licensor, before the Licensee makes any disclosure of the Confidential Information. The Licensee may also disclose the Licensed Technology to the extent reasonably required in connection with the conduct of its business including to potential investors, other business associates and professional advisors provided that such persons have agreed in writing to be bound by non-use and non-disclosure obligations that are no less strict than those set forth in this agreement or are subject to professional codes of conduct that prevent disclosure of client confidential information and the Licensee will take action in respect of any breach of such obligations.

 

 
 

 

6.3 Licensor may disclose the terms of this agreement and royalty reports and payments made by the Licensee to any third parties that have rights to a revenue share for providing funding in the development of the Licensed Technology provided that such persons have agreed in writing to be bound by non-use and non-disclosure obligations that prevent disclosure of client confidential information and Licensor will take action in respect of any breach of such obligations.
   
6.4 Clause 7.1 will not apply to any Confidential Information which:

 

  6.4.1 (save in the case of Licensed Technology) is known to the receiving party before disclosure, and not subject to any obligation of confidentiality owed to the disclosing party;
     
  6.4.2 is or becomes publicly known without the fault of the receiving party;
     
  6.4.3 is obtained by the receiving party from a third party in circumstances where the receiving party has no reason to believe that it is subject to an obligation of confidentiality owed to the disclosing party;
     
  6.4.4 the receiving party can establish by reasonable proof was substantially and independently developed by officers or employees of the receiving party who had no knowledge of the disclosing party’s Confidential Information; or
     
  6.4.5 is approved for release in writing by an authorised representative of the disclosing party.

 

6.5 Nothing in this agreement will prevent a party from disclosing Confidential Information where it is required to do so by law or regulation, stock exchange rules, or by order of a court or competent authority, provided that, in the case of a disclosure under the Freedom of Information Act 2000 (“FOIA”), none of the exemptions in the FOIA applies to the relevant Confidential Information and provided always that, to the extent permitted by law or regulation, the receiving party will give such notice as is reasonably practicable in the circumstances to the disclosing party about the timing and content of such a disclosure.
   
6.6 If either party to this agreement receives a request under the FOIA to disclose any information that, under this agreement, is the other party’s Confidential Information, it will notify and consult with the other party. The other party will respond within five (5) days after receiving notice if that notice requests the other party to provide information to assist in determining whether or not an exemption under the FOIA applies to the information requested under the FOIA.

 

7. Royalties and other Payments
   
7.1 Licensor will invoice the Licensee for the Signing Fee shortly after signature of this agreement and the Licensee must settle the invoice within thirty (60) days of receipt.

 

 
 

 

7.2 The Licensee will pay to Licensor a royalty equal to the applicable Royalty Rate on all Net Sales of Licensed Products.
   
7.3 In the event that the royalties paid to Licensor under clause 8.2 do not amount to at least the Minimum Sum, the Licensee must make up the difference between the royalties paid under clause 8.2 and the Minimum Sum in each Licence Year where a Minimum Sum applies.
   
7.4 The Licensee will pay to Licensor a royalty equal to the Fee Income Royalty Rate on all up-front, milestone, minimum sum and other one-off payments (other than payments received by the Licensee from a third party which, in accordance with the terms under which those payments are received, may only be used by the Licensee in relation to research and development of a Licensed Product) received by the Licensee under or in connection with all sub-licences and options granted by the Licensee with respect to the Licensed Technology excluding royalties paid to the Licensee by a sub-licensee based on net sales of Licensed Product. The Licensee will pay each such royalty within thirty (30) days after its receipt of the payment to which the royalty relates.
   
7.5 The Licensee will notify Licensor as soon as possible after it or any sub-licensee achieves any Milestone, and pay to Licensor the Milestone Fee in respect of each Milestone within thirty (30) days of the date on which each Milestone is achieved by the Licensee or a sub-licensee.
   
7.6 The Signing Fee and the Milestone Fee are non-refundable and will not be considered as an advance payment on royalties payable under clause 8.2. No part of the Minimum Sum will be refundable or applicable to succeeding Licence Years.
   
7.7 If a Licensed Product Marketed by the Licensee is re-Marketed by an Affiliate, the royalty on each such Licensed Product will be calculated on the highest of the prices at which it is Marketed or re-Marketed. The Licensee will pay to Licensor a royalty equal to the Fee Income Royalty Rate on any sum received by any sub-licensee that is an Affiliate where a royalty equal to the Fee Income Royalty Rate would have been due on that sum under clause 8.4 had it been received directly by the Licensee.
   
7.8 The Licensee or any of its sub-licensees may supply a commercially reasonable quantity of Licensed Products for promotional sampling provided that the number of Licensed Products supplied for promotional sampling shall not be greater than 5% of the total number of units of each Licensed Product sold, leased or licensed by the Licensee in any Quarter. Except as set out in this clause, the Licensee must not accept or solicit any non-monetary consideration when Marketing or otherwise transferring Licensed Products or when issuing sub-licences of the Licensed Technology without the prior written consent of Licensor.
   
7.9 The Licensee will make all payments in pounds sterling or any currency replacing pounds sterling in its entirety unless the parties agree otherwise.
   
7.10 For the purposes of calculating any amount payable by the Licensee to Licensor in a currency other than pounds sterling (or replacement currency), the Licensee shall apply an exchange rate equivalent to the average of the applicable closing mid rates quoted by the Financial Times as published in London on:

 

  7.10.1 the first Business Day of each month during the Quarter just closed; or

 

 
 

 

  7.10.2 for payments under clause 8.4 only, the first Business Day of the month in which the payment was received by the Licensee.

 

7.11 Where the Licensee has to withhold tax by law, the Licensee will deduct the tax, pay it to the relevant taxing authority, and supply Licensor with a Certificate of Tax Deduction at the time of payment to Licensor.
   
7.12 In the event that full payment of any amount due from the Licensee to Licensor under this agreement is not made by any of the dates stipulated, the Licensee shall be liable to pay interest on the amount unpaid at the rate of five per cent (5%) per annum over the base rate for the time being of Barclays Bank plc. Such interest shall accrue on a daily basis from the date when payment was due until the date of actual payment of the overdue amount, whether before or after judgment, and shall be compounded quarterly.

 

8. Commercially Reasonable Endeavours
   
8.1 The Licensee must use Commercially Reasonable Endeavours to develop, exploit and Market the Licensed Technology to maximise the financial return for both parties.
   
8.2 The Licensee must use Commercially Reasonable Endeavours to develop, exploit and Market the Licensed Technology in accordance with the Development Plan.
   
8.3 The Licensee will provide Licensor with any revised development plan together with any background supporting information necessary for Licensor to evaluate the draft plan; such revised development plan to be consistent with an anticipated return to Licensor under clause 8. The Licensee will consult with Licensor over the draft plan and will consider in good faith any comments that Licensor may put forward. Following approval of the revised development plan by Licensor, the revised development plan shall become the Development Plan. Any information provided under this clause 9.3 shall be considered Confidential Information of the Licensee.

 

9. Reports and Audit Rights
   
9.1 The Licensee will provide Licensor with a report at least once in every six (6) months detailing the activities and achievements in its development of the Licensed Technology in order to facilitate its commercial exploitation, and in the development of potential Licensed Products.
   
9.2 The Licensee will provide Licensor with a royalty report within thirty (30) days after the close of each Quarter for each Licensed Product Marketed by the Licensee, including a royalty report confirming that no royalties are due for a Quarter. Each Royalty Report will:

 

  9.2.1 set out the Net Sales of each Licensed Product Marketed by the Licensee or any sub-licensee, including the total gross selling price of each Licensed Product Marketed by the Licensee and any sub-licensees and the quantity or total number of units of each Licensed Product Marketed by the Licensee or any sub-licensee;
     
  9.2.2 set out details of deductions made in the calculation of Net Sales from the invoiced price of each Licensed Product in the form in which it is Marketed by the Licensee;

 

 
 

 

  9.2.3 set out details of the quantity of Licensed Products used for promotional sampling by the Licensee;
     
  9.2.4 provide a calculation of the royalties due from the Licensee to be paid at the Royalty Rate;
     
  9.2.5 set out details of payments received by the Licensee to which the Fee Income Royalty Rate applies and provide a calculation of the royalties due from the Licensee to be paid at the Fee Income Royalty Rate;
     
  9.2.6 set out details of Milestones achieved by the Licensee or any sub-licensees;
     
  9.2.7 provide a statement showing whether or not royalties due exceed the Minimum Sum and, if so, by how much; and
     
  9.2.8 set out the steps taken during the Licence Year to promote and Market Licensed Products.

 

The Licensee must pay Licensor the royalties due in respect of the Quarter just closed at the same time as the Licensee delivers the Royalty Report, provided that, if requested, Licensor will issue an invoice for the relevant payment prior to payment.

 

9.3 In the event of a dispute regarding the calculation of Net Sales or other payments, including the Licensee’s interpretation of International Financial Reporting Standards, whether following an audit pursuant to clause 10.6 or otherwise, the dispute shall be referred to an appropriately qualified independent expert (the “Expert”) jointly appointed by the parties (acting reasonably) who shall settle the dispute as follows. The Expert shall ask each party for written submissions within thirty (30) days of its appointment and shall be given access to the parties’ records and correspondence applicable to the dispute. The Expert shall have a period of sixty (60) days after this time to decide the dispute. The Expert will be appointed as an expert and not as an arbitrator. The parties will each have the right to make representations to the Expert. The Expert’s decision shall be binding on the parties without right of appeal and the costs of the Expert shall be borne by the non-prevailing party.
   
9.4 The Licensee will deliver to Licensor a periodic report at the close of each Licence Year providing sufficient data (in outline form) to give a reasonable indication or estimate of the actual or expected market share of the Licensee and its sub-licensees and will notify Licensor in the event that its market share does or is expected to breach the limits set out in the 2014 Commission Regulation 316/2014 Technology Transfer Block Exemption Regulation and Guidelines in Commission Communication 2014/c 89/03 whilst it applies to the UK or the limits set out in the Competition Act 1998 as amended, replaced, updated, re-enacted or consolidated from time to time. This obligation is not intended to place a significant additional financial burden on the Licensee.
   
9.5 The Licensee must keep complete and proper records and accurate accounts of all Licensed Products used and Marketed by the Licensee and any sub-licensee in each Licence Year for at least six (6) years. Licensor may, through an independent certified accountant appointed by Licensor (“the Auditor”), audit all such accounts on at least thirty (30) days’ written notice no more than once each Licence Year for the purpose of determining the accuracy of the Royalty Reports and payments. The Auditor shall be:

 

  9.5.1 permitted by the Licensee to enter the Licensee’s principal place of business upon reasonable notice to inspect such records and accounts;

 

 
 

 

  9.5.2 entitled to take copies of or extracts from such records and accounts as are strictly necessary for the Auditor to properly conduct the audit;
     
  9.5.3 given all other information by the Licensee as may be necessary or appropriate to enable the amount of royalties payable to be ascertained including the provision of relevant records; and
     
  9.5.4 shall be allowed access to and permitted, to the extent reasonably required, to conduct interviews of any staff of the Licensee in order to verify the accuracy of the records and accounts and the accuracy of any statements provided to Licensor under clause 10.2.

 

If on any such audit a shortfall in payments of greater than five per cent (5%) is discovered by the Auditor in respect of the audit period, the Licensee shall pay Licensor’s audit costs.

 

9.6 The auditing rights and obligations on the Licensee set out in clause 10.6 will apply equally to any sub-licensees allowed for in this agreement and the Licensee will ensure that the same obligations and access rights allowing Licensor auditing rights to the sub-licensee are included in each sub-licence agreement.

 

10. Duration and Termination

 

  10.1.1 This agreement will take effect on the date of signature. Subject to the possibility of earlier termination under the following provisions of this clause 11, and subject to the possibility of an extension to the term by mutual agreement on the same terms (which if requested by the Licensee Licensor shall agree to), this agreement shall continue in force until five (5) years from the date of this agreement.

 

10.2 If either party commits a material breach of this agreement, and the breach is not remediable or (being remediable) is not remedied within the period allowed by notice given by the other party in writing calling on the party in breach to effect such remedy (such period being not less than thirty (30) days), the other party may terminate this agreement by written notice having immediate effect.
   
10.3 The Licensee may terminate this agreement for any reason at any time provided it gives Licensor six (6) months’ written notice to terminate expiring after the third anniversary of this agreement. Any such termination shall not absolve the Licensee of its obligation to accrue and pay royalties and other payments under the provisions of clause 8 in respect of the period prior to termination.
   
10.4 Licensor may terminate this agreement:

 

  10.4.1 immediately, if the Licensee has a petition presented for its winding-up, (but excluding for this purpose any winding up petition presented against the Licensee in relation to any debt disputed by the Licensee), or passes a resolution for voluntary winding-up otherwise than for the purposes of a bona fide amalgamation or reconstruction, or compounds with its creditors, or has a receiver administrator or administrative receiver appointed over all or any part of its assets, or enters into any arrangements with creditors, or takes or suffers any similar action in consequence of debts;

 

 
 

 

  10.4.2 on thirty (30) days’ written notice if:

 

  (1) the Licensee opposes or challenges the validity of the Application provided always that nothing in this clause 11.4.2 will prevent the Licensee from seeking to determine whether a product of the Licensee is a Licensed Product for the purposes of this agreement and the seeking of such determination shall not trigger any termination rights herein; or
     
  (2) the Licensee is in breach of clause 9 and the Licensee does not take any remedial action reasonably requested by Licensor and notified to the Licensee by written notice pursuant to clause 11.2 within a reasonable time.

 

10.5 On termination or expiration of this agreement, for whatever reason, the Licensee:

 

  10.5.1 shall pay to Licensor all outstanding royalties and other sums due under this agreement;
     
  10.5.2 shall provide Licensor with details of the stocks of Licensed Products held at the point of termination;
     
  10.5.3 must cease to use or exploit the Licensed Technology, provided that this restriction does not apply to Licensed Know-How or Confidential Information which has entered the public domain through no fault of the Licensee, and that the Licensee may continue to use the Licensed Technology in order to meet any specific existing binding commitments already made by the Licensee at the date of termination and requiring delivery of Licensed Products within the next six (6) months;
     
  10.5.4 subject to clause 11.5.3 must at the option of Licensor and at the Licensee’s cost, destroy all other Licensed Products or send all other Licensed Products to a location nominated by Licensor to the Licensee in writing; and
     
  10.5.5 grants Licensor an irrevocable, transferable, non-exclusive licence to develop, make, have made, use and Market the Licensee’s Improvements and products that incorporate, embody or otherwise exploit the same. Licensor shall pay a reasonable royalty for use of this licence unless the termination arises under clause 11.4, or is by Licensor under clause 11.2, in which case it shall be royalty-free.

 

10.6 Termination of this agreement, whether for breach of this agreement or otherwise, shall not absolve the Licensee of its obligation to accrue and pay royalties under the provisions of clause 8 for the duration of any notice period and in respect of any dealings in Licensed Products permitted by clause 11.5 or to reimburse Licensor for all costs, filing fees, lawyers’ and patent agents’ fees, expenses and outgoings of whatever nature incurred by Licensor in the prosecution, maintenance and renewal of the Applications for the duration of any notice period in accordance with clause 5.2.
   
10.7 Clauses 1, 4.2, 6.3, 11.5, 11.6, 11.7, 11.8, 12, 13.4 and 13.14 will survive the termination or expiration of this agreement, for whatever reason, indefinitely.
   
10.8 Clauses 7 and 10.6 will survive the termination or expiration of this agreement, for whatever reason, for a period of six (6) years.

 

 
 

 

11. Liability
   
11.1 To the fullest extent permissible by law, Licensor does not make any warranties of any kind including, without limitation, warranties with respect to:

 

  11.1.1 the quality of the Licensed Technology;
     
     
  11.1.2 the suitability of the Licensed Technology for any particular use;
     
  11.1.3 whether use of the Licensed Technology will infringe third-party rights; or
     
  11.1.4 whether the Application will be granted or the validity of any patent that issues in response to that Application.

 

11.2 Except in relation to any claims, damages and liabilities arising directly from the fraud, recklessness or wilful misconduct of Licensor, the Licensee agrees to indemnify Licensor and hold Licensor harmless from and against any and all claims, damages and liabilities:

 

  11.2.1 asserted by third parties (including claims for negligence) which arise from the use of the Licensed Technology or the Marketing of Licensed Products by the Licensee and/or its sub-licensees; and/or
     
  11.2.2 arising directly from any breach by the Licensee of this agreement provided however that this indemnity for breach by the Licensee is subject to clause 12.5.

 

11.3 Licensor will use reasonable endeavours to defend any Indemnified Claim and to mitigate its losses, claims, liabilities, costs, charges and expenses or (at Licensor’s option) allow the Licensee to do so on its behalf. Licensor will not (except as required by law) make any admission, compromise, settlement or discharge of any Indemnified Claim without the consent of the Licensee (which will not be unreasonably withheld or delayed).
   
11.4 The Licensee undertakes to make no claim against any employee, student, agent or appointee of Licensor, being a claim which seeks to enforce against any of them any liability whatsoever in connection with this agreement or its subject-matter.
   
11.5 Subject to clause 12.7 and except in relation to the indemnities in clause 6.3 and 12.2, the liability of either party for any breach of this agreement, in negligence or or arising in any other way out of the subject-matter of this agreement, will not extend to incidental, indirect or consequential damages or to any loss of profits.
   
11.6 Subject to clause 12.7, the total aggregate liability of Licensor to the Licensee accruing under or otherwise in connection with this agreement or its subject-matter, including without limitation liability for negligence, shall in no event exceed:

 

  11.6.1 in respect of liability accruing in the first Licence Year, the amount of the Signing Fee paid to Licensor; and
     
  11.6.2 in respect of liability accruing in any subsequent Licence Year, the Signing Fee paid to Licensor and the total royalties paid in the previous Licence Year to Licensor under clause 8.2, 8.3 and 8.4.

 

11.7 Nothing in this agreement shall limit or exclude any liability for fraud or fraudulent misrepresentation or death, or personal injury or any other liability which may not, by law, be excluded.

 

 
 

 

12. General
   
12.1 Registration – The Licensee must register its interest in the Licensed Technology with any relevant authorities as soon as legally possible. The Licensee must not, however, register an entire copy of this agreement in any part of the Territory or disclose its financial terms without the prior written consent of Licensor, such consent not to be unreasonably withheld or delayed.
   
12.2 Advertising – The Licensee must not use the name of Licensor, or the Inventor except any Inventor who is, or has been, a shareholder of the Licensee, in any advertising, promotional or sales literature, without Licensor’s prior written approval save that the Licensee shall not have to seek re-approval for inclusion in any advertising, promotional or sales literature (but, for the sake of clarity, excluding any investment memoranda or other documentation prepared for the purpose of presentation to potential investors), any statement that has previously been approved by Licensor or included in any press release approved by Licensor.
   
12.3 Packaging – The Licensee will ensure that the Licensed Products and the packaging associated with them are marked suitably with any relevant patent or patent application numbers to satisfy the laws of each of the countries in which the Licensed Products are sold or supplied and in which they are covered by the claims of any patent or patent application, to the intent that Licensor shall not suffer any loss or any loss of damages in an infringement action.
   
12.4 Taxes - Where the Licensee has to make a payment to Licensor under this agreement which attracts value-added, sales, use, excise or other similar taxes or duties, the Licensee will be responsible for paying those taxes and duties.
   
12.5 Notices - All notices to be sent to Licensor under this agreement must indicate the Licensor Project № set out on the agreement front sheet and should be sent, by post and email unless agreed otherwise in writing, until further notice to: __________________________________________________________________________.All notices to be sent to the Licensee under this agreement should be sent, until further notice, to the Licensee’s Contact and Address indicating the Licensor Project №.
   
12.6 Force Majeure - If performance by either party of any of its obligations under this agreement (not including an obligation to make payment) is prevented by circumstances beyond its reasonable control, that party will be excused from performance of that obligation for the duration of the relevant event.
   
12.7 Assignment – The Licensee may assign any of its rights or obligations under this agreement in whole or in part, to an Affiliate and only for so long as it remains an Affiliate and Licensor shall at the request of the Licensee execute a Deed of Novation to bring about that assignment. Except as provided in this clause, the Licensee may not assign any of its rights or obligations under this agreement without the prior written consent of Licensor (such consent not to be withheld or delayed or conditioned except solely on reasonable grounds or the assignee having insufficient funds to fulfil the obligations of this agreement, it being acknowledged and agreed that if the assignee is a publicly listed company with a market capitalisation equal to or in excess of £100 million it will be considered to have sufficient financial resources). If Licensor assigns its rights in the Licensed Technology to any person it shall do so expressly subject to the Licensee’s rights under this agreement.

 

 
 

 

12.8 Severability - If any of the provisions of this agreement is or becomes invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions will not in any way be affected or impaired. The parties will, however, negotiate to agree the terms of a mutually satisfactory provision, achieving as nearly as possible the same commercial effect, to be substituted for the provision found to be void or unenforceable.
   
12.9 No Partnership etc - Nothing in this agreement creates, implies or evidences any partnership or joint venture between Licensor and the Licensee or the relationship between them of principal and agent.
   
12.10 Entire Agreement - This agreement constitutes the entire agreement between the parties in relation to the Licence to the exclusion of all other terms and conditions (including any terms or conditions which the Licensee purports to apply under any purchase order, confirmation order, specification or other document). The Licensee has not relied on any other statements or representations in agreeing to enter this agreement and waives all claims for breach of any warranty and all claims for any misrepresentation, (negligent or of any other kind, unless made by Licensor fraudulently) in relation to any warranty or representation which is not specifically set out in this agreement. Specifically, but without limitation, this agreement does not impose or imply any obligation on Licensor to conduct development work. Any arrangements for such work must be the subject of a separate agreement between Licensor and the Licensee.
   
12.11 Variation - Any variation of this agreement must be in writing and signed by authorised signatories for both parties. For the avoidance of doubt, the parties to this agreement may rescind or vary this agreement without the consent of any party that has the benefit of clause 13.14.
   
12.12 Waiver - No failure or delay by either party in enforcing its rights under this agreement, or at law or in equity will prejudice or restrict those rights. No waiver of any right will operate as a waiver of any other or later right or breach. Except as stated to the contrary in this agreement, no right, power or remedy conferred on, or reserved to, either party is exclusive of any other right, power or remedy available to it, and each of those rights, powers, and remedies is cumulative.
   
12.13 Rights Of Third Parties - The parties to this agreement intend that by virtue of the Contracts (Rights of Third Parties) Act 1999 that Licensor and the people referred to in clause 12.4 will be able to enforce the terms of this agreement intended by the parties to be for their benefit as if Licensor and the people referred to in clause 12.4 were party to this agreement. Subject to the foregoing, this agreement does not give rise to any other rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this agreement.
   
12.14 Governing Law - This agreement is governed by English Law, and the parties submit to the exclusive jurisdiction of the English Courts for the resolution of any dispute which may arise out of or in connection with this agreement except in relation to any action in relation to Intellectual Property Rights or Confidential Information which may be sought in any court of competent jurisdiction.

 

 
 

 

Schedule 1

 

DEFINITIONS

(Clause 1)

 

Academic and Research Purposes means research, teaching or other scholarly use which is undertaken for the purposes of education and research.

 

Affiliate means any company or legal entity in any country Controlling or Controlled by the Licensee.

 

Applications means:

 

(a) any trade secrets that Licensor has developed;
(b) any patents and applications which may be granted to Licensor in the Territory based on and deriving priority from those applications; and
(c) any addition, continuation, continuation-in-part, division, reissue, renewal or extension based on the Applications.

 

Business Day means a day, other than a Saturday or Sunday, on which clearing banks are permitted to open in London.

 

Commercially Reasonable Endeavours means the effort a prudent and determined company of comparable size and sector to the Licensee would take to pursue the goal of developing and Marketing Licensed Products to maximize the financial return and the social impact from the exploitation of the Licensed Technology and fulfil the steps laid out in the Development Plan.

 

Confidential Information means in relation to each party any materials, trade secrets or other information disclosed by that party to the other. Without limiting the foregoing the following shall be deemed to be the Confidential Information of both parties:

 

(a) the Licensed Technology, to the extent that it is not disclosed by the Application when published; and
(b) this agreement.

 

Control means:

 

(a) ownership of more than fifty percent (50%) of the voting share capital of the relevant entity; or
(b) the ability to direct the casting of more than fifty percent (50%) of the votes exercisable at a general meeting of the relevant entity on all, or substantially all, matters.

 

Development Plan means the plan set out in Schedule 3, as revised in accordance with clause 9.3.

 

Documents means the documents and materials set out in Schedule 2.

 

Fee Income Royalty Rate means the royalty rate set out in Schedule 2.

 

Field means the field set out in Schedule 2.

 

Improvement means any development of the Licensed Technology which would, if commercially practised, infringe and/or be covered by a claim subsisting or being prosecuted in the Application.

 

 
 

 

Indemnified Claim means any claim under which Licensor are entitled to be indemnified under clause 12.2.

 

Intellectual Property Rights means patents, trade marks, copyrights, database rights, rights in designs, and all or any other intellectual or industrial property rights, whether or not registered or capable of registration.

 

Inventor means the inventor or inventors named in the Application and identified in Schedule 2.

 

Inventor Improvements means any Improvements made prior to the second anniversary of the date of this agreement solely by, or solely under the direct supervision of, an Inventor, and the Intellectual Property Rights pertaining to them, of which Licensor has been made aware and is legally able to license, but shall not include, for the avoidance of doubt, any Improvements and Intellectual Property Rights developed pursuant to any employment or consultancy agreement with the Licensee.

 

Legal Action means commencing or defending any proceedings before a court or tribunal in any jurisdiction in relation to any rights included in the Licensed Intellectual Property including all claims and counterclaims for infringement and for declarations of non-infringement or invalidity.

 

Licence means the licence granted by Licensor to the Licensee under clause 2.1.

 

Licence Year means each twelve (12) month period beginning on the date of this agreement and each anniversary of the date of this agreement.

 

Licensed Intellectual Property Rights means the Applications and (to the extent they constitute Intellectual Property Rights) Inventor Improvements.

 

Licensed Know-how means all confidential information relating to the Applications or the technology described in the Applications that has been communicated to the Licensee by Licensor in writing before the date of this agreement or is communicated in writing to the Licensee by Licensor under this agreement and within twelve (12) months after the date of this agreement and (to the extent they constitute confidential information) Inventor Improvements.

 

Licensed Product means any product, process, service or composition which is entirely or partially produced by means of or with the use of, or within the scope of, the Licensed Technology.

 

Licensed Technology means the Licensed Intellectual Property Rights, and the Licensed Know-How, and such (if any) other Intellectual Property Rights owned by or licensed to Licensor as may be specifically identified in Schedule 2 (to the extent, in the case of licensed rights, that Licensor is legally able to grant a sub-licence of the same).

 

Licensee’s Contact and Address means the address for the Licensee set out in Schedule 2 of this agreement.

 

 
 

 

Licensee Improvements means any Improvements made prior to the second anniversary of the date of this agreement by the Licensee, and the Intellectual Property Rights pertaining to them which shall include, for the avoidance of doubt, any Improvements and Intellectual Property Rights developed by an Inventor pursuant to any employment or consultancy arrangement with the Licensee.

 

Market means, in relation to a Licensed Product, offering to sell, lease, licence or otherwise commercially exploit the Licensed Product or the sale, lease, licence or other commercial exploitation of the Licensed Product.

 

Milestone and Milestone Fee means the milestones, and the amounts payable on achievement of each of the milestones, set out in Schedule 2.

 

Minimum Sum means the minimum sum or sums set out in Schedule 2.

 

Net Sales means the gross selling price of the Licensed Product in the form in which it is Marketed by the Licensee or any sub-licensee, less:

 

(a) trade, quantity or cash discounts actually given;
(b) outbound carriage and packaging expenses actually paid;
(c) customs duties, sales taxes or other taxes imposed upon and paid with respect to such sales (excluding personal taxes); and
(d) amounts allowed or credited or retroactive price reductions or rebates actually given/paid.

 

Any refund of any of the foregoing amounts previously deducted from Net Sales shall be appropriately credited upon receipt.

 

Non-Commercial Use means Academic and Research Purposes but it does not include the right to commercially exploit the Licensed Technology or to grant any licence to commercially exploit the Licensed Technology.

 

Past Patent Costs means the past patent costs set out in Schedule 2.

 

Quarter means each period of three calendar months during a Licence Year with the first Quarter commencing on the first day of each Licence Year.

 

Royalty Rate means the royalty rate or rates set out in Schedule 2.

 

Royalty Report means the report to be prepared by the Licensee under clause 10.2.

 

Signing Fee means the fee set out in Schedule 2.

 

Territory means the territory or territories set out in Schedule 2, excluding any territory or territories removed through the operation of clause 5.3.

 

 
 

 

Schedule 2

 

Applications: Re-cycling industrial by product, construction and demolition materials into manufacturing cement free pavers and mortars that are environmentally friendly and continuously absorb carbon dioxide
   
  entitled “CEMENTLESS MATERIALS”.
   
Inventors: EcoMENA , www.ecomena.com
   
Field (clause 2.1): All
   
Territory (clause 2.1): Worldwide
   
Documents (clause 2.2): The Application
   
Signing Fee (clause 8.1): £20,000 and 160,000,000 shares of OTCPINK:COWI
   
Royalty Rate (clause 8.2): 5% of gross revenues generated by product sales
   
Minimum Sum (clause 8.3):  

 

Licence Year   Minimum Sum  
Licence Year 1-2   £ 5,000  
Licence Year 3   £ 3,000  
Licence Year 4 and each Licence Year thereafter   £ 1,000  


 

Fee Income Royalty Rate (clause 8.4): 12%

 

Licensee’s Contact and Address (clause 13.6):

 

  Contact Lloyd T. Spencer
  Address CarbonMeta Technologies Inc
    13110 NE 177th Place
    #145, Woodinville, WA 98072, USA
     
  Email lspencer@carbonmetatech.com

 

 
 

 

Schedule 3

 

DEVELOPMENT PLAN

 

CarbonMeta Technologies, Inc. plans to work with Licensor to develop and deploy a sustainable business that converts cement plant waste into building materials that can absorb carbon dioxide. To achieve this objective, CarbonMeta Technologies will:

 

Sign a definitive agreement with Licensor to license the cement waste processing technologies and processes related to the processing cement plant waste into building materials that can absorb carbon dioxide.

 

Establish a subsidiary corporations worldwide that will cooperatively work with Licensor researchers and interns to further develop the technologies and processes to achieve production of building materials that can absorb carbon dioxide:

 

  ● December 2021 : establish subsidiary operations in Riyadh, Saudi Arabia
  ● April 2022 : produce and market 600 tons per month of building materials that can absorb carbon dioxide
  ● September 2022 : produce and market 1,300 tons per month of building materials that can absorb carbon dioxide
  ● October 2022 : establish subsidiary operations in the United States of America
  ● March 2023 : produce and market 3,300 per month of building materials that can absorb carbon dioxide

 

Throughout this entire process, CarbonMeta Technologies shall be reaching out to qualified investors worldwide to fund each subsidiary company and key projects that achieve the objective of converting cement plant waste into building materials that can absorb carbon dioxide.

 

 
 

 

Schedule 4

 

Deed of Covenant

 

Licensor

<address>

<address>

<address>

England

Date: [insert date]

 

Dear Sirs,

 

Sub-Licence between [     ] and [insert details of Sub-Licensee] dated [insert date] (the “Sub-Licence”)

 

As part consideration for the grant of a sub-licence from [XXX] to use [insert details of licensed technology] (the “Licensed Technology”), the Sub-Licensee hereby covenants to Licensor, and Licensor covenants with the Sub-Licensee that:

 

  1. should the head licence between [XXX] and Licensor be terminated for whatever reason, Licensor and the Sub-Licensee shall enter into a direct licence containing the same obligations and liabilities as set forth in the Sub-Licence and the Sub-Licensee will pay all due and payable monies under the Sub-Licence to Licensor; and
     
  2. should the Sub-Licensee wish to further sub-licence the Licensed Technology where Licensor has consented to the Sub-Licence including the right to do so, it shall procure that any sub-sub-licensee enters into a Deed of Covenant with Licensor in a form substantially similar to this Deed of Covenant.
     
  3. Licensor shall have the right, during the term of the Sub-Licence, through an independent certified accountant appointed by Licensor (the “Auditor”), to audit all accounts on at least thirty (30) days’ written notice no more than once each calendar year for the purpose of determining the accuracy of the royalty reports and payments. The Auditor shall be:

 

    a. permitted to enter the principal place of business of the Sub-Licensee upon reasonable notice to inspect such records and accounts;
       
    b. entitled to take copies of or extracts from such records and accounts;
       
    c. given all other information by the Sub-Licensee as may be necessary or appropriate to enable the amount of royalties payable to be ascertained including the provision of relevant records; and
       
    d. shall be allowed access to and permitted to conduct interviews of any staff of the Sub-Licensee in order to verify the accuracy of the records and accounts and the accuracy of any royalty statements provided to Licensor.

 

If on any such audit a shortfall in payments of greater than five percent (5%) is discovered by the Auditor in respect of the audit period, the Sub-Licensee shall pay the audit costs of Licensor.

 

SIGNED AS A DEED by

 

[Insert details of Sub-Licensee] in the presence of:-

 

Signature of Witness:

Name of Witness:

Address:

 

SIGNED AS A DEED by

 

Licensor in the presence of: -

 

Signature of Witness:

Name of Witness:

Address:

 

 
 

 

AS WITNESS this agreement has been signed by the duly authorised representatives of the parties.

 

Signed by a director duly authorised for and on behalf of Licensor )    
  )    
  )    
  )    
      sign here:
      Director
       
Signed by a director duly authorised for and on behalf of [     ] )    
  )    
  )    
  )    
      sign here:
      Director

 

 
 

 

 

Exhibit 10.47

 

DATED 02 June 2021

 

(1)       OXFORD UNIVERSITY INNOVATION LIMITED

 

and

 

(2)         COROWARE INC

 

 

LICENCE OF TECHNOLOGY

(OUI PROJECT No. 15565)

 

 

 

 

THIS AGREEMENT is made on

 

BETWEEN:

 

(1) OXFORD UNIVERSITY INNOVATION LIMITED (Company No. 2199542) whose registered office is at University Offices, Wellington Square, Oxford OX1 2JD, England (“OUI”); and
   
(2) COROWARE INC, a registered Delaware Corporation whose office is 13110 NE 177th Place, 293, Woodinville, WA 98072, USA (“the Licensee”).

 

BACKGROUND:

 

The Licensed Technology is connected with OUI Project 15565 - Hydrogen from plastics via microwave-initiated catalytic dehydrogenation. The Licensee wishes to acquire a licence to the Licensed Technology and OUI is willing to license the Licensed Technology to the Licensee, on the terms of this agreement.

 

AGREEMENT:

 

1. Interpretation
   
  In this agreement (including its Schedules), any reference to a “clause” or “Schedule” is a reference to a clause of this agreement or a schedule to this agreement, as the case may be. Words and expressions used in this agreement have the meaning set out in Schedule 1.
   
2. Grant of Licence
   
2.1 In consideration of the payments required to be made under this agreement by the Licensee, OUI grants to the Licensee a licence in the Territory in respect of the Licensed Technology to develop, make, have made, use and have used, import, export and Market the Licensed Product in the Field on and subject to the terms and conditions of this agreement. Subject to clause 4, the Licence is exclusive in the Field in respect of Licensed Intellectual Property Rights. The Licence is non-exclusive in relation to the Licensed Know-How. OUI retains unrestricted rights to use and license others to use the Licensed Know-How, and to use and license the Licensed Technology outside the Field and the Territory.
   
2.2 As soon as is reasonably possible after the date of this agreement (and in any event within thirty (30) days of the date of this agreement), OUI will, at OUI’s cost, supply the Licensee with the Documents. OUI shall, for a period of one (1) year from the date of this agreement, continue to provide the Licensee with such documents and materials as embody the Licensed Know-How generated during that period.
   
2.3 The Licensee may grant sub-licences with the prior written consent of OUI, such consent not to be unreasonably withheld, conditioned or delayed, provided that:
   
2.3.1 the sub-licensee has obligations to the Licensee commensurate with those which the Licensee has to OUI under this agreement, except the financial terms of this agreement or where it is not legally possible to include such obligations in the sub-licence;

 

 

 

 

  2.3.2 the nature of the proposed sub-licensee is not likely in OUI’s reasonable opinion to have any detrimental impact on the reputation of either OUI or of the University;
     
  2.3.3 as soon as reasonably practicable following the grant of each sub-licence, the Licensee provides a certified copy of that sub-licence to OUI, such copy to be Confidential Information of the Licensee which may be redacted to the extent any information in such sub-licence does not relate to the Licensed Technology, OUI and/or this agreement;
  2.3.4 the sub-licensee enters into a Deed of Covenant with OUI in the form set out in Schedule 4; and
  2.3.5 no sub-licence will carry any right to sub-sub-license.
     
2.4 OUI will be deemed to have consented to a sub-licence within thirty (30) Business Days of receipt of such written request by the Licensee to grant a sub-licence, provided it has not refused consent or requested reasonable further time or information to consider the request within such thirty (30) Business Days period.
   
2.5 Notwithstanding clause 2.3, no prior written consent from OUI will be required for sub- licences if:
   
  2.5.1 the sub-licensee or an Affiliate of the sub-licensee, at the time of entering into a new sub-licence, is already a licensee or a sub-licensee of the Licensee in respect of all or part of the Licensed Technology; or
  2.5.2 the sub-licensee is an Affiliate of the Licensee;
     
  provided always that the sub-licence complies with provisions 2.3.1 and 2.3.4 but is not required to comply with the other provisions of that clause.
     
2.6 The Licensee will:
     
  2.6.1 where the Licensed Product is of a description covered by the Medicines Access Policy, adhere to the requirements of the Medicines Access Policy;
     
  2.6.2 ensure that the Licensed Technology will be developed and Marketed in association with the Licensed Products fully in compliance with all applicable laws and regulations, including applicable CE marking regulations and any other regulations governing the certification of products to indicate conformity with health, safety, and environmental protection standards that are applicable in the United Kingdom;
     
  2.6.3 comply with any United Nations trade sanctions or EU or UK legislation or regulation, from time to time in force, which impose arms embargoes or control the export from the United Kingdom of goods, technology or software, including weapons of mass destruction and arms, military, paramilitary and security equipment and dual-use items (items designed for civil use, but which can be used for military purposes) and certain drugs and chemicals; and

 

 

 

 

  2.6.4 not export, directly or indirectly, the Licensed Technology, Licensed Products or any technical data associated with the Licensed Technology to any country for which at the time of export an export licence or other governmental approval is required without first obtaining such licence or approval.

 

3. Improvements
   
3.1 The Licensed Technology covered by the Licence in clause 2 includes Inventor Improvements. OUI will communicate in writing to the Licensee all Inventor Improvements within a reasonable amount of time after becoming aware of the Inventor Improvement.
   
3.2 The Licensee acknowledges and agrees that all Intellectual Property Rights in Inventor Improvements belong to OUI.
   
3.3 The Licensee will communicate in writing to OUI all Licensee Improvements within a reasonable amount of time after the Licensee becomes aware of, or after the completed development of, the Licensee Improvements.
   
3.4 OUI acknowledges and agrees that all Intellectual Property Rights in the Licensee Improvements belong to the Licensee.
   
4. Rights Regarding Non-Commercial Use
   
4.1 The Licensee grants OUI an irrevocable, perpetual, royalty-free licence to grant the University and those persons who at any time work or have worked on the Licensed Technology the licence set out in clause 4.2.
   
4.2 OUI has granted and in respect of Licensee Improvements, will grant, to the University and those persons who at any time work or have worked on the Licensed Technology, a non-transferable, irrevocable, perpetual, royalty-free licence to use and to publish the Licensed Technology and the Licensee Improvements, in each case for Non-Commercial Use.
   
4.3 The Licence is also subject to an irrevocable, non-transferrable, royalty free right to use the Licensed Technology for Academic and Research Purposes, including research projects funded by third parties (provided those third parties gain or claim no rights to the Licensed Technology) granted to Herriot-Watt University, Aston University and the University Court of the University of Edinburgh under a Collaboration Agreement dated 26 July 2016.
   
5. Filing and Maintenance
   
5.1 The Licensee will pay OUI, the Past Patent Costs within thirty (60) days of receiving an invoice from OUI.

 

 

 

 

5.2 OUI will, in consultation with the Licensee and at the Licensee’s cost, prosecute, use all reasonable endeavours to maintain, and renew the Applications in the Territory (including any patent applications filed for an Inventor Improvement) throughout the duration of this agreement. OUI will give all reasonable consideration to the views of the Licensee and will not unreasonably refuse to prosecute, maintain or renew the Applications provided always that the Licensee agrees to bear the costs of such action in accordance with this clause 5.2. The Licensee will reimburse OUI for all costs, filing fees, lawyers’ and patent agents’ fees, expenses and outgoings of whatever nature incurred by OUI in the prosecution, maintenance and renewal of the Application (including those incurred in opposition proceedings before the European Patent Office or in ex parte re-examination or inter partes review proceedings in the United States Patent and Trademark Office (“USPTO”) or any similar proceedings before any patent office challenging the grant or validity of the Application) within thirty (30) days of receiving an invoice from OUI. OUI shall be entitled to make it a condition of any action of OUI under this clause 5.2 that the Licensee provides OUI with sufficient money in advance to cover the costs likely to be incurred in the action.
   
5.3 Where any of the Applications is prosecuted in the USPTO and the Licensee is a small business concern as defined under the US Small Business Act (15USC632) OUI intends to pay reduced USPTO patent fees under US patent law 35USC 41(h)(1). The Licensee will notify OUI as soon as reasonably possible if it or a sub-licensee ceases to be a small business concern as defined under the US Small Business Act (15USC632) or becomes aware of any other reason why it would not qualify for reduced USPTO patent fees under US patent law 35USC 41(h)(1).
   
5.4 The Licensee shall inform OUI not less than six (6) months in advance of the National Phase filing deadline (noted in Schedule 2) of the territories within the scope of the PCT that it wishes to be covered in the National Phase of the Applications. In the event that the Licensee does not give the required minimum of six months advance notice OUI shall then be entitled to proceed with filing the Applications at the Licensee’s cost in whichever territories as it may in its sole discretion decide.
   
5.5 The Licensee shall be entitled to remove any one or more of the countries from the Territory at any time by giving not less than six months’ notice to OUI. If any of the Applications is proceeding under the PCT then such notice may not be given any earlier than the date for commencement of the National Phase filing. For the avoidance of doubt the Licensee shall remain liable for the costs mentioned in clause 5.2 that arise or are incurred by OUI during the said notice period in respect of the countries being removed.
   
5.6 OUI and the Licensee will carry out an annual review of the prosecution of the Applications within thirty (30) days of the end of each Licence Year and after the end of the second Licence Year. OUI will consider with the Licensee at each annual review whether it is appropriate for the Licensee to take over the prosecution and maintenance of the Applications.
   
5.7 In the event that OUI elects to discontinue the prosecution and/or maintenance of any of the Applications, the Licensee shall have the right but not the obligation to take over prosecution and maintenance of the Applications OUI has elected to discontinue.
   
6. Infringement
   
6.1 Each party will notify the other in writing of any misappropriation or infringement of any rights in the Licensed Technology of which the party becomes aware.

 

 

 

 

6.2 The Licensee has the first right (but is not obliged) to take Legal Action at its own cost in relation to any misappropriation or infringement of any rights included in the Licensed Intellectual Property Rights in the Field and in the Territory. The Licensee must discuss any proposed Legal Action with OUI prior to the Legal Action being commenced, and take due account of the legitimate interests of OUI in the Legal Action it takes provided always that the Licensee may act without further consultation if rights in the Licensed Technology would otherwise be prejudiced or lost.
   
6.3 If the Licensee takes Legal Action under clause 6.2, the Licensee will:
     
  6.3.1 indemnify and hold OUI and the University harmless against all costs (including lawyers’ and patent agents’ fees and expenses), claims, demands and liabilities arising out of or consequent upon a Legal Action and will settle any invoice received from OUI in respect of such costs, claims, demands and liabilities within thirty (30) days of receipt;
     
     
  6.3.2 treat any account of profits or damages (including, without limitation, punitive damages) awarded in or paid to the Licensee under any settlement of the Legal Action for any misappropriation or infringement of any rights included in the Licensed Technology as Net Sales for the purposes of clause 8, having first for these purposes deducted from the award or settlement an amount equal to any legal costs incurred by the Licensee in the Legal Action that are not covered by an award of legal costs; and
     
  6.3.3 keep OUI regularly informed of the progress of the Legal Action, including, without limitation, any claims affecting the scope of the Licensed Technology.
     
6.4 OUI may take any Legal Action at its own cost in relation to any misappropriation or infringement of any rights included in the Licensed Intellectual Property Rights where:
     
  6.4.1 the Licensee has notified OUI in writing that it does not intend to take any Legal Action in relation to any misappropriation or infringement of any such rights; or
     
  6.4.2 if having received professional advice with regard to any Legal Action within fourteen (14) days of the notification under clause 6.1, and consulted with OUI, the Licensee does not take reasonable steps to act upon an agreed process for dealing with such misappropriation or infringement (which may include, for the avoidance of doubt, seeking a second opinion in respect of such professional advice) within any timescale agreed between OUI and the Licensee and in any event within forty-five (45) days of notification under clause 6.1,

 

provided it shall not settle any action without first consulting with the Licensee and taking account of the reasonable observations and requests of the Licensee.

 

6.5 Subject to clauses 6.2 and 6.3, if the Licensee takes Legal Action OUI will provide such reasonable assistance as requested by the Licensee in relation to such Legal Action at the Licensee’s cost and authorises the Licensee to join OUI as a party in any Legal Action where it is a legal requirement for the patent owner to be a plaintiff in the Legal Action, provided that the Licensee indemnifies OUI under clause 6.3.1 for the costs of any legal representation in the Legal Action required by OUI.

 

 

 

 

7. Confidentiality
   
7.1 Subject to clauses 7.2, 7.3 and 7.4, each party (being a receiving or disclosing party as the case may be) will keep confidential the Confidential Information of the other party and will not disclose or supply the Confidential Information to any third party or use it for any purpose, except in accordance with the terms and objectives of this agreement.
   
7.2 The Licensee may disclose to sub-licensees of the Licensed Technology such of the Confidential Information as is necessary for the exercise of any rights sub-licensed, provided that the Licensee shall ensure that such sub-licensees accept a continuing obligation of confidentiality on substantially the same terms as this clause and giving third party enforcement rights to OUI, before the Licensee makes any disclosure of the Confidential Information. The Licensee may also disclose the Licensed Technology to the extent reasonably required in connection with the conduct of its business including to potential investors, other business associates and professional advisors provided that such persons have agreed in writing to be bound by non-use and non-disclosure obligations that are no less strict than those set forth in this agreement or are subject to professional codes of conduct that prevent disclosure of client confidential information and the Licensee will take action in respect of any breach of such obligations.
   
7.3 Confidential Information may be exchanged freely between OUI and the University and communications between those two parties shall not be regarded as disclosures, dissemination or publication for the purpose of this agreement. OUI may also disclose the terms of this agreement and royalty reports and payments made by the Licensee to any third parties that have rights to a revenue share for providing funding in the development of the Licensed Technology provided that such persons have agreed in writing to be bound by non-use and non-disclosure obligations that prevent disclosure of client confidential information and OUI will take action in respect of any breach of such obligations.
   
7.4 Clause 7.1 will not apply to any Confidential Information which:
     
  7.4.1 (save in the case of Licensed Technology) is known to the receiving party before disclosure, and not subject to any obligation of confidentiality owed to the disclosing party;
     
  7.4.2 is or becomes publicly known without the fault of the receiving party;
  7.4.3 is obtained by the receiving party from a third party in circumstances where the receiving party has no reason to believe that it is subject to an obligation of confidentiality owed to the disclosing party;
     
  7.4.4 the receiving party can establish by reasonable proof was substantially and independently developed by officers or employees of the receiving party who had no knowledge of the disclosing party’s Confidential Information; or
  7.4.5 is approved for release in writing by an authorised representative of the disclosing party.
     
7.5   Nothing in this agreement will prevent a party from disclosing Confidential Information where it is required to do so by law or regulation, stock exchange rules, or by order of a court or competent authority, provided that, in the case of a disclosure under the Freedom of Information Act 2000 (“FOIA”), none of the exemptions in the FOIA applies to the relevant Confidential Information and provided always that, to the extent permitted by law or regulation, the receiving party will give such notice as is reasonably practicable in the circumstances to the disclosing party about the timing and content of such a disclosure.

 

 

 

 

 

7.6 If either party to this agreement receives a request under the FOIA to disclose any information that, under this agreement, is the other party’s Confidential Information, it will notify and consult with the other party. The other party will respond within five(5) days after receiving notice if that notice requests the other party to provide information to assist in determining whether or not an exemption under the FOIA applies to the information requested under the FOIA.
   
8. Royalties and other Payments
   
8.1 OUI will invoice the Licensee for the Signing Fee shortly after signature of this agreement and the Licensee must settle the invoice within thirty (60) days of receipt.
   
8.2 The Licensee will pay to OUI a royalty equal to the applicable Royalty Rate on all Net Sales of Licensed Products.
   
8.3 In the event that the royalties paid to OUI under clause 8.2 do not amount to at least the Minimum Sum, the Licensee must make up the difference between the royalties paid under clause 8.2 and the Minimum Sum in each Licence Year where a Minimum Sum applies.
   
8.4 The Licensee will pay to OUI a royalty equal to the Fee Income Royalty Rate on all up- front, milestone, minimum sum and other one-off payments (other than payments received by the Licensee from a third party which, in accordance with the terms under which those payments are received, may only be used by the Licensee in relation to research and development of a Licensed Product) received by the Licensee under or in connection with all sub-licences and options granted by the Licensee with respect to the Licensed Technology excluding royalties paid to the Licensee by a sub-licensee based on net sales of Licensed Product. The Licensee will pay each such royalty within thirty (30) days after its receipt of the payment to which the royalty relates.
   
8.5 The Licensee will notify OUI as soon as possible after it or any sub-licensee achieves any Milestone, and pay to OUI the Milestone Fee in respect of each Milestone within thirty
  (30) days of the date on which each Milestone is achieved by the Licensee or a sub- licensee.
   
8.6 The Signing Fee and the Milestone Fee are non-refundable and will not be considered as an advance payment on royalties payable under clause 8.2. No part of the Minimum Sum will be refundable or applicable to succeeding Licence Years.
   
8.7 The Minimum Sum and the Milestone Fee will be indexed to the RPI and each Minimum Sum and Milestone will be increased (or decreased, if appropriate) by the percentage change in the RPI between the date of this agreement and:
   
  8.7.1 in the case of any Minimum Sum, the last day of the Licence Year to which it relates; and
     
  8.7.2 in the case of any Milestone Fee, the date on which the Milestone to which it relates is achieved.

 

 

 

 

8.8 If a Licensed Product Marketed by the Licensee is re-Marketed by an Affiliate, the royalty on each such Licensed Product will be calculated on the highest of the prices at which it is Marketed or re-Marketed. The Licensee will pay to OUI a royalty equal to the Fee Income Royalty Rate on any sum received by any sub-licensee that is an Affiliate where a royalty equal to the Fee Income Royalty Rate would have been due on that sum under clause 8.4 had it been received directly by the Licensee.
   
8.9 The Licensee or any of its sub-licensees may supply a commercially reasonable quantity of Licensed Products for promotional sampling provided that the number of Licensed Products supplied for promotional sampling shall not be greater than 5% of the total number of units of each Licensed Product sold, leased or licensed by the Licensee in any Quarter. Except as set out in this clause, the Licensee must not accept or solicit any non- monetary consideration when Marketing or otherwise transferring Licensed Products or when issuing sub-licences of the Licensed Technology without the prior written consent of OUI.
   
8.10 The Licensee will make all payments in pounds sterling or any currency replacing pounds sterling in its entirety unless the parties agree otherwise.
   
8.11 For the purposes of calculating any amount payable by the Licensee to OUI in a currency other than pounds sterling (or replacement currency), the Licensee shall apply an exchange rate equivalent to the average of the applicable closing mid rates quoted by the Financial Times as published in London on:
   
  8.11.1 the first Business Day of each month during the Quarter just closed; or
     
  8.11.2 for payments under clause 8.4 only, the first Business Day of the month in which the payment was received by the Licensee.
   
8.12 Where the Licensee has to withhold tax by law, the Licensee will deduct the tax, pay it to the relevant taxing authority, and supply OUI with a Certificate of Tax Deduction at the time of payment to OUI.
   
8.13 In the event that full payment of any amount due from the Licensee to OUI under this agreement is not made by any of the dates stipulated, the Licensee shall be liable to pay interest on the amount unpaid at the rate of five per cent (5%) per annum over the base rate for the time being of Barclays Bank plc. Such interest shall accrue on a daily basis from the date when payment was due until the date of actual payment of the overdue amount, whether before or after judgment, and shall be compounded quarterly.
   
9. Commercially Reasonable Endeavours
   
9.1 The Licensee must use Commercially Reasonable Endeavours to develop, exploit and Market the Licensed Technology to maximise the financial return for both parties and to demonstrate the University’s positive impact on society from the exploitation of the Licensed Technology.
   
9.2 The Licensee must use Commercially Reasonable Endeavours to develop, exploit and Market the Licensed Technology in accordance with the Development Plan.

 

 

 

 

9.3 The Licensee will provide OUI with any revised development plan together with any background supporting information necessary for OUI to evaluate the draft plan; such revised development plan to be consistent with an anticipated return to OUI under clause 8. The Licensee will consult with OUI over the draft plan and will consider in good faith any comments that OUI may put forward. Following approval of the revised development plan by OUI, the revised development plan shall become the Development Plan. Any information provided under this clause 9.3 shall be considered Confidential Information of the Licensee.
   
10. Reports and Audit Rights
   
10.1 The Licensee will provide OUI with a report at least once in every six (6) months detailing the activities and achievements in its development of the Licensed Technology in order to facilitate its commercial exploitation, and in the development of potential Licensed Products.
   
10.2 The Licensee will provide OUI with a royalty report within thirty (30) days after the close of each Quarter for each Licensed Product Marketed by the Licensee, including a royalty report confirming that no royalties are due for a Quarter. Each Royalty Report will:
   
10.2.1  set out the Net Sales of each Licensed Product Marketed by the Licensee or any sub-licensee, including the total gross selling price of each Licensed Product Marketed by the Licensee and any sub-licensees and the quantity or total number of units of each Licensed Product Marketed by the Licensee or any sub-licensee;
     
10.2.2 set out details of deductions made in the calculation of Net Sales from the invoiced price of each Licensed Product in the form in which it is Marketed by the Licensee;
     
10.2.3  set out details of the quantity of Licensed Products used for promotional sampling by the Licensee;
     
10.2.4  provide a calculation of the royalties due from the Licensee to be paid at the Royalty Rate;
     
10.2.5  set out details of payments received by the Licensee to which the Fee Income Royalty Rate applies and provide a calculation of the royalties due from the Licensee to be paid at the Fee Income Royalty Rate;
     
10.2.6  set out details of Milestones achieved by the Licensee or any sub-licensees;
     
10.2.7  provide a statement showing whether or not royalties due exceed the Minimum Sum and, if so, by how much; and
     
10.2.8 set out the steps taken during the Licence Year to promote and Market Licensed Products.
     
  The Licensee must pay OUI the royalties due in respect of the Quarter just closed at the same time as the Licensee delivers the Royalty Report, provided that, if requested, OUI will issue an invoice for the relevant payment prior to payment.
   
10.3 In the event of a dispute regarding the calculation of Net Sales or other payments, including the Licensee’s interpretation of International Financial Reporting Standards, whether following an audit pursuant to clause 10.6 or otherwise, the dispute shall be referred to an appropriately qualified independent expert (the “Expert”) jointly appointed by the parties (acting reasonably) who shall settle the dispute as follows. The Expert shall ask each party for written submissions within thirty (30) days of its appointment and shall be given access to the parties’ records and correspondence applicable to the dispute. The Expert shall have a period of sixty (60) days after this time to decide the dispute. The Expert will be appointed as an expert and not as an arbitrator. The parties will each have the right to make representations to the Expert. The Expert’s decision shall be binding on the parties without right of appeal and the costs of the Expert shall be borne by the non-prevailing party.

 

 

 

 

10.4 The Licensee will deliver to OUI a periodic report at the close of each Licence Year providing sufficient data (in outline form) to give a reasonable indication or estimate of the actual or expected market share of the Licensee and its sub-licensees and will notify OUI in the event that its market share does or is expected to breach the limits set out in the 2014 Commission Regulation 316/2014 Technology Transfer Block Exemption Regulation and Guidelines in Commission Communication 2014/c 89/03 whilst it applies to the UK or the limits set out in the Competition Act 1998 as amended, replaced, updated, re-enacted or consolidated from time to time. This obligation is not intended to place a significant additional financial burden on the Licensee.
   
10.5 The Licensee will provide data and any other information on the Licensee’s use of the Licensed Technology if asked to do so by the University to assist the University in demonstrating the University’s impact on society and to support drafting a Research Excellence Framework impact case study for the University to submit to Research England of UK Research and Innovation as required under the current or any future (however named) Research Excellence Framework audit process.
   
10.6 The Licensee must keep complete and proper records and accurate accounts of all Licensed Products used and Marketed by the Licensee and any sub-licensee in each Licence Year for at least six (6) years. OUI may, through an independent certified accountant appointed by OUI (“the Auditor”), audit all such accounts on at least thirty (30) days’ written notice no more than once each Licence Year for the purpose of determining the accuracy of the Royalty Reports and payments. The Auditor shall be:
   
  10.6.1 permitted by the Licensee to enter the Licensee’s principal place of business upon reasonable notice to inspect such records and accounts;
     
  10.6.2 entitled to take copies of or extracts from such records and accounts as are strictly necessary for the Auditor to properly conduct the audit;
     
  10.6.3 given all other information by the Licensee as may be necessary or appropriate to enable the amount of royalties payable to be ascertained including the provision of relevant records; and
     
  10.6.4 shall be allowed access to and permitted, to the extent reasonably required, to conduct interviews of any staff of the Licensee in order to verify the accuracy of the records and accounts and the accuracy of any statements provided to OUI under clause 10.2.
     
  If on any such audit a shortfall in payments of greater than five per cent (5%) is discovered by the Auditor in respect of the audit period, the Licensee shall pay OUI’s audit costs.
     
10.7 The auditing rights and obligations on the Licensee set out in clause 10.6 will apply equally to any sub-licensees allowed for in this agreement and the Licensee will ensure that the same obligations and access rights allowing OUI auditing rights to the sub- licensee are included in each sub-licence agreement.

 

 

 

 

11. Duration and Termination
   
11.1 This agreement will take effect on the date of signature. Subject to the possibility of earlier termination under the following provisions of this clause 11, and subject to the possibility of an extension to the term by mutual agreement on the same terms (which if requested by the Licensee OUI shall agree to), this agreement shall continue in force until the later of:
   
  11.1.1 the expiry or rejection of all patents and patent applications falling within the definition of the Application; and
  11.1.2 twenty (20) years from the date of this agreement.
     
11.2 If either party commits a material breach of this agreement, and the breach is not remediable or (being remediable) is not remedied within the period allowed by notice given by the other party in writing calling on the party in breach to effect such remedy (such period being not less than thirty (30) days), the other party may terminate this agreement by written notice having immediate effect.
   
11.3 The Licensee may terminate this agreement for any reason at any time provided it gives OUI six (6) months’ written notice to terminate expiring after the third anniversary of this agreement. Any such termination shall not absolve the Licensee of its obligation to accrue and pay royalties and other payments under the provisions of clause 8 in respect of the period prior to termination.
   
11.4 OUI may terminate this agreement:
   
11.4.1 immediately, if the Licensee has a petition presented for its winding-up, (but excluding for this purpose any winding up petition presented against the Licensee in relation to any debt disputed by the Licensee), or passes a resolution for voluntary winding-up otherwise than for the purposes of a bona fide amalgamation or reconstruction, or compounds with its creditors, or has a receiver administrator or administrative receiver appointed over all or any part of its assets, or enters into any arrangements with creditors, or takes or suffers any similar action in consequence of debts;
   
11.4.2 on thirty (30) days’ written notice if:
     
  (1) the Licensee opposes or challenges the validity of the Application provided always that nothing in this clause 11.4.2 will prevent the Licensee from seeking to determine whether a product of the Licensee is a Licensed Product for the purposes of this agreement and the seeking of such determination shall not trigger any termination rights herein; or
     
  (2) the Licensee is in breach of clause 9 and the Licensee does not take any remedial action reasonably requested by OUI and notified to the Licensee by written notice pursuant to clause 11.2 within a reasonable time.
     
11.5 On termination or expiration of this agreement, for whatever reason, the Licensee:
     
  11.5.1 shall pay to OUI all outstanding royalties and other sums due under this agreement;
     
  11.5.2 shall provide OUI with details of the stocks of Licensed Products held at the point of termination;

 

 

 

 

  11.5.3 must cease to use or exploit the Licensed Technology, provided that this restriction does not apply to Licensed Know-How or Confidential Information which has entered the public domain through no fault of the Licensee, and that the Licensee may continue to use the Licensed Technology in order to meet any specific existing binding commitments already made by the Licensee at the date of termination and requiring delivery of Licensed Products within the next six (6) months;
     
  11.5.4 subject to clause 11.5.3 must at the option of OUI and at the Licensee’s cost, destroy all other Licensed Products or send all other Licensed Products to a location nominated by OUI to the Licensee in writing; and
     
  11.5.5 grants OUI an irrevocable, transferable, non-exclusive licence to develop, make, have made, use and Market the Licensee’s Improvements and products that incorporate, embody or otherwise exploit the same. OUI shall pay a reasonable royalty for use of this licence unless the termination arises under clause 11.4, or is by OUI under clause 11.2, in which case it shall be royalty- free.

 

11.6 Termination of this agreement, whether for breach of this agreement or otherwise, shall not absolve the Licensee of its obligation to accrue and pay royalties under the provisions of clause 8 for the duration of any notice period and in respect of any dealings in Licensed Products permitted by clause 11.5 or to reimburse OUI for all costs, filing fees, lawyers’ and patent agents’ fees, expenses and outgoings of whatever nature incurred by OUI in the prosecution, maintenance and renewal of the Applications for the duration of any notice period in accordance with clause 5.2.
     
11.7 Clauses 1, 4.2, 6.3, 11.5, 11.6, 11.7, 11.8, 12, 13.4 and 13.14 will survive the termination or expiration of this agreement, for whatever reason, indefinitely.
   
11.8 Clauses 7 and 10.6 will survive the termination or expiration of this agreement, for whatever reason, for a period of six (6) years.
   
12. Liability
   
12.1 To the fullest extent permissible by law, OUI does not make any warranties of any kind including, without limitation, warranties with respect to:
     
  12.1.1 the quality of the Licensed Technology;
     
  12.1.2 the suitability of the Licensed Technology for any particular use;
     
  12.1.3 whether use of the Licensed Technology will infringe third-party rights; or
     
  12.1.4 whether the Application will be granted or the validity of any patent that issues in response to that Application.
     
12.2 Except in relation to any claims, damages and liabilities arising directly from the fraud, recklessness or wilful misconduct of OUI or the University, the Licensee agrees to indemnify OUI and the University and hold OUI and the University harmless from and against any and all claims, damages and liabilities:
     
12.2.1  asserted by third parties (including claims for negligence) which arise from the use of the Licensed Technology or the Marketing of Licensed Products by the Licensee and/or its sub-licensees; and/or

 

 

 

 

  12.2.2 arising directly from any breach by the Licensee of this agreement provided however that this indemnity for breach by the Licensee is subject to clause 12.5.
     
12.3 OUI will use reasonable endeavours to defend any Indemnified Claim and to mitigate its losses, claims, liabilities, costs, charges and expenses or (at OUI’s option) allow the Licensee to do so on its behalf (subject to the University retaining the right to be kept informed of progress in the action and to have reasonable input into its conduct.) OUI will not (except as required by law) make any admission, compromise, settlement or discharge of any Indemnified Claim without the consent of the Licensee (which will not be unreasonably withheld or delayed).
   
12.4 The Licensee undertakes to make no claim against any employee, student, agent or appointee of OUI or of the University, being a claim which seeks to enforce against any of them any liability whatsoever in connection with this agreement or its subject- matter.
   
12.5 Subject to clause 12.7 and except in relation to the indemnities in clause 6.3 and 12.2, the liability of either party for any breach of this agreement, in negligence or or arising in any other way out of the subject-matter of this agreement, will not extend to incidental, indirect or consequential damages or to any loss of profits.
   
12.6 Subject to clause 12.7, the total aggregate liability of OUI to the Licensee accruing under or otherwise in connection with this agreement or its subject-matter, including without limitation liability for negligence, shall in no event exceed:
     
  12.6.1 in respect of liability accruing in the first Licence Year, the amount of the Signing Fee paid to OUI; and
     
  12.6.2 in respect of liability accruing in any subsequent Licence Year, the Signing Fee paid to OUI and the total royalties paid in the previous Licence Year to OUI under clause 8.2, 8.3 and 8.4.
     
12.7 Nothing in this agreement shall limit or exclude any liability for fraud or fraudulent misrepresentation or death, or personal injury or any other liability which may not, by law, be excluded.
   
13. General
   
13.1 Registration – The Licensee must register its interest in the Licensed Technology with any relevant authorities as soon as legally possible. The Licensee must not, however, register an entire copy of this agreement in any part of the Territory or disclose its financial terms without the prior written consent of OUI, such consent not to be unreasonably withheld or delayed.
   
13.2 Advertising – The Licensee must not use the name of OUI, the University or the Inventor except any Inventor who is, or has been, a shareholder of the Licensee, in any advertising, promotional or sales literature, without OUI’s prior written approval save that the Licensee shall not have to seek re-approval for inclusion in any advertising, promotional or sales literature (but, for the sake of clarity, excluding any investment memoranda or other documentation prepared for the purpose of presentation to potential investors), any statement that has previously been approved by OUI or included in any press release approved by OUI.

 

 

 

 

13.3 Packaging – The Licensee will ensure that the Licensed Products and the packaging associated with them are marked suitably with any relevant patent or patent application numbers to satisfy the laws of each of the countries in which the Licensed Products are sold or supplied and in which they are covered by the claims of any patent or patent application, to the intent that OUI shall not suffer any loss or any loss of damages in an infringement action.
   
13.4 Thesis - This agreement shall not prevent or hinder registered students of the University from submitting for degrees of the University theses based on the Licensed Technology; or from following the University’s procedures for examinations and for admission to postgraduate degree status.
   
13.5 Taxes - Where the Licensee has to make a payment to OUI under this agreement which attracts value-added, sales, use, excise or other similar taxes or duties, the Licensee will be responsible for paying those taxes and duties.
   
13.6 Notices - All notices to be sent to OUI under this agreement must indicate the OUI Project № set out on the agreement front sheet and should be sent, by post and email unless agreed otherwise in writing, until further notice to: COO, Oxford University Innovation Limited, Buxton Court, 3 West Way, Oxford OX2 0JB, Email: licensing.notices@innovation.ox.ac.uk . All notices to be sent to the Licensee under this agreement should be sent, until further notice, to the Licensee’s Contact and Address indicating the OUI Project №.
   
13.7 Force Majeure - If performance by either party of any of its obligations under this agreement (not including an obligation to make payment) is prevented by circumstances beyond its reasonable control, that party will be excused from performance of that obligation for the duration of the relevant event.
   
13.8 Assignment – The Licensee may assign any of its rights or obligations under this agreement in whole or in part, to an Affiliate and only for so long as it remains an Affiliate and OUI shall at the request of the Licensee execute a Deed of Novation to bring about that assignment. Except as provided in this clause, the Licensee may not assign any of its rights or obligations under this agreement without the prior written consent of OUI (such consent not to be withheld or delayed or conditioned except solely on reasonable grounds, that primarily relate to avoiding any detrimental reputational impact on the University or the assignee having insufficient funds to fulfil the obligations of this agreement, it being acknowledged and agreed that if the assignee is a publicly listed company with a market capitalisation equal to or in excess of £100 million it will be considered to have sufficient financial resources). If OUI assigns its rights in the Licensed Technology to any person it shall do so expressly subject to the Licensee’s rights under this agreement.
   
13.9 Severability - If any of the provisions of this agreement is or becomes invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions will not in any way be affected or impaired. The parties will, however, negotiate to agree the terms of a mutually satisfactory provision, achieving as nearly as possible the same commercial effect, to be substituted for the provision found to be void or unenforceable.

 

 

 

 

13.10 No Partnership etc - Nothing in this agreement creates, implies or evidences any partnership or joint venture between OUI and the Licensee or the relationship between them of principal and agent.
   
13.11 Entire Agreement - This agreement constitutes the entire agreement between the parties in relation to the Licence to the exclusion of all other terms and conditions (including any terms or conditions which the Licensee purports to apply under any purchase order, confirmation order, specification or other document). The Licensee has not relied on any other statements or representations in agreeing to enter this agreement and waives all claims for breach of any warranty and all claims for any misrepresentation, (negligent or of any other kind, unless made by OUI fraudulently) in relation to any warranty or representation which is not specifically set out in this agreement. Specifically, but without limitation, this agreement does not impose or imply any obligation on OUI or the University to conduct development work. Any arrangements for such work must be the subject of a separate agreement between the University and the Licensee.
   
13.12 Variation - Any variation of this agreement must be in writing and signed by authorised signatories for both parties. For the avoidance of doubt, the parties to this agreement may rescind or vary this agreement without the consent of any party that has the benefit of clause 13.14.
   
13.13 Waiver - No failure or delay by either party in enforcing its rights under this agreement, or at law or in equity will prejudice or restrict those rights. No waiver of any right will operate as a waiver of any other or later right or breach. Except as stated to the contrary in this agreement, no right, power or remedy conferred on, or reserved to, either party is exclusive of any other right, power or remedy available to it, and each of those rights, powers, and remedies is cumulative.
   
13.14 Rights Of Third Parties - The parties to this agreement intend that by virtue of the Contracts (Rights of Third Parties) Act 1999 the University and the people referred to in clause 12.4 will be able to enforce the terms of this agreement intended by the parties to be for their benefit as if the University and the people referred to in clause 12.4 were party to this agreement. Subject to the foregoing, this agreement does not give rise to any other rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this agreement.
   
13.15 Governing Law - This agreement is governed by English Law, and the parties submit to the exclusive jurisdiction of the English Courts for the resolution of any dispute which may arise out of or in connection with this agreement except in relation to any action in relation to Intellectual Property Rights or Confidential Information which may be sought in any court of competent jurisdiction.

 

 

 

 

Schedule 1

 

DEFINITIONS

(Clause 1)

 

Academic and Research Purposes means research, teaching or other scholarly use which is undertaken for the purposes of education and research.

 

Affiliate means any company or legal entity in any country Controlling or Controlled by the Licensee.

 

Applications means:

 

(a) the patent application or applications set out in Schedule 2;
(b) any patents granted in response to the applications referred to in (a) above;
(c) any corresponding foreign patents and applications which may be granted to OUI in the Territory based on and deriving priority from those applications; and
(d) any addition, continuation, continuation-in-part, division, reissue, renewal or extension based on the Applications.

 

Business Day means a day, other than a Saturday or Sunday, on which clearing banks are permitted to open in London.

 

Clinical Patient Care means diagnosing, treating and/or managing the health of persons under the care of an individual having the right to use the Licensed Technology in the event that such Licensed Technology is capable of application in a healthcare setting without further development.

 

Commercially Reasonable Endeavours means the effort a prudent and determined company of comparable size and sector to the Licensee would take to pursue the goal of developing and Marketing Licensed Products to maximize the financial return and the social impact from the exploitation of the Licensed Technology and fulfil the steps laid out in the Development Plan.

 

Confidential Information means in relation to each party any materials, trade secrets or other information disclosed by that party to the other. Without limiting the foregoing the following shall be deemed to be the Confidential Information of both parties:

 

(a) the Licensed Technology, to the extent that it is not disclosed by the Application when published; and
(b) this agreement.

 

Control means:

 

(a) ownership of more than fifty percent (50%) of the voting share capital of the relevant entity; or
(b) the ability to direct the casting of more than fifty percent (50%) of the votes exercisable at a general meeting of the relevant entity on all, or substantially all, matters.

 

Development Plan means the plan set out in Schedule 3, as revised in accordance with clause 9.3.

 

Documents means the documents and materials set out in Schedule 2.

 

 

 

 

Fee Income Royalty Rate means the royalty rate set out in Schedule 2.

 

Field means the field set out in Schedule 2.

 

Improvement means any development of the Licensed Technology which would, if commercially practised, infringe and/or be covered by a claim subsisting or being prosecuted in the Application.

 

Indemnified Claim means any claim under which OUI and the University are entitled to be indemnified under clause 12.2.

 

Intellectual Property Rights means patents, trade marks, copyrights, database rights, rights in designs, and all or any other intellectual or industrial property rights, whether or not registered or capable of registration.

 

Inventor means the inventor or inventors named in the Application and identified in Schedule 2.

 

Inventor Improvements means any Improvements made prior to the second anniversary of the date of this agreement solely by, or solely under the direct supervision of, an Inventor, and the Intellectual Property Rights pertaining to them, of which OUI has been made aware and is legally able to license, but shall not include, for the avoidance of doubt, any Improvements and Intellectual Property Rights developed pursuant to any employment or consultancy agreement with the Licensee.

 

Legal Action means commencing or defending any proceedings before a court or tribunal in any jurisdiction in relation to any rights included in the Licensed Intellectual Property including all claims and counterclaims for infringement and for declarations of non-infringement or invalidity.

 

Licence means the licence granted by OUI to the Licensee under clause 2.1.

 

Licence Year means each twelve (12) month period beginning on the date of this agreement and each anniversary of the date of this agreement.

 

Licensed Intellectual Property Rights means the Applications and (to the extent they constitute Intellectual Property Rights) Inventor Improvements.

 

Licensed Know-how means all confidential information relating to the Applications or the technology described in the Applications that has been communicated to the Licensee by OUI in writing before the date of this agreement or is communicated in writing to the Licensee by OUI under this agreement and within twelve (12) months after the date of this agreement and (to the extent they constitute confidential information) Inventor Improvements.

 

Licensed Product means any product, process, service or composition which is entirely or partially produced by means of or with the use of, or within the scope of, the Licensed Technology.

 

Licensed Technology means the Licensed Intellectual Property Rights, and the Licensed Know- How, and such (if any) other Intellectual Property Rights owned by or licensed to OUI as may be specifically identified in Schedule 2 (to the extent, in the case of licensed rights, that OUI is legally able to grant a sub-licence of the same).

 

 

 

 

Licensee’s Contact and Address means the address for the Licensee set out in Schedule 2 of this agreement.

 

Licensee Improvements means any Improvements made prior to the second anniversary of the date of this agreement by the Licensee, and the Intellectual Property Rights pertaining to them which shall include, for the avoidance of doubt, any Improvements and Intellectual Property Rights developed by an Inventor pursuant to any employment or consultancy arrangement with the Licensee.

 

Market means, in relation to a Licensed Product, offering to sell, lease, licence or otherwise commercially exploit the Licensed Product or the sale, lease, licence or other commercial exploitation of the Licensed Product.

 

Medicines Access Policy means the policy of the University to promote access to pharmaceutical and other products and services, the current version of which is available at https://researchsupport.admin.ox.ac.uk/policy/oxford/medicines .

 

Milestone and Milestone Fee means the milestones, and the amounts payable on achievement of each of the milestones, set out in Schedule 2.

 

Minimum Sum means the minimum sum or sums set out in Schedule 2.

 

Net Sales means the gross selling price of the Licensed Product in the form in which it is Marketed by the Licensee or any sub-licensee, less:

 

(a) trade, quantity or cash discounts actually given;
(b) outbound carriage and packaging expenses actually paid;
(c) customs duties, sales taxes or other taxes imposed upon and paid with respect to such sales (excluding personal taxes); and
(d) amounts allowed or credited or retroactive price reductions or rebates actually given/paid.

 

Any refund of any of the foregoing amounts previously deducted from Net Sales shall be appropriately credited upon receipt.

 

Non-Commercial Use means Academic and Research Purposes and the purposes of Clinical Patient Care. This includes the right for the University to license the Licensed Technology to any of its collaborators in connection with and solely for the University’s Academic and Research Purposes; but it does not include the right to commercially exploit the Licensed Technology or to grant any licence to commercially exploit the Licensed Technology.

 

Past Patent Costs means the past patent costs set out in Schedule 2.

 

Quarter means each period of three calendar months during a Licence Year with the first Quarter commencing on the first day of each Licence Year.

 

Royalty Rate means the royalty rate or rates set out in Schedule 2.

 

Royalty Report means the report to be prepared by the Licensee under clause 10.2.

 

RPI means the Retail Prices Index for all items which is published in the United Kingdom by the Office for National Statistics, or any replacement of it.

 

Signing Fee means the fee set out in Schedule 2.

 

Territory means the territory or territories set out in Schedule 2, excluding any territory or territories removed through the operation of clause 5.3.

 

University means the Chancellor, Masters and Scholars of the University of Oxford whose administrative offices are at the University Offices, Wellington Square, Oxford OX1 2JD.

 

 

 

 

Schedule 2
   
Applications: International Patent Application No. PCT/GB2019/051541, which was filed on 04.06.2019 and entitled “Process”.
   
National Phase filings : US and EU
   
Inventors: Tiancun Xiao, Peter P. Edwards and Xiangyu Jie
   
Field (clause 2.1): All
   
Territory (clause 2.1): US and EU
   
Documents (clause 2.2): The Application
   
Past Patent Costs (clause 5.1): £14,807 as of 31st March 2021
   
Signing Fee (clause 8.1): £40,000
   
Royalty Rate (clause 8.2): 5%
   
Minimum Sum (clause 8.3):

 

Licence Year  Minimum Sum 
Licence Year 1-2   0 
Licence Year 3  £10,000 
Licence Year 4 and each
Licence Year thereafter		  £20,000 

 

Fee Income Royalty Rate (clause 8.4): 12%

 

Milestone and Milestone Fee (clause 8.5):

 

Milestone  Milestone Fee 
     
First commercial sale of any Licensed Product  £20,000 
Sales over £1millon  £50,000 
Grant of USA Patent  £10,000 
Grant of EU Patent  £10,000 

 

RPI on date of this agreement (clause 8.7): 294.6

 

Licensee’s Contact and Address (clause 13.6):

 

Contact Lloyd T. Spencer
   
Address

Coroware Inc,

13110 NE 177th Place, 293,

Woodinville, WA 98072, USA

   
Email lspencer@coroware.com

 

 

 

 

Schedule 3

 

DEVELOPMENT PLAN

 

CoroWare, Inc. plans to work with University of Oxford to develop and deploy a sustainable business that converts plastic waste streams into high value carbon and hydrogen products. To achieve this objective, CoroWare will:

 

Sign a definitive agreement with Oxford University Innovation to license the microwave technologies and processes related to the processing of organic waste into hydrogen and carbon nanotubes

 

Establish a subsidiary corporation in the United Kingdom that will cooperatively work with University of Oxford researchers and interns to further develop the technologies and processes to achieve production of marketable carbon nanotubes-

 

  ● September 2021 : establish subsidiary in Oxford, United Kingdom
  ● March 2022 : produce 0.025 kilograms per day of marketable carbon nanotubes
  ● September 2022 : produce 0.5 kilograms per day of marketable carbon nanotubes
  ● March 2023 : 10 kilograms per day of marketable carbon nanotubes

 

Establish a subsidiary corporation in the Netherlands to support a lead customer that has expressed interest in using innovative technologies to process plastic waste streams

 

This subsidiary would customize the processes from the Oxford subsidiary to meet the specific needs of the Netherlands lead customer (e.g. polyvinyl chloride plastics)-

 

  ● October 2021 : establish subsidiary in Rotterdam, Netherlands
  ● June 2022 : produce 0.01 kilograms per day of marketable carbon nanotubes

 

Throughout this entire process, CoroWare shall be reaching out to qualified investors worldwide to fund each subsidiary company and key projects that achieve the objective of converting plastic waste streams into high value carbon and hydrogen products.

 

 

 

 

Schedule 4

 

Deed of Covenant

 

Oxford University Innovation Limited

University Offices,

Wellington Square,

Oxford OX1 2JD, England

Date: [insert date]

 

Dear Sirs,

 

Sub-Licence between [                        ] and [insert details of Sub-Licensee] dated [insert date] (the “Sub-Licence”)

 

As part consideration for the grant of a sub-licence from [XXX] to use [insert details of licensed technology] (the “Licensed Technology”), the Sub-Licensee hereby covenant to Oxford University Innovation Limited (OUI) and OUI covenant with the Sub-Licensee that:

 

1. should the head licence between [XXX] and OUI be terminated for whatever reason, OUI and the Sub-Licensee shall enter into a direct licence containing the same obligations and liabilities as set forth in the Sub-Licence and the Sub-Licensee will pay all due and payable monies under the Sub-Licence to OUI; and
   
2. should the Sub-Licensee wish to further sub-licence the Licensed Technology where OUI has consented to the Sub-Licence including the right to do so, it shall procure that any sub-sub-licensee enters into a Deed of Covenant with OUI in a form substantially similar to this Deed of Covenant.
   
3. OUI shall have the right, during the term of the Sub-Licence, through an independent certified accountant appointed by OUI (the “Auditor”), to audit all accounts on at least thirty (30) days’ written notice no more than once each calendar year for the purpose of determining the accuracy of the royalty reports and payments. The Auditor shall be:
   
  a. permitted to enter the principal place of business of the Sub-Licensee upon reasonable notice to inspect such records and accounts;
     
  b. entitled to take copies of or extracts from such records and accounts;
     
  c. given all other information by the Sub-Licensee as may be necessary or appropriate to enable the amount of royalties payable to be ascertained including the provision of relevant records; and
     
  d. shall be allowed access to and permitted to conduct interviews of any staff of the Sub-Licensee in order to verify the accuracy of the records and accounts and the accuracy of any royalty statements provided to OUI.

 

 

 

 

If on any such audit a shortfall in payments of greater than five percent (5%) is discovered by the Auditor in respect of the audit period, the Sub-Licensee shall pay the audit costs of OUI.

 

SIGNED AS A DEED by  
   
[Insert details of Sub-Licensee] in the presence of:-  
   
Signature of Witness:  
   
Name of Witness:  
   
Address:  

 

SIGNED AS A DEED by  
   
OXFORD UNIVERSITY INNOVATION LIMITED in the presence of:-  
   
Signature of Witness:  
   
Name of Witness:  
   
Address:  

 

 

 

 

AS WITNESS this agreement has been signed by the duly authorised representatives of the parties.

 

Signed by a director duly authorised for

and on behalf of Oxford University Innovation Limited

)

)

)

)

 02 June 2021 | 02:59 PDT
Head of Licensing & Ventures – Physical Sciences
Brendan Ludden
    sign here: /s/ Brendan Ludden
     
    Director

 

Signed by a director duly authorized for

and on behalf of [CoroWare, Inc.]

)

)

)

)

 02 June 2021 | 13:35 BST
President and CEO
Lloyd Spencer
    sign here: /s/ Lloyd Spencer
     
    Director

 

 

 

 

 

Exhibit 10.48

 

OPERATING AGREEMENT FOR MANAGEMENT OF

 

CarbonMeta Green Building Materials, LLC

 

A Wyoming Limited Liability Company

 

THIS AGREEMENT, is made this 28th day of August, 2022 between CarbonMeta Green Building Materials, LLC, and the members (as hereinafter defined) of said Limited Liability Company, for the purpose set forth herein:

 

RECITALS:

 

WHEREAS, the Articles of Organization of CarbonMeta Green Building Materials, LLC permit the election/appointment/designation of manager(s)/Managing Member(s) in accordance with Wyoming Law; and

 

WHEREAS, CarbonMeta Green Building Materials, LLC and manager(s)/Managing Member(s) desire to set forth the terms and provisions of the management of CarbonMeta Green Building Materials, LLC in accordance with Wyoming Law.

 

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, it is agreed as follows:

 

1. CarbonMeta Green Building Materials, LLC retains the following named Managing Member(s) for this Limited Liability Company:

 

CarbonMeta Technologies, Inc., a Delaware Corporation

 

Salvum Corporation, a Wyoming Corporation

 

2. The compensation terms for the services of the within Managing Member(s) are as follows: None until further approval and/or amendment hereto.

 

3. The Managing Member(s) shall perform the following:

 

(a) Manage the day to day affairs of CarbonMeta Green Building Materials, LLC, subject to the restrictions limitations and instructions as may be agreed upon by the Managing Members of CarbonMeta Green Building Materials, LLC.

 

(b) Adopt, amended and/or repeal regulations of CarbonMeta Green Building Materials, LLC in accordance with Wyoming Law.

 

(c) Enter into contracts and agreements, incur debt or exercise the powers of CarbonMeta Green Building Materials, LLC necessary for the management of CarbonMeta Green Building Materials, LLC business, except as may be otherwise restricted or provided by agreement of the members of CarbonMeta Green Building Materials, LLC. No single contract, agreement, or debt may be executed or incurred which obligates CarbonMeta Green Building Materials, LLC for more than Five Thousand Dollars ($5,000.00) without more than fifty one percent (51%) consent from all voting members.

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

4. The term of this agreement shall automatically renew at the annual meeting of members unless expressly terminated therein or the manager(s)/Managing Member(s) resign, or are removed or otherwise cease serving as manager(s)/Managing Member(s) and successors thereto are appointed/elected by the members in which case a new agreement shall be voted on and put into affect.

 

5. The operation of CarbonMeta Green Building Materials, LLC will be conducted in accordance with the provisions of this agreement.

 

FURTHER PROVISIONS REGARDING THE LIMITED LIABILITY COMPANY

 

I. DEFINITIONS

 

For purposes of this operating agreement, the following terms are defined as follows:

 

Section 1. Articles of Organization. As used throughout this operating agreement, this term is defined as the document creating CarbonMeta Green Building Materials, LLC pursuant to Wyoming Law.

 

Section 2. Capital Account. As used throughout this operating agreement, this term is defined as the agreed value of the initial contributions, increased by amounts subsequently contributed to capital and reduced by distributions as set forth in Wyoming Law.

 

Section 3. Limited Liability Company. As used throughout this operating agreement, this term is defined as the entity herein created in accordance with Wyoming Law.

 

Section 4. Manager(s). As used throughout this operating agreement, this term is defined as the persons who are elected or appointed pursuant to the Articles of Organization or by this operating agreement of CarbonMeta Green Building Materials, LLC to manage the affairs of this entity pursuant to Wyoming Law.

 

The Manager(s) are designated/appointed as follows:

 

Lloyd T. Spencer, who shall represent the interests of and be indemnified by CarbonMeta Technologies, Inc., a Delaware Corporation, and Managing Member

 

Robert Switzer, who shall represent the interests of and be indemnified by Salvum Corporation, a Wyoming Corporation

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

Section 5. Managing Member(s). As used throughout this operating agreement, this term is defined as the member(s) appointed or elected by the members of CarbonMeta Green Building Materials, LLC to manage this entity as set forth in Wyoming Law. The Managing Member(s) are designated/appointed as follows:

 

CarbonMeta Technologies, Inc., a Washington Corporation

 

Salvum Corporation, a Wyoming Corporation

 

Section 6. Relative Capital Account Vote. As used throughout this operating agreement, this term is defined as the vote of members of CarbonMeta Green Building Materials, LLC, entitled to vote, who together hold relative capital accounts (as that term is defined under Wyoming Law in excess of twenty-five per cent (25%) of the total the capital accounts of all members.

 

Section 7. Member(s). As used throughout this operating agreement, this term is defined as any person who has an equity interest in CarbonMeta Green Building Materials, LLC represented by a capital account as set forth in Wyoming Law.

 

A. The designated number of total membership units in CarbonMeta Green Building Materials, LLC shall be 1000.

 

B. The member(s) and their “relative capital accounts” for purposes of this Agreement and all such other purposes of CarbonMeta Green Building Materials, LLC, are defined as follows:

 

Member   Units   Ownership/Capital Account
         
CarbonMeta Technologies, Inc., A   501   50.1% of Current
A Washington Corporation        
         
Salvum Corporation, A Wyoming Corporation   499   49.9% of Current

 

Section 8. Member’s Promise to Contribute. As used throughout this operating agreement, this term is defined as a promise by a member to contribute to CarbonMeta Green Building Materials, LLC which is set forth in writing and signed by the said member, pursuant to Wyoming Law.

 

Section 9. Operating Agreement. As used throughout this operating agreement, this term is defined as the written provisions set forth herein which are adopted for the management and operating agreement of the affairs of CarbonMeta Green Building Materials, LLC and which set forth the relationships of the members as set forth in Wyoming Law.

 

Section 10. Relative Capital Account. As used throughout this operating agreement, this term is defined with respect to a member, the ratio, the numerator of which is the capital account of that member and the denominator of which is total of the capital account of all members as set forth in Wyoming Law.

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

II. MEETINGS OF MEMBERS

 

Section 1. Annual Meeting. The annual membership meeting of CarbonMeta Green Building Materials, LLC will be held on the 1st day of December of each year or at such other time and place as designated by the Managing Members(s) (or manager(s) as applicable) of CarbonMeta Green Building Materials, LLC provided that if said day falls on a Sunday or legal holiday, then the meeting will be held on the first business day thereafter. Business transacted at said meeting may include the election/appointment/designation of manager(s)/Managing Member(s) of CarbonMeta Green Building Materials, LLC.

 

Section 2. Special Meetings. Special meetings of the member(s) will be held when directed by a member(s), manager(s) or Managing Member(s) provided that said person(s) sign, date and deliver to CarbonMeta Green Building Materials, LLC’s Managing Member(s) (or manager(s) if applicable) one or more written demands for the meeting describing the purposes(s) for which it is to be held. A meeting so requested will be called for a date not less than 10 nor more than 60 days after the request is made, unless the member (or manager(s) or Managing Member(s)) requesting the meeting designates a later date. The call for the meeting will be made by the member(s), manager(s) or Managing Member(s) initiating the request.

 

Section 3. Place. Meetings will be held at the principal place of business of CarbonMeta Green Building Materials, LLC or at such other place as is designated by the members.

 

Section 4. Record Date and List of Members. The members of CarbonMeta Green Building Materials, LLC shall fix the record date; however, in no event may a record date fixed by the members be a date prior to the date on which the resolution fixing the record date is adopted. After fixing a record date for a meeting, the member(s) (manager(s) or Managing Member(s), if applicable) shall prepare an alphabetical list of the names of all the CarbonMeta Green Building Materials, LLC’s members who are entitled to notice of a meeting, arranged by name with the address and relative capital account of each member. Said list shall be available for inspection in accordance with Wyoming Law.

 

Section 5. Notice. Written notice stating the place, day and hour of the meeting, and the purpose(s) for which said special meeting is called, will be delivered not less than 10 nor more than 60 days before the meeting, either personally or by first class mail, by or at the direction of Managing Member(s) (or manager(s) if applicable) calling the meeting to each member of record entitled to vote at such meeting. If mailed, such notice will be deemed to be effective when deposited in the United States mail and addressed to the member at the member’s address as it appears on the membership Ledger of CarbonMeta Green Building Materials, LLC, with postage thereon prepaid. CarbonMeta Green Building Materials, LLC shall notify each member, entitled to a vote at the meeting, of the date, time and place of each annual and special meeting no fewer than 10 or more than 60 days before the meeting date. Notice of a special meeting shall describe the purpose(s) for which the meeting is called. A member may waive any notice required hereunder either before or after the date and time stated in the notice; however, the waiver must be in writing, signed by the member entitled to the notice and be delivered to CarbonMeta Green Building Materials, LLC for inclusion in the minutes of CarbonMeta Green Building Materials, LLC.

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

Section 6. Notice of Adjourned Meeting. When a meeting is adjourned to another time or place, it will not be necessary to give any notice of the adjourned meeting provided that the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. At such an adjourned meeting, any business may be transacted that might have been transacted on the original date of the meeting. If, however, a new record date for the adjourned meeting is made or is required, then, a notice of the adjourned meeting will be given on the new record date as provided in this Article to each member of record entitled to notice of such meeting.

 

Section 7. Member Quorum and Voting. Members representing more than fifty-one percent (51%) of the relative capital accounts of CarbonMeta Green Building Materials, LLC, represented in person or by proxy, will constitute a quorum at a meeting of members (A “Majority” as used throughout this Agreement). If a quorum is present as herein defined, fifty-one percent (51%) of the Relative Capital Account Vote represented at the meeting will be the act of the members unless otherwise provided by law. It is recognized that the members of CarbonMeta Green Building Materials, LLC are entities or organizations that may be comprised of multiple principals and owners. In all CarbonMeta Green Building Materials, LLC voting matters, each CarbonMeta Green Building Materials, LLC member shall have a single vote in light of their Relative Capital Account, and the capital accounts, ownership percentages, and governing instruments of the respective CarbonMeta Green Building Materials, LLC member entities or organizations shall be disregarded other than to confirm the manner in which the single vote from that member was obtained.

 

Section 8. Voting by Members. All members of CarbonMeta Green Building Materials, LLC are entitled to vote on matters relating to CarbonMeta Green Building Materials, LLC except to the extent otherwise provided in the Articles of Organization or in this Operating Agreement. Each member’s vote shall be weighted in proportion to the member’s relative capital account; If the capital account of each member is negative or zero, each member shall have one vote. Any manager who is not a member shall not be entitled to vote on matters relating to CarbonMeta Green Building Materials, LLC, except to the extent otherwise provided in the Articles of Organization or in this operating agreement.

 

Section 9. Proxies. A member may vote either in person or by proxy provided that any and all proxies are executed in writing by the member or his duly authorized attorney-in-fact. No proxy will be valid after the duration of 11 months from the date thereof unless otherwise provided in the proxy.

 

Section 10. Action by Members Without a Meeting. Any action required or permitted by law, this operating agreement, or the Articles of Organization of CarbonMeta Green Building Materials, LLC to be taken at any annual or special meeting of members may be taken without a meeting, without prior notice and without a vote, provided that the action is taken by the members according to the voting provisions of Sections 7, 8 and 9 above. The foregoing actions(s) shall be evidenced by written consents describing the action taken, dated and signed by members according to the voting provisions of Sections 7, 8 and 9 above, and delivered to CarbonMeta Green Building Materials, LLC in accordance with Wyoming Law. Within 10 days after obtaining such authorization by written consent, notice shall be given to those members who have not consented in writing or who are not entitled to vote. Said notice shall fairly summarize the material features of the authorized action.

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

III. MANAGEMENT

 

Section 1: Management of Limited Liability Company. Unless otherwise provided in the Articles of Organization or in this operating agreement, the management of CarbonMeta Green Building Materials, LLC shall be vested in the members in proportion to the members’ contributions to the capital of CarbonMeta Green Building Materials, LLC, as adjusted from time to time to properly reflect any additional contributions or withdrawals by the members. If the Articles of Organization or this operating agreement provide for the management of CarbonMeta Green Building Materials, LLC by a manager(s) or Managing Member(s), said manager(s) or Managing Member(s) shall be elected annually by the members in the manner prescribed by this operating agreement. Such manager(s) or Managing Member(s) shall hold the offices and have responsibilities accorded to them by the members and set out in the Articles of Organization or this operating agreement of CarbonMeta Green Building Materials, LLC. The manager(s) or Managing Member(s) of CarbonMeta Green Building Materials, LLC shall discharge said person(s)’ duties, including duties as a committee member in accordance with Wyoming Law.

 

Section 2: Liability of Managers, Managing Members and Members. Neither the members of CarbonMeta Green Building Materials, LLC nor the managers or Managing Members are liable under a judgment, decree or order of a court or in any other manner, for a debt, obligation or liability of CarbonMeta Green Building Materials, LLC, except as provided in Wyoming Law. Notwithstanding the foregoing, the manager(s) and/or Managing Member(s) of CarbonMeta Green Building Materials, LLC may be found liable to the extent set forth in Wyoming Law.

 

IV. MANAGING MEMBER(S) OR MEMBER(S)

 

Section 1. Function. All limited liability company powers, business, and affairs will be exercised, managed and directed by CarbonMeta Green Building Materials, LLC.

 

Section 2. Managing member(s) (or manager(s) if applicable), if a natural person, must be of 18 years of age or older but need not be residents of this state. Managing member(s) must be member(s) of CarbonMeta Green Building Materials, LLC; however, if manager(s) are utilized, manager(s) need not be member(s) of CarbonMeta Green Building Materials, LLC.

 

Section 3. Compensation. The member(s) will have authority to fix the compensation (if any) for the manager(s) and/or Managing Member(s) of CarbonMeta Green Building Materials, LLC.

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

Section 4. Number. If Managing Member(s) are used by CarbonMeta Green Building Materials, LLC, the number of Managing Member(s) will be as set forth hereafter. If Managing Member(s) are used by CarbonMeta Green Building Materials, LLC, the number of Managing Member(s) will be as set forth hereafter. Said number is a minimum of One (1) and a maximum of Four (4).

 

Section 5. Election and Term. Each person named in the Articles of Organization as a Managing Member(s) or manager(s) will hold office until the first annual meeting of member, or until the earlier resignation, removal or death of said Managing Member(s) or manager(s). At the first annual meeting of members and at each annual meeting thereafter, the members will elect Managing Member(s) (or manager(s), if applicable) to serve until the next annual member meeting, prior resignation, removal or death.

 

Section 6. Vacancies. In the event of the death or permanent incapacity of a single Managing Member, the remaining Managing Member shall automatically become the sole Managing Member. In the event of a vacancy occurring in the Managing Member(s) (or manager(s) if applicable) under other circumstances including loss of both Managing Members or the resignation or termination of one or both Managing Members, the vacancies will be filled by a Majority Relative Capital Account Vote. A Managing Member or manager so elected to fill a vacancy will hold office only until the next annual meeting of members.

 

Section 7. Removal and Resignation of Managers. At a meeting of managers called expressly for that purpose, any Managing Member(s) (or manager(s) if applicable) may be removed by a Majority Relative Capital Account Vote. Managing member(s) (or manager(s) if applicable) may resign at any time by delivering written notice to the members of CarbonMeta Green Building Materials, LLC. Such a resignation is effective when the notice is delivered unless a later effective date is specified in said notice.

 

V. MEMBERSHIP CERTIFICATES

 

Section 1. Issuance. Every member in CarbonMeta Green Building Materials, LLC will be entitled to have a certificate representing said member’s interest in the limited liability company. No certificate representing such membership will be issued until the respective member has fully paid the initial capital contribution applicable for said member.

 

Section 2. Form. Certificates representing membership in CarbonMeta Green Building Materials, LLC will be signed by the Managing Member(s) (or manager(s) if applicable) and will be sealed with the seal of CarbonMeta Green Building Materials, LLC.

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

Section 3. Admission and Transferability of Membership. Unless otherwise provided in the Articles of Organization or in this operating agreement, a member’s interest in CarbonMeta Green Building Materials, LLC is not assignable in whole or in part, unless a majority of the non assigning members consent to this assignment. Thus, an assignee of an interest in a limited liability company may not become a member unless all other members consent. As assignee who has become a member has, to the extent assigned, the rights and powers, and is subject to the restrictions and liabilities, of a member under the Articles of Organization, this operating agreement and Wyoming Law. An assignee who becomes a member also is liable for the obligations of his assignor to make and return contributions as provided under Wyoming Law; however, the assignee is not obligated for liabilities which are unknown to the assignee at the time he became a member and which could not be ascertained this operating agreement hereof. If an assignee of an interest in CarbonMeta Green Building Materials, LLC becomes a member, the assignor is nor released from liability to the limited liability company under Wyoming Law. As assignment of a member’s interest in CarbonMeta Green Building Materials, LLC does not dissolve the limited liability company or entitle the assignee to become or to exercise any rights or powers of a member. An assignment entitles the assignees to share in the profits and losses of CarbonMeta Green Building Materials, LLC, to receive such distribution(s) and to receive such allocation of income, gain, loss deduction or credit or similar item to which the assignor was entitled, to the extent assigned. A member ceases to be a member and ceases to have the power(s) to exercise of a member upon assignment of his entire interest in CarbonMeta Green Building Materials, LLC. If an individual member dies or is adjudged incompetent to manage his person or his property by a court of competent jurisdiction, the member’s legal representative may exercise all the member’s rights for the purpose of settling such member’s estate or administering such member’s property, including any power the member had to give an assignee the right to become a member. If a non-individual member is dissolved or terminated, the powers of that member may be exercised by its legal representative or successor. No person may be admitted as a member unless each member consents in writing to the admission of the additional member, unless otherwise provided in the Articles of Organization or in this operating agreement.

 

Section 4. Lost, Stolen, or Destroyed Certificates. If a member claims that a membership certificate issued and recorded by CarbonMeta Green Building Materials, LLC has been lost or destroyed, a new certificate will be issued to said member, provided that said member presents an affidavit claiming the said certificate to be lost, stolen or destroyed. At the discretion of the Managing Member(s) (or manager(s), if applicable), said member may be required to deposit a bond or other indemnity in such amount and with such sureties, if any, as the members may require.

 

VI. BOOKS AND RECORDS

 

Section 1. Books and Records. CarbonMeta Green Building Materials, LLC shall keep as permanent records the following:

 

(a) Current list of the full names and last known business addresses of all members;

 

(b) Copy of the articles of organization and all certificates of amendments thereto, together with executed copies of any powers of attorney pursuant to which any certificate was executed;

 

(c) Copies of CarbonMeta Green Building Materials, LLC’s federal, state and local income tax returns and reports, if any, for the three (3) most recent years;

 

(d) Copies of any effective operating agreement and financial statements of CarbonMeta Green Building Materials, LLC for the three (3) most recent years;

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

(e) Unless contained in the articles of organization or the operating agreement, a writing setting forth: (i) The amount of cash and a description and statement of the agreed value of the other property or services contributed by each member and which each member has agreed to contribute; (ii) The times at which or events on the happening of which any additional contributions agreed to be made by each member are to be made; (iii) Any events upon the happening of which the limited liability company is to be dissolved and its affairs wound up.

 

Section 2. Member’s Inspection Rights. A member of CarbonMeta Green Building Materials, LLC (including a beneficial owner whose interest are held in a trust or a nominee on behalf of a beneficial owner) may inspect and copy, during regular business hours at CarbonMeta Green Building Materials, LLC’s principal office, any of CarbonMeta Green Building Materials, LLC records required to be kept pursuant to Section 1, of this Article of these operating agreement, if said member gives CarbonMeta Green Building Materials, LLC written notice of such demand at least 5 business days before the date on which the member wishes to inspect and copy. The foregoing right of inspection is subject however to such other restrictions as are applicable under Wyoming Law, including, but not limited to, the inspection of certain records being permitted only if the demand for inspection is made in good faith and for a proper purpose (as well as the member describing with reasonable particularity the purpose and records desired to be inspected and such records are directly connected with the purpose).

 

Section 3. Other Reports to Members. CarbonMeta Green Building Materials, LLC shall report any indemnification or advanced expenses to any Managing Member, manager, employee, or agent (for indemnification relating to litigation or threatened litigation) in writing to the members with or before the notice of the next members’ meeting, or prior to such meeting if the indemnification or advance occurs after the giving of such notice but prior to the time such meeting is held, which report shall include a statement specifying the persons paid, the amounts paid, and the nature and status, at the time of such payment, of the litigation or threatened litigation.

 

VII. CONTRIBUTIONS

 

Section 1. Contributions by Members. The schedule of cash or property or services rendered contributions at inception of CarbonMeta Green Building Materials, LLC is attached hereto as Exhibit “A” and incorporated herein by this reference. The contribution of a member may be in cash, property or services rendered or a promissory note or other obligation to contribute cash or property or to perform services as set forth in Wyoming Law. A member is obligated to CarbonMeta Green Building Materials, LLC to perform any enforceable promise to contribute cash or property or services, even if he is unable to perform because of his death, disability or any other reason. If a member does not make the required contribution of property or services, he is obligated at the option of CarbonMeta Green Building Materials, LLC to contribute cash equal to that portion of the value, as stated in the records of CarbonMeta Green Building Materials, LLC of the stated contribution that have not been made. The obligation of a member to make a contribution or return money or other property paid or distributed in violation of these operating agreements or of Wyoming Law, may be compromised only by consent of all the members.

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

Section 2. Failure to Make Contributions. Any member who fails to make any contribution which said member is obligated to make shall be subject to the following penalties or consequences as may be determined by the non-defaulting members:

 

(a) The defaulting member’s proportionate interest in CarbonMeta Green Building Materials, LLC may be reduced;

 

(b) The defaulting member’s interest may be subordinated to the interest(s) of the non-defaulting members;

 

(c) The defaulting member’s interest may be subjected to forced sale;

 

(d) The defaulting member’s interest may be forfeited;

 

(e) The loan by the non-defaulting members to the defaulting member of the amount necessary to meet the defaulting member’s commitment on such terms as may be reasonable and proper;

 

(f) The fixing of the value of the defaulting member’s interest in CarbonMeta Green Building Materials, LLC by appraisal or by formula and redemption or sale of such interest at such value; and/or

 

(g) Such other penalties and/or consequences as may be determined to be fair and reasonable, under the circumstances.

 

VIII. DISTRIBUTIONS

 

CarbonMeta Green Building Materials, LLC may from time to time distribute its property to its members in accordance with this operating agreement, except that no distribution may be made if after the distribution CarbonMeta Green Building Materials, LLC would not be able to pay its debts as they become due in the usual course of business, or CarbonMeta Green Building Materials, LLC’s total assets would be less than the sum of its total liabilities (except liabilities to members on account of their contributions, unless otherwise provided in the Articles of Organization). The distributions, when made, must be allocated on the basis of each member’s relative capital account. The Managing Member(s) (or manager(s) if applicable) may base a determination that a distribution is proper either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances. In the case of any distribution based upon such valuation, each such distribution shall be identified as a distribution based upon a current valuation of assets, and the amount distributed shall be disclosed to the receiving members concurrent with their receipt of the distribution.

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

IX. SHARING OF PROFITS AND LOSSES

 

The profits and losses of CarbonMeta Green Building Materials, LLC shall be allocated among the members on the basis of each member’s relative capital accounts.

 

X. WITHDRAWAL/REDUCTION OF CAPITAL. CONTRIBUTIONS

 

A member may withdraw from CarbonMeta Green Building Materials, LLC upon not less than six (6) months’ prior written notice on each non-withdrawing member at the records for each such non withdrawing member appearing on CarbonMeta Green Building Materials, LLC’s records. Upon withdrawal, a withdrawing member is entitled to receive any distribution to which he is entitled under the Articles of Organization and the within operating agreement hereunder. At the minimum, the withdrawing member is entitled to receive the balance of such member’s capital account within a reasonable time after withdrawal; however, such a withdrawing member may not receive a distribution from CarbonMeta Green Building Materials, LLC to the extent that after giving effect to the distribution, all liabilities of CarbonMeta Green Building Materials, LLC (other than liabilities to members on account of their ownership interests) exceed the value of CarbonMeta Green Building Materials, LLC’s assets. Irrespective of the nature of a member’s contribution, a member has only the right to demand and receive cash in return for such member’s contribution to capital. If a member receives the return of any part of such member’s contribution, such member is subject to potential liability for and in the amount set forth in Wyoming Law.

 

XI. LIMITED LIABILITY COMPANY SEAL

 

The manager(s)/Managing Member(s) will provide a limited liability company seal which will be in circular form embossing in nature and stating “Limited Liability Company Seal”, “Wyoming”, year of organization and name of CarbonMeta Green Building Materials, LLC.

 

XII. ADOPTION, ALTERATION, AND REPEAL OF OPERATING AGREEMENT

 

The power to adopt, alter, or repeal provisions of this operating agreement of CarbonMeta Green Building Materials, LLC shall be vested in the members of the company (unless vested in the manager(s) or in the Managing Member(s) by the Articles of Organization). The provisions of this operating agreement adopted by the members (or manager(s)/Managing Member(s) if applicable) may be repealed or altered; new provisions of this operating agreement may be adopted; and the members may prescribe in any regulations that such operating agreement may not be altered, amended or repealed by the manager(s)/Managing Member(s). The operating agreement may contain any provisions for the provisions of this operating agreement and management of the affairs of CarbonMeta Green Building Materials, LLC which are consistent with law and the Articles of Organization. If the management of CarbonMeta Green Building Materials, LLC is vested in a manager(s) or Managing Member(s), the manager(s) (or Managing Member(s) if applicable) may adopt provisions of this operating agreements to be effective only in an emergency. An emergency exists if CarbonMeta Green Building Materials, LLC’s manager(s) (or Managing Member(s) if applicable) cannot readily be assembled because of some catastrophic event. The emergency provisions of this operating agreement, which are subject to amendment or repeal by the members, may make all provisions necessary for managing CarbonMeta Green Building Materials, LLC during an emergency, including procedures for calling a meeting of the manager(s) (or Managing Member(s) if applicable) and designation of additional or substitute manager(s) (or Managing Member(s) if applicable). All provisions of the regular operating agreement consistent with the emergency provisions of this operating agreement remain effective during the emergency. The emergency provisions of this operating agreement are not effective after the emergency ends. Actions taken by CarbonMeta Green Building Materials, LLC in good faith in accordance with the emergency operating agreement have the effect of binding the company and may not be used to impose liability on a manager(s), Managing Member(s) (if applicable), employee, or agent(s) of the company. The members agree to the jurisdiction of the United States Central District Court of Wyoming for any and all disputes between the parties, and agree to mediate with a mutually agreed upon third party neutral retired judge mediator of mutual choice from said jurisdiction prior to commencing any case in court for any remedy in law or equity.

 

IN WITNESS WHEREOF, the parties have exacted this agreement on the year and date above written.

 

Manager(s)/Managing Member(s)/Member(s) of CarbonMeta Green Building Materials, LLC:

 

  CarbonMeta Technologies, Inc.
     
     
  By: Lloyd Spencer, President
    Salvum Corporation
     
     
  By: Robert Switzer, President

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

Exhibit A - Schedule of Capital Contributions at Inception

 

Name  Cash   Property   Note/Debt   Other
                
CarbonMeta Technologies, Inc.  $0    250,000,000    0    
         Shares of COWI Common Stock         
                  
                  Assign License for Ecomena Cementless Comcrete to J.V.
                   
Salvum Corporation  $0    0    0   Existing EarthCrete Sales Pipeline and Customer List
                   
                  Earthcrete Sales Revenue (Attachment A-1)
                   
                  License to use Earthcrete Trademark Worldwide

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement
 

 

Attachment A-1

(Sales Revenue – Earthcrete)

 

Total Revenue: $701,030

(3186.5 Cubic Yards x $220 Per Yard)

 

 

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CarbonMeta Green Building Materials, LLC – Operating Agreement

 

 

Exhibit 10.49

 

HY-TECH TECHNOLOGY GROUP, INC.

A Delaware Corporation

 

8% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

$50,000 Date: February 12, 2003

 

FOR VALUE RECEIVED, Hy-Tech Technology Group, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Tim Burgess (“Lender”), in lawful money of and within the United States of America and in immediately available funds, the principal sum of $50,000 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein. Borrower further agrees to pay interest on the Principal Amount at the rate per annum of 8% (the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

1.Principal Repayment. The outstanding Principal Amount and interest shall be payable on the 120th day from closing (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2.Conversion. Seven days prior to the Repayment Date, the Lender shall notify Borrower of its intent to; (i) convert the entire amount of principal and interest due pursuant to this Note into shares of the Borrower’s common stock at a price of $1.00 per share, or (ii) be repaid the principal and interest in accordance with Section I above. However, if the Borrower’s common stock has an average closing price for the 30 days prior to the Repayment Date of a minimum of $3.36 (200% of the closing sale price of the Company’s common stock on the date of this Note), all of the principal and interest owed to Lender shall automatically convert into shares of the Borrower’s common stock at $1.00 per share on the Repayment Date and Lender shall have no right to be repaid its principal and interest other than in accordance with (i) above.

 

3.Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4.Default. The following events shall each be an “Event of Default” under this Note:

 

A.Bankruptcy or insolvency of Borrower;

 

 

 

 

B.Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C.Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 7% per annum in excess of the Stated Interest Rate.

 

5.Covenants.

 

A.Use of Proceeds. The Borrower shall use the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B.Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver theNote, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C.Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

D.Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E.Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F.Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

 

 

 

G.Trademarks, Copyrights and Patents. The Borrower will not do any act, or omit to do any act, whereby Borrower’s Trademarks, Copyrights or Patents, or any application appurtenant thereto, may become abandoned, invalidated, unenforceable, avoided, avoidable, or will otherwise diminish in value, and shall notify Lender immediately if it knows of any reason or has reason to know of any ground under which this result may occur. Borrower shall take appropriate action, at its expense to halt the infringement of Borrower’s Trademarks, Copyrights and Patents and shall properly exercise its duty to control the nature and quality of the goods offered by any licensees in connection therewith.

 

6.Waiver. TO THE FULLEST EXTENT PERMITIED BY LAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.

 

7.Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

8.Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

Hy-Tech Technology Group, Inc.

1840 Boy Scout Drive

Fort Myers, Florida 33907

Attention: President

 

If to the Lender, at:

 

Tim Burgess

226 Hamilton Road

Athens, GA 30606-5082

 

or at any address specified by Borrower or Lender in writing.

 

 

 

 

9.Expenses. The Borrower shall pay all expenses of the Lender in. connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

10.Set-Off. Regardless any means of obtaining repayment of the obligations hereunder, any deposits, balances or other sums credited by or due from the Lender to the Borrower may at any time and from time to time, without notice to the Borrower or compliance with any other condition precedent now or hereafter imposed by statute, rule of law, or otherwise (all of which are hereby expressly waived) be set off, appropriated, and applied by the Lender against any and all obligations of the Borrower to the Lender or any of its affiliates in such manner as the Lender in its sole discretion may determine, and the Borrower hereby grants to the Lender a continuing security interest in such deposits, balances or other sums for the payment and performance of all such obligations.

 

11.No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

12.Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

13.Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

14.Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

15.Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

16.Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

 

 

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE CITY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

  HY-TECH TECHNOLOGY GROUP, INC.

 

  By:  
  Name:  
  Title:  

 

 

 

 

Exhibit 10.50

 

HY-TECH TECHNOLOGY GROUP, INC.

(A Delaware Corporation)

 

8% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

$50,000 Date: February 13, 2003

 

FOR VALUE RECEIVED, Hy-Tech Technology Group, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Azriel Nagar {“Lender”), in lawful money of and within the United States of America and in immediately available funds, the principal sum of $50,000 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner set forth herein. Borrower further agrees to pay interest on the Priµcipal Amount at the rate per annu of4S% (tho “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of a 365-day or 366-day year, as the case may be, for the actual number of days elapsed.

 

1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on the 120th day from closing (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2. Conversion. Seven days prior to the Repayment Date, the Lender shall notify Borrower of its intent to: (i) convert the entire amount of principal and interest due pursuant to this Note into shares of the Borrower’s common stock at a price of $1.00 per share, or (ii) be repaid the principal and interest in accordance with Section 1 above. However, if the Borrower’s common stock has an average closing price for the 30 days prior to the Repayment Date ofa minimum of$3.32 (200% of the closing sale price of the Company’s common stock on the date of this Note), all of the principal and interest owed to Lender shall automatically convert into shares of the Borrower’s common stock at $1.00 per share on the Repayment Date and Lender shall have no right to be repaid its principal and interest other than in accordance with (i) above.

 

3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United Stales dollars to such bank account as shall he designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4. Default. The following events shall each be an “Event of Default” under this Note:

 

A. bankruptcy or insolvency of Borrower;

 

B. Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

 

 

 

C. breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice thereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of30 days after such Event of Default, the interest rate on this Note shall increase to 7% per annum in excess of the Stated Interest Rate.

 

5. Covenants.

 

A. Use of Proceeds. The Borrower shall use the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business org nization, rights and privileges and irfeSf,flt gooqwill and, to the best of its ability, its relationships existing with other parties and shall at all times cau e to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E. Taxes and Other Obligations. The Bmrnwer shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

G. Trademarks, Copyrights and Patents. The Borrower will not do any act, or omit to do any act, whereby Borrower’s Trademarks, Copyrights or Patents, or any application appmtenant thereto, may become abandoned, invalidated, unenforceable, avoided, avoidable, or will otherwise diminish in value, and shall notify Lender immediately if it knows of any reason or has reason to know of any ground under which this result may occur. Borrower shall take appropriate action at its expense to halt the infringement of Borrower’s Trademarks, Copyrights and Patents and shall properly exercise its duty to control the nature and quality of the goods offered by any licensees in connection therewith.

 

 

 

 

6. Waiver. TO THE FULLEST EXTENT PERMITTED BYLAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (i) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (ii) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (iii) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HEREBY WAIVED TO THE FULLEST EXTENT PERMITTED BYLAW.

 

7. Attorney’s Fees; Collection Costs. Ifthere has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

8. Notices. Unless otherwise specified herein, all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service, as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

Hi-Tech Technology Group, Inc.

1840 Boy Scout Drive

Fort Myers, Florida 33907

Attention: President

 

If to the Lender, at:

 

Azriel Nagar

342 Irving Ave.

South Orange, NJ 07079

 

or at any other address specified by Borrower or Lender in writing.

 

9, Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

 

 

 

10. Set-Off. Regardless any means of obtaining repayment of the obligations hereunder, any deposits, balances or other sums credited by or due from the Lender to the Borrower may, at any time and from time to time, without notice to the Borrower or compliance with any other condition precedent now or hereafter imposed by statute, rnle of law, or otherwise (all of which are hereby expressly waived) be set off, appropriated, and applied by the Lender against any and all obligations of the Bonower to the Lender or any of its affiliates in such manner as the Lender in its sole discretion may determine, and the Borrower hereby grants to the Lender a continuing security interest in such deposits, balances or other sums for the payment and performance of all such obligations.

 

11. No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

12. Amend ments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of ai,nendments, by the Bonower.

 

13. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

14. Partial Invalidity. The invalidity or unenforceability of any one or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

15. Captions. The captions and hyadings of the various sections and pb ctions ,of this Note are provided for convenience only and shall not be constrned to modify the meaning of such ‘sections or subsections.

 

16. Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

 

 

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE CITY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

HY-TECH TECHNOLOGY GROUP, INC.
   
  By:              
  Name:  
  Title:

 

 

 

Exhibit 10.51

 

HY-TECH TECHNOLOGY GROUP, INC.

A Delaware Corporation

 

8% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

$50,000 Date: February 12, 2003

 

FOR VALUE RECEIVED, Hy-Tech Technology Group, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Julian M. Herskowitz (“Lender”), in lawful money of and within the United States of America and in immediately available funds, the principal sum of $25,000 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein. Borrower further agrees to pay interest on the Principal Amount at the rate per annum of 8% (the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

1.Principal Repayment. The outstanding Principal Amount and interest shall be payable on the 120th day from closing (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2.Conversion. Seven days prior to the Repayment Date, the Lender shall notify Borrower of its intent to; (i) convert the entire amount of principal and interest due pursuant to this Note into shares of the Borrower’s common stock at a price of $1.00 per share, or (ii) be repaid the principal and interest in accordance with Section I above. However, if the Borrower’s common stock has an average closing price for the 30 days prior to the Repayment Date of a minimum of $3.36 (200% of the closing sale price of the Company’s common stock on the date of this Note), all of the principal and interest owed to Lender shall automatically convert into shares of the Borrower’s common stock at $1.00 per share on the Repayment Date and Lender shall have no right to be repaid its principal and interest other than in accordance with (i) above.

 

3.Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4.Default. The following events shall each be an “Event of Default” under this Note:

 

A.Bankruptcy or insolvency of Borrower;

 

 

 

 

B.Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C.Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 7% per annum in excess of the Stated Interest Rate.

 

5.Covenants.

 

A.Use of Proceeds. The Borrower shall use the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B.Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver theNote, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C.Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

D.Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E.Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F.Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

 

 

 

G.Trademarks, Copyrights and Patents. The Borrower will not do any act, or omit to do any act, whereby Borrower’s Trademarks, Copyrights or Patents, or any application appurtenant thereto, may become abandoned, invalidated, unenforceable, avoided, avoidable, or will otherwise diminish in value, and shall notify Lender immediately if it knows of any reason or has reason to know of any ground under which this result may occur. Borrower shall take appropriate action, at its expense to halt the infringement of Borrower’s Trademarks, Copyrights and Patents and shall properly exercise its duty to control the nature and quality of the goods offered by any licensees in connection therewith.

 

6.Waiver. TO THE FULLEST EXTENT PERMITIED BY LAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.

 

7.Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

8.Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

Hy-Tech Technology Group, Inc.

1840 Boy Scout Drive

Fort Myers, Florida 33907

Attention: President

 

If to the Lender, at:

 

Julian M. Herskowitz

6 Hollacher Drive

Northport, NY 11768

 

or at any address specified by Borrower or Lender in writing.

 

 

 

 

9.Expenses. The Borrower shall pay all expenses of the Lender in. connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

10.Set-Off. Regardless any means of obtaining repayment of the obligations hereunder, any deposits, balances or other sums credited by or due from the Lender to the Borrower may at any time and from time to time, without notice to the Borrower or compliance with any other condition precedent now or hereafter imposed by statute, rule of law, or otherwise (all of which are hereby expressly waived) be set off, appropriated, and applied by the Lender against any and all obligations of the Borrower to the Lender or any of its affiliates in such manner as the Lender in its sole discretion may determine, and the Borrower hereby grants to the Lender a continuing security interest in such deposits, balances or other sums for the payment and performance of all such obligations.

 

11.No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

12.Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

13.Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

14.Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

15.Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

16.Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

 

 

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE CITY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

  HY-TECH TECHNOLOGY GROUP, INC.
     
  By: /s/ G F McNear
  Name: G.F. McNear
  Title: C.E.O.

 

 

 

Exhibit 10.52

 

Promissory Note  

 

This Promissory Note is made as of July 27, 2010, between CoroWare, Inc, a Delaware corporation (COROWARE), whose business address is 4056 148th Avenue NE, Redmond, WA 98052, and Richard Wynns, whose address is 16048 San Carlos Blvd, Ste 3, Fort Myers, FL 33908-3328 (the “HOLDER”).

 

1.For value received, COROWARE promises to pay to HOLDER the principal sum of TWENTY FIVE THOUSAND DOLLARS ($25,000.00 US).

 

Interest shall accrue from the date of this Promissory Note (NOTE) on the unpaid principal amount at a rate equal to [1.5]% per month, compounded monthly. Interest on this NOTE shall be calculated on the basis of a 360-day year.

 

This NOTE is subject to the terms and conditions that are detailed in the remainder of this agreement.

 

2.Maturity. Principal and accrued interest under this NOTE shall be due and payable 180 days from the date of this NOTE (the “Maturity Date”).

 

3.Payment. All payments shall be made in lawful money of the United States of America at such place as the parties hereto have designated in writing in accordance with the Escrow and Security Agreement. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal

 

3.1.At the mutual written consent of COROWARE and HOLDER, repayment of principal and interest may be issued in CoroWare restricted common stock (COWI.OB) from COROWARE to HOLDER.

 

The number of shares shall be calculated by using the closing price of the common stock on the date of mutual written consent. Such shares shall be restricted common stock issued by and governed under Rule 144 under the Securities Exchange Act of 1934.

 

4.Prepayment. This NOTE may be prepaid in whole or in part.

 

5.Additional Consideration. As additional consideration for the Lender, the Company shall, within 10 business days of the date of execution of this agreement, issue to the Lender an amount of CoroWare common stock (COWI.OB) equivalent to 20% of the Principal. The number of shares shall be calculated by using the closing price of the common stock on the date of signature. Such shares shall be restricted common stock issued by and governed under Rule 144 under the Securities Exchange Act of 1934.

 

6.Transfer; Successors and Assigns. The terms and conditions of this NOTE shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Notwithstanding the foregoing, neither the Company nor the Holder may assign, pledge, or otherwise transfer this NOTE without the prior written consent of the other party, except for transfers to affiliates. Subject to the preceding sentence, this NOTE may be transferred only upon surrender of the original NOTE for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new NOTE for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this NOTE.

 

Promissory Note AgreementPage 1Tuesday, September 13, 2022
   
________________________ ________________________
Initials and Date Initials and Date
COROWARE HOLDER

 

 

7.Events of Default. If any of the events specified in this Section 5 shall occur (herein individually referred to as an “Event of Default”), the Holder may, so long as such condition exists, declare the entire principal and accrued interest hereon immediately due and payable, by notice in writing to the Company:

 

7.1.Default in the payment of the principal and accrued interest of this NOTE when due and payable if such default is not cured by the Company within ten (10) days after the Holder has given the Company written notice of such default;

 

7.2.The institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the federal bankruptcy laws, or any other applicable federal or state law, or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by the Company in furtherance of any such action;

 

7.3.If, within sixty (60) days after the commencement of an action against the Company seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within thurty (30) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated;

 

7.4.Failure by the Company to observe or perform any obligations of the Company to the Holder on or with respect to any transactions, debts, undertakings or agreements other than the transaction evidenced by this NOTE; or

 

7.5.The institution of any proceeding for the dissolution or termination of the Company voluntarily, involuntarily, or by operation of law.

 

8.As long as this NOTE is in Default, then this NOTE shall bear interest (the “Default Interest”) at the lesser of (i) twenty one percent (21%) per annum compounded annually or (ii) the maximum rate permitted by law. At the Holder’s election, such Default Interest shall be payable by the Company in cash or shares of the Company’s Common Stock at a price per share equal to the then fair market value of such Common Stock, as determined in good faith by the Company’s Board of Directors.

 

9.Governing Law. This NOTE and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Washington, without giving effect to principles of conflicts of law.

 

Promissory Note AgreementPage 2Tuesday, September 13, 2022
   
________________________ ________________________
Initials and Date Initials and Date
COROWARE HOLDER

 

 

10.Notices. Any notice required or permitted by this NOTE shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice.

 

11.NOTICES. Any notice, request, authorization, direction, or other communication under this Agreement shall be deemed given on the day they are (i) deposited in the mail, postage prepaid, certified or registered, return receipt requested; or (ii) sent by air express courier (e.g., DHL, Federal Express or Airborne), charges prepaid, return receipt requested; and addressed as set forth below.

 

CoroWare, Inc.   Richard Wynns
1410 Market Street   16048 San Carlos Blvd, Ste 3
Kirkland, WA 98033   Fort Myers, FL 33908-3328

 

Attention:

 Chief Executive Officer  

 

Attention:

  
Phone: (800) 641-2676   Phone: (239) 466-6455
Fax: (800) 641-2676   Fax:  
E-Mail: ceo@coroware.com   E-Mail: hummerdad1@aol.com

 

12.Amendments and Waivers. Any term of this NOTE may be amended only with the written consent of the Company and the Holder.

 

13.Shareholders, Officers and Directors Not Liable. In no event shall any shareholder, officer or director of the Company be liable for any amounts due or payable pursuant to this NOTE.

 

14.Legal Costs. Except as otherwise provided in the agreements executed by the parties hereto, each party agrees to bear its own legal costs in connection with the transactions contemplated by this NOTE.

 

15.Counterparts. This NOTE may be executed in counterparts, each of which will be deemed to be an original and all of which together will constitute a single instrument.

 

16.ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING PAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

Promissory Note AgreementPage 3Tuesday, September 13, 2022
   
________________________ ________________________
Initials and Date Initials and Date
COROWARE HOLDER

 

 

COROWARE   HOLDER
     
     
Signature   Signature
     
Lloyd Spencer   Richard Wynns
Name (Print)   Name (Print)
     
CEO    
Title    
     
July 27, 2010   July 27, 2010
Effective Date   Effective Date

 

Promissory Note AgreementPage 4Tuesday, September 13, 2022
   
________________________ ________________________
Initials and Date Initials and Date
COROWARE HOLDER

 

 

 

 

Exhibit 10.53

 

Convertible Promissory Note

 

Innova Holdings, Inc. (Maker)

Richard Wynns (Payee)

 

$30,000 July 22, 2005

 

FOR VALUE RECEIVED, the undersigned, Innova Holdings, Inc. (“Maker”), a Delaware corporation, promises to pay to the order of Richard Wynns (“Payee”), the principal sum of Thirty Thousand Dollars ($30,000.00), with interest at an annual rate of five percent (5%) on December 31, 2006. This promissory note is convertible into common stock of Maker at $0.015 per share at any time up through its repayment.

 

This note represents a loan from Payee for sums borrowed by Maker from Payee to assist Maker with meeting certain of its operating expenses.

 

The Maker shall have the right to prepay the amounts due hereunder, in whole or in part, at any time without premium or penalty.

 

Upon the occurrence of any of the following events of default:

 

(i) any payment due hereunder shall not be paid within fifteen (15) days after the date when due;

 

(ii) the Maker shall fail to perform or observe any other obligation at the time and in the manner required by this Promissory Note; or

 

(iii) if any court of competent jurisdiction shall enter an order appointing, without the consent of the Maker, a custodian, receiver, trustee or other officer with similar powers with respect to the Maker or with respect to any substantial part of the property of the Maker, or if an order for relief shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding up or liquidation of the Maker’s property, of if any petition for any such relief shall be filed against the Maker and such petition shall not be dismissed within thirty (30) days,

 

then, and in any such event and at any time thereafter, the Payee may, by written notice to the Maker, declare the entire unpaid principal amount hereunder to be immediately due and payable, whereupon the same shall become forthwith due and payable, and proceed to exercise any and all rights and remedies that Payee may have at law or in equity.

 

If any attorney is engaged to collect all or any portion of the liabilities of the Maker hereunder or to represent Payee in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’ rights and involving a claim under this Promissory Note, or to represent Payee in any other proceedings whatsoever in connection with this Promissory Note, then the Maker shall be liable to Payee for all reasonable attorneys’ fees, costs and expenses in connection therewith, in addition to all other amounts due hereunder.

 

 
 

 

The Maker hereby waives presentment for payment, demand, notice of non-payment, notice of dishonor, protest of any dishonor, notice of protest and protest of this Promissory Note. The Maker hereby consents to every extension of time; renewal, waiver or modification that may be granted by Payee with respect to the payment or other provisions of this Promissory Note or any part hereof, with or without substitution.

 

No delay or omission on the part of Payee in exercising any rights or remedies contained herein shall operate as a waiver of such right or remedy or of any other right or remedy, and no singular or paiiial exercise of any right or remedy shall preclude any other further exercise thereof, or the exercise of any other right or remedy. A waiver of any right or remedy on any one occasion shall not be construed as a bar or waiver of any right or remedy on future occasions, and no delay, omission, waiver or partial exercise shall be deemed to establish a custom or course of dealing or performance between the parties hereto.

 

In the event that any provision of this Promissory Note is deemed to be invalid by reason of the operation of any law, this Promissory Note shall be construed as riot containing such provision and the invalidity of such provision shall not affect the validity of any other provisions hereof, and any other provisions hereof which otherwise are lawful and valid shall remain in full force and effect.

 

This Promissory Note shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of Payee and the Maker.

 

This Promissory Note may not be changed or amended orally, but only by an instrument in writing signed by the party against whom enforcement of the change or amendment is sought.

 

The validity and interpretation of this Promissory Note shall be governed by the internal laws (and not the laws of conflict) of the State of Florida.

 

IN WITNESS WHEREOF, the Maker has executed this Promissory Note on the day and year first above written.

 

 

-2-

 

 

 

Exhibit 10.54

 

Issuance Date: August 22, 2006

 

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.

 

No. IVHG-2-2 WH $567,200

 

COROWARE INC.

 

Amended and Restated Secured Convertible Debenture

 

Due: August 22, 2009

 

This Amended and Restated Secured Convertible Debenture (including all secured convertible debentures issued in exchange, transfer or replacement hereof, this “Debenture”) was originally issued pursuant to that certain Securities Purchase Agreement (the “Securities Purchase Agreement”) dated July 20, 2006 in the original principal amount of $575,000 by COROWARE, INC. (f/k/a INNOVA ROBOTICS & AUTOMATION, INC., f/k/a INNOVA HOLDINGS, INC.), a Delaware corporation (the “Company”), to YA GLOBAL INVESTMENTS, LTD. (f/k/a CORNELL CAPITAL PARTNERS, LP) (the “Former Holder”). As of January 12, 2010 the Former Holder sold, transferred, and assigned to Westmount Holdings International Limited (the “Holder”) the Original Debenture (as defined herein) representing the outstanding principal balance at such time of $567,200, along with the cmrnsponding accrued and unpaid interest thereon of $317,510. This Debenture (No. IVHG-2-2 WH) is being re-issued and registered in the name of the Holder to reflect the $567,200 of the outstanding principal balance, along with accrued and unpaid interest thereon of $317,510 that was sold transferred, and assigned to the Holder.

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the Holder or its successors and assigns the principal sum of $567,200 together with accrued but unpaid interest of $317,510 as of January 12,, 2010, plus interest accruing thereafter, in accordance with the following terms:

 

Section I. General Terms

 

(a) Obligations Due and Payable. Notwithstanding anything contained herein to the contrary, the Company acknowledges that the obligations evidenced by this Debenture matured as of Augusr 22, 2009 (the “Maturity Date”) and are currently due and payable in full.

 

 

 

 

(b) Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to fourteen percent (14%) per annum. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures in cash or in Common Stock (valued at the Closing Bid Price on the Trading Day immediately prior to the date paid) at the option of the Company.

 

(c) Security. This Debenture is secured by, among other things, a Security Agreement (the “Security Agreement”) dated November 2, 2007 granted by the Company and its subsidiaries. In connection therewith, and to secure the obligations owed pursuant to this Debenture, the Company hereby grants to the Holder a security interest in all of its Pledged Property (as defined in the Security Agreement).

 

Section 2. Events of Default.

 

(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i) Any default in the payment of the principal of, interest on or other charges in respect of this Debenture, free of any claim of subordination, as and when the same shall become due and payable whether upon a Mandatory Redemption (as defined in Section 3(b)), an Optional Redemption (as defined in Section 3(a)), or the Maturity Date or by acceleration or otherwise;

 

(ii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, ainngement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to,approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

 

 

 

 

(iii) The Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

(iv) The Common Stock shall cease to be quoted for trading or listing for trading on any of (a) the NYSE Amex, (b) New York Stock Exchange, (c) the Nasdaq Stock Market, or (d) the OTC Bulletin Board (“OTC”) (each, a “Primary Market”) and shall not again be quoted or listed for trading on any Primary Market within five (5) Trading Days of such delisting; Primary Market

 

(v) The Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6);

 

(vi) The Company shall fail to file the Underlying Shares Registration Statement (as defined in Section 6) with the Commission (as defined in Section 6), or the Underlying Shares Registration Statement shall not have been declared effective by the Commission, in each case within the time periods set forth in the Investor Registration Rights Agreement (“Registration Rights Agreement”) dated July 20, 2006 between the Company and the Holder;

 

(vii) If the effectiveness of the Underlying Shares Registration Statement lapses for any reason or the Holder shall not be permitted to resell the shares of Common Stock underlying this Debenture under the Underlying Shares Registration Statement, in either case, for more than five (5) consecutive Trading Days or an aggregate of eight Trading Days (which need not be consecutive Trading Days);

 

(viii) The Company shall fail for any reason to deliver Common Stock certificates to a Holder prior to the fifth (5u’) Trading Day after a Conversion Date or after a Redemption Date if the Company chose to settle a Mandatory Redemption in shares of Common Stock, or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions, or settlements of Mandatory Redemptions in shares of Common Stock, in accordance with the terms hereof;

 

(ix) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) days after notice is claimed delivered hereunder;

 

 

 

 

(x) The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(ix) hereof) or any Transaction Document (as defined in Section 6) which is not cured within a period of ten (10) days after notice of snch breach has been sent by the Holder to the Company;

 

(b) During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Company. If an Event of Default shall occur the Conversion Price shall be reduced to $0.02 (the “Default Conversion Price”). Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Debenture or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Debenture or the sale of the Underlying Shares.

 

Section 3. Redemptions.

 

(a) Company’s Optional Cash Redemption. The Company at its option shall have the right to redeem (“Optional Redemption”) a portion or all amounts outstanding under this Debenture prior to the Matmity Date provided that as of the date of the Holder’s receipt of a Redemption Notice (as defined herein) (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price, (ii) the Underlying Share Registration Statement is effective, and (iii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption Premium”) equal to ten percent (10%) of the principal amount being redeemed, and accrned interest, (collectively referred to as the “Redemption Amount”). In order to make a redemption, the Company shall first provide wdtten notice to the Holder of its intention to make a redemption (the “Redemption Notice”) setting forth the amount of principal it desires to redeem. After receipt of the Redemption Notice the Holder shall have three (3) business days to elect to convert all or any portion of this Debenture, subject to the limitations set forth in Section 4(b). On the fourth (4th) business day after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the principal amount redeemed after giving effect to conversions effected during the three (3) business day period.

 

 

 

 

(b) Mandatory Redemptions.

 

(i) Holder’s Right. Beginning on the earlier of (A) the first Trading Day immediately following thirty days (30) after the date in which the Underlying Shares Registration Statement is first declared effective or (B) January I, 2007, and continuing on the first Trading Day of each calendar month thereafter (each, a “Redemption Date”), the Holder shall have the right to force the Company to redeem (“Mandatory Redemptions”) up to $500,000 of the remaining principal amount of the Debenture (the “Maximum Redemption Amount”) per calendar month by transmitting a copy of a Redemption Notice in the form attached hereto as Exhibit A (the “Redemption Notice”) requiring the Company to redeem (as set forth below in Section 3(b)(ii) hereof) the principal amount set forth in the Redemption Notice (the “Mandatory Redemption Amount”). The Company, in its sole discretion, may increase the Maximum Redemption Amount and, upon an Event of Default the Maximum Redemption Amount shall be automatically increased to an amount up to the remaining principal amount of the Debenture.

 

Notwithstanding the foregoing, if (A) the Closing Bid Price of the Common Stock exceeds the Conversion Price for each of the five consecutive Trading Days immediately prior to the Redemption Date, (B) the Underlying Share Registration Statement has been declared effective and remains effective on the Redemption Date, and (C) no Event of Default shall have occurred, then the Holder shall not be permitted to require the Company to make a Mandatory Redemption in that month.

 

(ii) Company’s Settlement Options. The Company has the option, in its sole discretion, to settle Mandatory Redemptions by (A) paying the Holder cash in an amount equal to the Mandatory Redemption Amount plus the Redemption Premium, or (B) issuing the Holder the number of shares of Common Stock (the “Redemption Shares”) equal to the Mandatory Redemption Amount divided by a price (the “Market Price”) equal to 95% of the lowest daily Volume Weighted Average Price of the Common Stock during the thirty (30) trading days immediately preceding the date the Holder delivers the Redemption Notice as quoted by Bloomberg, LP provided that in order for the Company to choose option B of this Section 3(b)(ii), (x) the Underlying Shares Registration Statement shall have been declared effective and shall remain effective on the date of the Redemption Notice, and (Y) no Event of Default shall have occurred.

 

(iii) Redemption Notice Procedures.

 

(A) On or prior to 5:00 pm New York City time on the Trading Day immediately following the Redemption Date, the Company shall return a copy of the Redemption Notice via facsimile (or other delivery) to the Holder, which Redemption Notice shall note the Company’s choice of settlement options with respect to such Redemption Notice and shall be signed by an officer of the Company.

 

(B) The Company shall settle all Redemption Notices within 5 Trading Days of the Redemption Date.

 

 

 

 

(iv) Settlement of Put Notice in shares of Common Stock. In the event that the Company chooses (if available) to settle a Redemption Notice in shares of Common Stock pursuant to option (B) of Section 3(b)(ii), upon notice to the Holder of such selection, the Redemption Notice shall effectively be treated the same as a Conversion Notice submitted by the Holder and processed in accordance with the provisions for Conversion Notices set forth in Section 4. The limitations on Conversions set forth in Section 4(b) hereof shall apply to any shares of Common Stock issued pursuant to this Section 3. In the event that the Company fails to notify the Holder of its election of settlement options in accordance with Section 3(b)(iii) hereof, then if applicable, the Company hereby designates all such Redemption Notices to automatically be settled in shares of Common Stock.

 

Section 4. Conversion.

 

(a) Conversion at Option of Holder.

 

(i) This Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as defined in Section 6) (subject to the limitations on conversion set forth in Section 4(b) hereof). The number of shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing (x) the outstanding amount of this Debenture to be converted by (y) the Conversion Price (as defined in Section 4(c)(i)). The Company shall deliver Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a Conversion Date.

 

(ii) Notwithstanding anything to the contrary contained herein, if on any Conversion Date: (1) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder in shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on a Primary Market; or (3) the Company has failed to timely satisfy a conversion; then, at the option of the Holder, the Company, in lieu of delive1ing shares of Common Stock pursuant to Section 4(a)(i), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an amount in cash equal to the product of the outstanding principal amount to be converted divided by the applicable Conversion Price, and multiplied by the highest Closing Bid Price of the stock from date of the conversion notice till the date that such cash payment is made.

 

Further, if the Company shall not have delivered any cash due in respect of conversion of this Debenture by the fifth (5th) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue shares of Common Stock pursuant to Section 4(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such shares will be subject to the provisions of this Section.

 

(iii) The Holder shall effect conversions by delivering to the Company a completed notice in the form attached hereto as Exhibit B (a “Conversion Notice”). The date on which a Conversion Notice is delivered is the “Conversion Date.” Unless the Holder is converting the entire principal amount outstanding under this Debenture, the Holder is not required to physically sunender this Debenture to the Company in order to effect conversions. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

 

 

 

 

(b) Certain Conversion Restrictions.

 

(i) A Holder may not convert this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent such conversion or receipt of such interest payment would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of, and payment of interest on, this Debenture held by such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with the periods described in Section 4(a)(i) and, at the option of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future conversions or return such excess principal amount to the Holder. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.

 

(c) Conversion Price and Adjustments to Conversion Price.

 

(i) The conversion price in effect on any Conversion Date shall be equal to the lower of $0.02 per share or eighty-five percent (85%) of the lowest Volume Weighted Average Price in the thirty (30) Trading Days prior to the Conversion Date (the “Conversion Price”). The Conversion Price may be adjusted pursuant to the terms of this Debenture.

 

(ii) If the Company, at any time while this Debenture is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

 

 

 

(iii) If the Company, at any time while this Debenture is outstanding, shall issue rights, options or wanants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants (plus the number of additional shares of Common Stock offered for subscription or purchase), and of which the numerator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants, plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Conversion Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. However, upon the expiration of any such right, option or wairnnt to purchase shares of the Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section, if any such right, option or warrant shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of the Common Stock actually purchased upon the exercise of such rights, options or warrants actually exercised.

 

(iv) If the Company or any subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall issue shares of Common Stock or rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per shai·e which is issued in connection with such issuance, be entitled to receive shares of Common Stock at a price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later tlian one (1) business day following the issuance of any Common Stock or Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms. No adjustment under this Section 4(c)( iv) shall be made as a result of issuances of Excluded Securities.

 

 

 

 

(v) If the Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which this Debenture shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Bid Price determined as of the record date mentioned above, and of which the numerator shall be such Closing Bid Price on such record date less the then fair market value at such record date.of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

(vi) In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to, at its option, (A) convert the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Conunon Stock following such reclassification or share exchange, and the Holder of this Debenture shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture could have been converted immediately prior to such reclassification or share exchange would have been entitled, or (B) require the Company to prepay the outstanding principal amount of this Debenture, plus all interest and other amounts due and payable thereon. The entire prepayment price shall be paid in cash. This provision shall similarly apply to successive reclassifications or share exchanges.

 

(vii) Whenever the Conversion Price is adjusted pursuant to Section 4 hereof, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

 

 

 

(viii) If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last address as it shall appear upon the stock books of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders ofthe Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day calendar period commencing the date of such notice to the effective date of the event triggering such notice.

 

(ix) In case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder, plus all accmed and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

 

 

 

 

(d) Other Provisions.

 

(i) Conversion at the Option of the Company. The Company shall have the right to force the Holder to convert this Debenture into shares of Common Stock in accordance with this Section 3 hereof, in amounts not to exceed $200,000 in any thirty (30) day period, after the Original Issue Date, subject to the limitations on conversions set forth in Section 3(b) hereof and provided that the following conditions are satisfied: (a) the Closing Bid Price of the Common Stock is greater than 110% of the Conversion Price on each of the five Trading Days immediately preceding the Conversion Date, (b) the average daily trading volume for the Common Stock on a Primary Market shall have been greater than $200,000 over the five Trading Days prior to the Conversion Date, (c) the Underlying Shares Registration Statement shall be effective and the Holder shall be permitted to resell the shares of Common Stock underlying this Debenture under the Underlying Registration Statement, and (cl) no Event of Default has occurred.

 

(ii) The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Debenture; and within three (3) Business Days following the receipt by the Company of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement.

 

(iii) All calculations under this Section 4 shall be rounded up to the nearest $0.0001 or whole share.

 

(iv) The Company covenants that it will at all times reserve and keep available out of its authorized and unissuecl shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in this Debenture or in the Transaction Documents) be issuable (taking into account the adjustments and restrictions set forth herein) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock tlmt shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Underlying Shares Registration Statement has been declared effective under the Securities Act, registered for public sale in accordance with such Underlying Shares Registration Statement.

 

(v) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Closing Bid Price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

(vi) The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

 

 

 

(vii) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company ‘s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(viii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(a)(i) by the fifth (5th) Trading Day after the Conversion Date, and if after such fifth (5”‘) Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (I) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either reissue a Debenture in the principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements under Section 4(a)(i). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which the market price of the Underlying Shares on the date of conversion was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

 

 

 

Section 5. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (I) Trading 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, to: Coroware, Inc.

1410 Market Street, Suite 200

Kirkland, WA 98033

Attention: Lloyd Spencer
Telephone: (425)818-8990
Facsimile: (800) 641-2676

 

With a copy to: Sichenzia Ross Friedman Ference LLP

1065 Avenue of the Americas

New York, NY 10018

Attention: Gregory Sichenzia
Telephone: (212) 930-9700
Facsimile: (212)930-9725

 

If to the Holder: Westmount International Holdings Limited

433 Plaza Real, Suite 275

Boca Raton, FL 33432

Att: Chris Alf

(561) 417-3004

 

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) business days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of snch transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebnttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

Section 6. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Approved Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company prior to the date of the Securities Purchase Agreement, pursuant to which the Company’s securities may be issued only to any employee, officer or director for services provided to the Company.

 

“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

 

 

 

 

“Change of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(l) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Company (except that the acquisition of voting securities by the Holder shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c).

 

“Closing Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock is then listed as quoted by Bloomberg, LP.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $.001, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.

 

“Conversion Date” shall mean the date upon which the Holder gives the Company notice of their intention to effectuate a conversion of this Debenture into shares of the Company’s Common Stock as outlined herein.

 

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

 

“Excluded Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right, option, obligation or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the date of the Securities Purchase Agreement, and (c) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of this Debenture.

 

“Original Issue Date” shall mean the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.

 

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

 

 

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading Day” means a day on which the shares of Common Stock are quoted on the OTC or quoted or traded on such Primary Market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

 

“Transaction Documents” means the Securities Purchase Agreement or any other agreement delivered in connection with the Securities Purchase Agreement, including, without limitation, the Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer Agent Instructions, and the Registration Rights Agreement.

 

“Underlying Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms hereof.

 

“Underlying Shares Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering among other things the resale of the Underlying Shares and naming the Holder as a “selling stockholder” thereunder.

 

Section 7. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

Section 8. This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

Section 9. If this Debenture is mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

Section 10. No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.

 

Section 11. This Debenture shall be governed by and construed in accordance with the laws of tl1e State of New Jersey, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on fornm non conveniens to the bringing of any such proceeding in such jurisdictions.

 

 

 

 

Section 12. If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

 

Section 13. Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to tliat term or any other term of this Debenture. Any waiver must be in writing.

 

Section 14. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of tl1is Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

Section 15. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 16. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations but with the same terms and conditions, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

 

Section 17. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

Section 18. Amended and Restated Debenture. This Debenture shall amend and restate that certain Secured Convertible Debenture dated as of August 22, 2006 issued by the Company in favor of the Holder in the original principal amount of $575,000 (the “Original Debenture”). This Debenture is not in any way intended to constitute a novation of the obligations and liabilities existing under the Original Debenture or evidence payment of all or any portion of such obligations and liabilities.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Amended and Restated Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.

 

  COMPANY:
   
  COROWARE,I
     
  By: /s/ Lloy T. Spencer
  Name: Lloy T. Spencer
  Title: Chief Executive Of icer

 

 

 

 

EXHIBIT A

 

REDEMPTION NOTICE

 

Redemption Date: __________________________ Mandatory Redemption Amount: ______________

 

Settlement in Common Stock

D All Conditions to Company’s option to settle in Common Stock (Section 3(b)) are satisfied

Mandatory Redemption Amount: $_____________________________________________________
Redemption Conversion Price: $_____________________________________________________
Number of shares of Common
Stock to be issued: ______________________________________________________

 

Please issue the shares of Common Stock in the following name ancl to the following acldress:

 

Issue to: Westmount International Holdings Limited

433 Plaza Real, Suite 275

Boca Raton, FL 33432

Att: Chris Alf

(561) 417-3004

 

Broker DTC Participant Cocle:

 

Account Number:

 

Settlement in Cash

Manclatory Reclemption Amount: $,_________________________________________________
Redemption Premimn: $,_________________________________________________
Total Cash Settlement: $._________________________________________________

 

Notification of Settlement Option

D Settlement in Common Stock Settlement inCash

 

__________________________  
Coroware, Inc.  
By:                                             
Its:    

 

**THIS REDEMPTION NOTICE MUST BE SIGNED & RETURNED VIA FACSIMILE TO THE HOLDER AT (201) 946-0851 NO LATER THAN 5:00 N.Y.C, TIME ON THE DAY FOLLOWING THE REDEMPTION DATE**

 

 

 

 

EXHIBITB

 

CONVERSION NOTICE

 

(To be executed by the Holder in order to Convert the Debenture)

 

TO:

 

The undersigned hereby irrevocably elects to convert$____________________________of the principal amount of the above Debenture into Shares of Common Stock of COROWARE, INC., according to the conditions stated therein, as of the Conversion Date written below.

 

Conversion Date: ____________________________________________________
Amount to be converted: $___________________________________________________
Conversion Price: $___________________________________________________
Number of shares of Common  
Stock to be issued: ____________________________________________________
Amount of Debenture  
Unconverted: $___________________________________________________

 

Please issue the shares of Common Stock in the following name and to the following address:

 

Issue to: Westmount International Holdings Limited

433 Plaza Real, Suite 275

Boca Raton, FL 33432

Att: Chris Alf

(561) 417-3004

 

Authorized Signature:_____________________________________________________
Name:_____________________________________________________
Title:_____________________________________________________
Broker DTC Participant Code: 
Account Nmnber: 

 

 

 

 

 

Exhibit 10.55

 

CoroWare, INC.

A Delaware Corporation

 

10% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

$13,000.00   Date: February 21, 2012

 

FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Kelburgh LTD (“Lender”), in lawful money of and within the United States of America and in immediately available funds, the principal sum of $13,000.00                   (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein. Borrower further agrees to pay interest on the Principal Amount at the compounded rate per annum of 10% (ten per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

1.Principal Repayment. The outstanding Principal Amount and interest shall be payable on the 30th day from closing (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2.Conversion. Seven days prior to the Repayment Date, the Lender shall notify Borrower of its intent to; (i) convert the entire amount of principal and interest due pursuant to this Note into shares of the Borrower’s common stock at a price equal to the 5 day average closing price discounted an additional 15%, or (ii) be repaid the principal and interest in accordance with Section I above. The 5 day average closing price shall be calculated using the 5 trading days prior to the day that the shares are converted.

 

3.Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4.Default. The following events shall each be an “Event of Default” under this Note:

 

A.Bankruptcy or insolvency of Borrower;

 

B.Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C.Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

 

 

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.

 

5.Covenants.

 

A.Use of Proceeds. The Borrower shall use the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B.Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C.Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

D.Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E.Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F.Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

G.Trademarks, Copyrights and Patents. The Borrower will not do any act, or omit to do any act, whereby Borrower’s Trademarks, Copyrights or Patents, or any application appurtenant thereto, may become abandoned, invalidated, unenforceable, avoided, avoidable, or will otherwise diminish in value, and shall notify Lender immediately if it knows of any reason or has reason to know of any ground under which this result may occur. Borrower shall take appropriate action, at its expense to halt the infringement of Borrower’s Trademarks, Copyrights and Patents and shall properly exercise its duty to control the nature and quality of the goods offered by any licensees in connection therewith.

 

 

 

 

6.Waiver. TO THE FULLEST EXTENT PERMITIED BY LAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.

 

7.Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

8.Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

CoroWare, Inc.

1410 Market Street

Suite 200

Kirkland, WA 98033

Attention: President

 

If to the Lender, at:

 

Kelburgh LTD

P.O. Box 957,

Offshore Incoporations Centre,

Road Town,

Tortola,

British Virgin Islands.

 

or at any address specified by Borrower or Lender in writing.

 

 

 

 

9.Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

10.Set-Off. Regardless any means of obtaining repayment of the obligations hereunder, any deposits, balances or other sums credited by or due from the Lender to the Borrower may at any time and from time to time, without notice to the Borrower or compliance with any other condition precedent now or hereafter imposed by statute, rule of law, or otherwise (all of which are hereby expressly waived) be set off, appropriated, and applied by the Lender against any and all obligations of the Borrower to the Lender or any of its affiliates in such manner as the Lender in its sole discretion may determine, and the Borrower hereby grants to the Lender a continuing security interest in such deposits, balances or other sums for the payment and performance of all such obligations.

 

11.No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

12.Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

13.Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

14.Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

15.Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

 

 

 

16.Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

  COROWARE, INC.
     
  By:
  Name: Lloyd T. Spencer
  Title: President and CEO
     
  Date: 5/14/2013
     
  KELBURGH LTD
   
 
  Name: Robert Simpson
     
  Date: 14th May 2013

 

 

 

Exhibit 10.56

 

CoroWare, Inc.

A Delaware Corporation

 

10% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTNE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

lli961.90 Date: October 5, 2011

 

FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Premier IT Solutions (a Texas corporation) (“Holder”) or his assignee, in lawful money of and within the United States of America and in immediately available funds, the principal sum of $$21,961.90 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner set forth herein. Borrower further agrees to pay interest on the Principal Amount at the compounded rate per annum of 10% (ten per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on March 5, 2012 (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2. Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below.

 

2.1 Conversion into the Borrower’s Common Stock

 

(a) The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default, as the case may be, into fully paid and non-assessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, at the conversion price as defined in Section 2.l(b) hereof (the “Conversion Price”). Upon delivery to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request for conversion (the date of giving such notice of conversion being a “Conversion Date”), the Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. The number of shares of Common Stock to be issued upon each conversion of this Note shall be detennined by dividing that portion of the principal of the Note to be converted and interest, if any, by the Conversion Price, and then multiplied by One Hundred Fifteen Percent (115%).

 

 

 

 

(b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be the average closing bid prices for the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the Common Stock is listed or traded, for the five (5) trading days prior to but not including the Conversion Date.

 

(c) The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.

 

B. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

 

C. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

 

D. Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.

 

2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.l(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

 

 

 

 

2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation l3d-3 thereunder.

 

3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Holder in United States dollars to such bank account as shall be designated by Holder in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4. Default. The following events shall each be an “Event of Default” under this Note:

 

A. Bankruptcy or insolvency of Borrower;

 

B. Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C. Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Holder.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Holder, become immediately due and payable to Holder, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Holder shall become immediately due and payable without any action of Holder. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.

 

5. Covenants.

 

A. Use of Proceeds. The Borrower has used the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

 

 

 

D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E. Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

6. Waiver. TO THE FULLEST EXTENT PERMITIED BYLAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT PERMITTED BYLAW.

 

7. Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Holder shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Holder, including, without limitation, reasonable attorney’s fees relating thereto.

 

 

 

 

8. Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

CoroWare, Inc.

1410 Market Street

Suite 200

Kirkland, WA 98033

Attention: President

Phone: 800-641-2676

Fax : 425-818-8990

 

If to the Holder, at:

 

Premier IT Solutions

80 I East Campbell Road, Suite # 310

Richardson, TX - 75081

Attn: President

Phone: 972-231-4747

Fax : 972-231-4862

 

or at any address specified by Borrower or Holder in writing.

 

9. Expenses. The Borrower shall pay all expenses of the Holder in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Holder in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Holder’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

10. No Waivers of Holder’s Rights. No failure or delay by the Holder in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

11. Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Holder and, in the case of amendments, by the Borrower.

 

 

 

 

12. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Holder and their respective successors and assigns; provided that neither the Borrower nor the Holder may assign or transfer its rights or obligations hereunder.

 

13. Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

14. Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

15. Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

COROWARE, INC.  
     
By: /s/ Lloyd T. Spencer  
Name: Lloyd T. Spencer  
Title: President and CEO  
Date: October 5, 2011  
     
HOLDER  
   
By:    
Name: Vasu Devalla  
Title: Vice President  
Date: October 5, 2011  

 

 

 

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

The undersigned hereby elects to convert $__________ of the principal and $__________ of the interest due on the Note issued by COROWARE, INC. on ____________________, 201_ into shares of common stock of COROWARE, INC. (the “Company”) according to the conditions set forth in such Note, as of the date written below.

 

Date of Conversion: ________________________________________________________________________________

 

Conversion Price: _________________________________________________________________________________

 

Shares To Be Delivered: _____________________________________________________________________________

 

Signature: _______________________________________________________________________________________

 

Print Name: ______________________________________________________________________________________

 

Address:. _______________________________________________________________________________________

 

_______________________________________________________________________________________________

 

 

 

Exhibit 10.57

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)

 

us $32,000.00

 

COROWARE, INC.

12% CONVERTIBLE REDEEMABLE NOTE

DUE MARCH 11, 2015

 

FOR VALUE RECEIVED, Coroware, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors and permitted assigns (“Holder”), the aggregate principal face amount of Thirty Two Thousand Dollars exactly (U.S.$32,000.00) on March 11, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 12% per annum commencing on March 11, 2014. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225 initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

 

This Note is subject to the following additional provisions:

 

1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the san1e. No service charge will be made for such registration or transfer or exchange, except that Holder s all pay any tax or other governmental charges payable in connection therewith.

 

 

 

 

2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

 

3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”) and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.

 

4. (a) The Holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 50% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.

 

(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 12% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

 

2

 

 

(c) During the first six months this Note is in effect, the Company may re- deem this Note by paying to the Holder an amount equal to 150% of the unpaid principal amount of this Note along with any prepaid and earned interest. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.

 

(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

 

(e) In case of any Sale Event in connection with which this Note is not re- deemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

 

5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

 

7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

 

3

 

 

8. If one or more of the following described “Events of Default” shall occur:

 

(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

 

(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or

 

(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note; or

 

(d) The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

 

(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged with in thirty (30) days after such appointment; or

 

(f) Any governmental agency or any court of competent jurisdiction at the in- stance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or

 

(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

 

(h) defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or

 

(i) The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;

 

G) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;

 

4

 

 

(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or

 

(1) The Company shall not replenish the reserve set forth in Section 12, with- in 3 business days of the request of the Holder.

 

Then, or at any time thereafter, unless cured, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day.

 

If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney, then the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

9. In case any provision of this Note 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 Note will not in any way be affected or impaired thereby.

 

10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.

 

11. The Company represents that it is not a “shell’’ issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

 

12. The Company will issue irrevocable transfer agent instructions reserving 244,000,000 shares of Common Stock for conversion under this Note. The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note, the reserve representing this Note shall be cancelled.

 

13. The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.

 

14. This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.

 

5

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

 

Dated:

 

  COROWARE, INC.
     
  By                          
  Title:

 

6

 

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert the Note)

 

The undersigned hereby irrevocably elects to convert $__________________ of the above Note into ____________ Shares of Common Stock of Coroware, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.

 

If Shares are to be issued in the name of a person other than the undersigned, the W1dersigned will pay all transfer and other taxes and charges payable with respect thereto.

 

Date of Conversion: _______________________________________________________

Applicable Conversion Price: ________________________________________________

Signature: ______________________________________________________________

[Print Name of Holder and Title of Signer]

Address: ______________________________________________________________
  ______________________________________________________________

 

SSN or EIN: ___________________________

Shares are to be registered in the following name: _____________________________________________

 

Name: ______________________________________________________

Address: ____________________________________________________

Tel: _____________________________________________

Fax: _____________________________________________

SSN or EIN: _______________________________________

 

Shares are to be sent or delivered to the following account:

 

Account Name: ___________________________________________________________

Address: ________________________________________________________________

 

7

 

 

Exhibit 10.58

 

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF TIDS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)

 

us $20,625.00

 

COROWARE, INC.

12% CONVERTIBLE REDEEMABLE NOTE

DUE JANUARY 7, 2016

 

FOR VALUE RECEIVED, CoroWare, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors and permitted assigns (“Holder”), the aggregate principal face amount of Twenty Thousand Six Hundred Twenty Five Hundred Dollars exactly (U.S. $20,625.00) on January 7, 2016 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 12% per annum commencing on January 7, 2015. This Note contains a 25% original issue discount such that the purchase price of the note is $16,500. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

 

 
 

 

This Note is subject to the following additional provisions:

 

1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith.

 

2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

 

3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”) and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.

 

4. (a) The Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 45% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 35% instead of 45% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the Common Stock of the Company.

 

2

 

 

(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 12% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

 

(c) During the first 180 days after the Note has been issued, it may be prepaid at 150% of the face amount plus any accrued interest. This Note may not be prepaid after the 180th day. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.

 

(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

 

(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

 

5. No provision of this Note shall alter or impair the obligation of the Com- pany, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

6. The Company hereby expressly waives demand and presentment for pay- ment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

 

3

 

 

7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

 

8. If one or more of the following described “Events of Default” shall occur:

 

(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

 

(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or

 

(c) The Company shall fail to perform or observe, in any respect, any cove- nant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or

 

(d) The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

 

(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or

 

(f) Any governmental agency or any court of competent jurisdiction at the in- stance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or

 

(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

 

(h) The Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or

 

4

 

 

(i) The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;

 

G) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;

 

(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or

 

(1) The Company shall not replenish the reserve set forth in Section 12, with- in 3 business days of the request of the Holder.

 

(m) The Company shall not be “current” in its filings with the Securities and Exchange Commission; or

 

(n) The Company shall lose the “bid” price for its stock in a market (including the OTCQB marketplace or other exchange).

 

Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%.

 

If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

5

 

 

Make-Whole for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:

 

Failure to Deliver Loss= [(High trade price at any time on or after the day of exercise) x (Number of conversion shares)]

 

The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.

 

9. In case any provision of this Note is held by a court of competent jurisdic- tion 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 Note will not in any way be affected or impaired thereby.

 

10. Neither this Note nor any term hereof may be amended, waived, dis- charged or terminated other than by a written instrument signed by the Company and the Holder.

 

11. The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

 

12. The Company shall issue irrevocable transfer agent instructions reserving 1,000,000,000 shares of its Common Stock for conversions under this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs associated with issuing and delivering the shares. The company should at all times reserve a minimum of four times the amount of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts.

 

13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.

 

14. This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.

 

6

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

 

Dated:

 

  COROWARE, INC.
   
  By
  Title: President and CEO

 

7

 

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert the Note)

 

The undersigned hereby irrevocably elects to convert $___________ of the above Note into ___________ Shares of Common Stock of CoroWare, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.

 

If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.

 

Date of Conversion: _______________________________________________________

Applicable Conversion Price: ________________________________________________

Signature: ______________________________________________________________

[Print Name of Holder and Title of Signer]

Address: ______________________________________________________________
  ______________________________________________________________

 

SSN or EIN: ___________________________

Shares are to be registered in the following name: _____________________________________________

 

Name: ______________________________________________________

Address: ____________________________________________________

Tel: _____________________________________________

Fax: _____________________________________________

SSN or EIN: _______________________________________

 

Shares are to be sent or delivered to the following account:

 

Account Name: ___________________________________________________________

Address: ________________________________________________________________

 

8

 

 

Exhibit 10.59

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)

 

us $40,000.00

 

REPLACEMENT NOTE- ORIGINALLY ISSUED 7-20-2006 IN THE AMOUNT OF $1,250,000.00 AND RE-ASSIGNED ON 12-31-10 IN THE AMOUNT OF $341,123.00 IN PRINCIPAL AND $227,140 IN ACCRUED INTEREST

 

COROWARE, INC.

12% CONVERTIBLE REDEEMABLE NOTE

DUE MARCH 11, 2015

 

FOR VALUE RECEIVED, Coroware, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors and permitted assigns (“Holder”), the aggregate principal face amount of Forty Thousand dollars exactly (U.S. $40,000.00) on March 11, 2015 (“Maturitv Date”) and to pay interest on the principal amount outstanding here- under at the rate of 12% per annum commencing on March 11, 2014. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225 initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

 

This Note is subject to the following additional provisions:

 

1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith.

 

 
 

 

2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

 

3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”) and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this ote be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.

 

4. (a) The Holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 50% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.

 

(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 12% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

 

2

 

 

(c) This Note may not be prepaid.

 

(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

 

(e) In case of any Sale Event in connection with which this Note is not re- deemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

 

5. No provision of this Note shall alter or impair the obligation of the Com- pany, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

6. The Company hereby expressly waives demand and presentment for pay- ment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

 

7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

 

8. If one or more of the following described “Events of Default” shall occur:

 

(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

 

3

 

 

(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or

 

(c) The Company shall fail to perform or observe, in any respect, any cove- nant, term, provision, condition, agreement or obligation of the Company under this Note; or

 

(d) The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

 

(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within thirty (30) days after such appointment; or

 

(f) Any governmental agency or any court of competent jurisdiction at the in- stance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or

 

(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

 

(h) defaulted on or breached any term of any other note of similar debt in- strument into which the Company has entered and failed to cure such default within the appropriate grace period; or

 

(i) The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;

 

(i) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;

 

(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or

 

4

 

 

(l) The Company shall not replenish the reserve set forth in Section 12, with- in 3 business days of the request of the Holder.

 

Then, or at any time thereafter, unless cured, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day.

 

If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney, then the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

9. In case any provision of this Note is held by a court of competent jurisdic- tion 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 Note will not in any way be affected or impaired thereby.

 

10. Neither this Note nor any term hereof may be amended, waived, dis- charged or terminated other than by a written instrument signed by the Company and the Holder.

 

11. The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

 

12. The Company will issue irrevocable transfer agent instructions reserving 322,000,000 shares of Common Stock for conversion under this Note. The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note, the reserve representing this Note shall be cancelled.

 

13. The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.

  

14. This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart:to this Agreement shall be effective as an original.

 

5

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

 

Dated:      

 

    COROWARE, INC.
     
    By:              
    Title:  

 

6

 

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert the Note)

 

The undersigned hereby irrevocably elects to convert $ ________of the above Note into ________ Shares of Common Stock of Coroware, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.

 

If Shares are to be issued in the name of a person other than the undersigned, the w1dersigned will pay all transfer and other taxes and charges payable with respect thereto.

 

Date of Conversion: ________________________________________________________

Applicable Conversion Price: ________________________________________________

Signature: ______________________________________________________________

[Print Name of Holder and Title of Signer]

Address: ______________________________________________________________
  ______________________________________________________________

 

SSN or EIN: ____________________________

Shares are to be registered in the following name: _____________________________________________

 

Name: ______________________________________________________

Address: ____________________________________________________

Tel: _____________________________________________

Fax: _____________________________________________

SSN or EIN: _______________________________________

 

Shares are to be sent or delivered to the following account:

 

Account Name: ___________________________________________________________

Address: ________________________________________________________________

 

7

 

 

Exhibit 10.60

 

THIS SECURED CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND THIS SECURED CONVERTIBLE NOTE, THE SECURITIES AND ANY INTEREST THEREIN MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS, WHICH, IN THE OPINION OF COUNSEL FOR THE LENDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

 

AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE

 

$10,750.00 New York, New York
  January 28, 2011

 

FOR VALUE RECEIVED, the undersigned, CoroWare, Inc., a Delaware corporation (referred to herein as the “Borrower”), with offices at 4056 148th Avenue NE, Redmond, Washington 98052, hereby unconditionally promises to pay to the order of Barclay Lyons, LLC, its endorsees, successors and assigns (the “Lender”), in lawful money of the United States, at such address as the Lender may from time to time designate, the principal sum of Ten Thousand Dollars ($10,750.00) (the “Loan”), This Note shall mature and become due and payable in full on or after January 28, 2011, or on demand by the holder (the “Maturity Date”).

 

1. Terms of Repayment. Principal of and interest on this Note shall be paid by the Borrower as follows:

 

(i) Upon written demand by Lender at any time, Borrower shall pay all principal and interest, unless otherwise converted (as defined in Section 2. Below). Interest shall accrue at a rate of Twenty-One Percent (21%) per annum.

 

(ii) The Borrower further agrees that, if any payment made by the Borrower or any other person is applied to this Note and is at any time annulled, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of any property hereafter pledged as security for this Note is required to be returned by Lender to the Borrower, its estate, trustee, receiver or any other party, including, without limitation, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the Borrower’s liability hereunder (and any lien, security interest or other collateral securing such liability) shall be and remain in full force and effect, as fully as if such payment had never been made, or, if prior thereto any such lien, security interest or other collateral hereunder securing the Borrower’s liability hereunder shall have been released or terminated by virtue of such cancellation or surrender, this Note (and such lien, security interest or other collateral) shall be reinstated in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of the Borrower in respect to the amount of such payment (or any lien, security interest or other collateral securing such obligation).

 

 

 

 

2. Conversion.

 

(i) The Lender shall have the option, at any time, to convert the outstanding principal of this Note into fully-paid and non-assessable shares of Borrower’s Common Stock at fifty percent (50%) discount to the average “Fair Market Value” (the “Conversion Rate”) but not to exceed Five Cents ($0.05) per share. However, should the Borrower effect a forward split, the ceiling price of Five Cents ($0.05) per share shall be discounted down according to the split ratio and notwithstanding the preceding, the ceiling price shall be negotiable at the Lender’s request. “Fair Market Value” on a date shall be the average of the daily closing prices for the Five (5) consecutive trading days before such date excluding any trades which are not bona fide arm’s length transactions. The closing price for each day shall be (a) if such security is listed or admitted for trading on any national securities exchange, the last sale price of such security, regular way, or the mean of the closing bid and asked prices thereof if no such sale occurred, in each case as officially reported on the principal securities exchange on which such security are listed, or (b) if quoted on NASDAQ or any similar system of automated dissemination of quotations of securities prices then in common use the mean between the closing high bid and low asked quotations of such security in the over-the-counter market as shown by NASDAQ or such similar system of automated dissemination of quotations of securities prices, as reported by any member firm of the New York Stock Exchange selected by the Lender. If such security is quoted on a national securities or central market system in lieu of a market or quotation system described above, the closing price shall be determined in the manner set forth in clause (a) of the preceding sentence if bid and asked quotations are reported but actual transactions are not, and in the manner set forth in clause (b) of the preceding sentence if actual transactions are reported.

 

(ii) In no event shall the Lender be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Lender and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of common stock issuable upon the conversion of the portion of this note with respect to which the determination of this proviso is being made, which would result in beneficial ownership by the holder and its affiliates of more than Four Point Nine Nine Per Cent (4.99%) of the outstanding shares of common stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with section 13(d) of the Securities Exchange Act of 1934, as amended (rhe “Exchange Act), and Regulations 13D – G thereunder, except as otherwise provided in clause (1) of such proviso.

 

(iii) To exercise any conversion, the holder of this Note shall surrender the Note to the Borrower during usual business hours at the offices of the Borrower, accompanied by a written notice in the form attached hereto as Exhibit A, Notice of Conversion, and made a part hereof.

 

(iv) As promptly as practicable after the surrender of this Note by the Lender, the Borrower shall deliver or cause to be delivered to the Lender, certificates for the full number of Shares issuable upon conversion of this Note, in accordance with the provisions hereof, together with a duly executed new Note of the Borrower in the form of this Note for any principal amount not so converted. Such conversion shall be deemed to have been made at the time that this Note was surrendered for conversion and the notice specified herein shall have been received by the Borrower.

 

 

 

 

(v) The number of shares issuable upon conversion of this Note or repayment by the Borrower in shares shall be proportionately adjusted if the Borrower shall declare a dividend of capital stock on its capital stock, or subdivide its outstanding capital stock into a larger number of shares by reclassification, stock split or otherwise, which adjustment shall be made effective immediately after the record date in the case of a dividend, and immediately after the effective date in the case of a subdivision. The number of shares issuable upon conversion of this Note or any part thereof shall be proportionately adjusted in the amount of securities for which the shares have been changed or exchanged in another transaction for other stock or securities, cash and/or any other property pursuant to a merger, consolidation or other combination. The Borrower shall promptly provide the holder of this Note with notice of any events mandating an adjustment to the conversion ratio, or for any planned merger, consolidation, share exchange or sale of the Borrower, signed by the President and Chief Executive Officer of Borrower.

 

(vi) The Borrower is unconditionally, and without regard to the liability of any other person, liable for the payment and performance of this Note and such liability shall not be affected by an extension of time, renewal, waiver, or modification of this Note or the release, substitution, or addition of collateral for this Note. Each person signing this Note consents to any and all extensions of time, renewals, waivers, or modifications, as well as to release, substitution, or addition of guarantors or collateral security, without affecting the Borrower’s liabilities hereunder. Lender is entitled to the benefits of any collateral agreement, guarantee, security agreement, assignment, or any other documents which may be related to or are applicable to the debt evidenced by this Note, all of which are collectively referred to as “Loan Documents” as they now exist, may exist in the future, have existed, and as they may be amended, modified, renewed, or substituted.

 

3. Fees and Requirements for Funding. The Borrower hereby agrees that funding this note is conditioned on the following:

 

(i) Two Thousand Five Hundred Dollars ($2,500.00) shall be paid immediately out of the proceeds of this Note to Brinen & Associates, LLC for legal fees and expenses incurred by the Lender and hereby agreed to be paid by the Borrower

 

(ii) Eight Thousand Two Hundred Fifty Dollars ($8,250.00) of the proceeds of this Note may be used unconditionally by the Borrower

 

(iii) No funding of this Note shall occur until an original signed copy is Brinen & Associates, LLC at 7 Dey Street, Suite 1503, New York, NY 10007

 

4. Liability of the Borrower. The Borrower is unconditionally, and without regard to the liability of any other person, liable for the payment and performance of this Note and such liability shall not be affected by an extension of time, renewal, waiver, or modification of this Note or the release, substitution, or addition of collateral for this Note. Each person signing this Note consents to any and all extensions of time, renewals, waivers, or modifications, as well as to release, substitution, or addition of guarantors or collateral security, without affecting the Borrower’s liabilities hereunder. Lender is entitled to the benefits of any collateral agreement, guarantee, security agreement, assignment, or any other documents which may be related to or are applicable to the debt evidenced by this Note, all of which are collectively referred to as “Loan Documents” as they now exist, may exist in the future, have existed, and as they may be amended, modified, renewed, or substituted.

 

 

 

 

5. Representations and Warranties. The Borrower represents and warrants as follows: (i) the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (ii) the execution, delivery and performance by the Borrower of this Note are within the Borrower’s powers, have been duly authorized by all necessary action, and do not contravene (A) the Borrower’s certificate of incorporation or (B) bylaws or (x) any law or (y) any agreement or document binding on or affecting the Borrower, not otherwise disclosed to the Lender prior to execution of this Note, (iii) no authorization or approval or other action by, and no notice to or filing with, any governmental authority, regulatory body or third person is required for the due execution, delivery and performance by the Borrower of this Note; (iv) this Note constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms except as enforcement hereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally and subject to the applicability of general principles of equity; (v) the Borrower has all requisite power and authority to own and operate its property and assets and to conduct its business as now conducted and proposed to be conducted and to consummate the transactions contemplated hereby; (vi) the Borrower is duly qualified to conduct its business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it, or in which the transaction of its business makes such qualification necessary; (vi) there is no pending or, to the Borrower ‘s knowledge, information or belief, threatened action or proceeding affecting the Borrower before any governmental agency or arbitrator which challenges or relates to this Note or which may otherwise have a material adverse effect on the Borrower; (viii) after giving effect to the transactions contemplated by this Note, the Borrower is Solvent; (ix) the Borrower is not in violation or default of any provision of (A) its certificate of incorporation or by-laws, each as currently in effect, or (B) any instrument, judgment, order, writ, decree or contract, statute, rule or regulation to which the Borrower is subject not otherwise disclosed to the Lender prior to the execution of this Note, and (x) this Note is validly issued, free of any taxes, liens, and encumbrances related to the issuance hereof and is not subject to preemptive right or other similar right of members of the Borrower, and (xi) the Borrower has taken all required action to reserve for issuance such number of shares of Common Stock as may be issuable from time to time upon conversion of this Note.

 

6. Covenants. So long as any principal or interest is due hereunder and shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing:

 

(i) Maintain and preserve its existence, rights and privileges;

 

(ii) Other than a financing (i.e. revolving credit facility, note payable) for up to $100,000, the Company will not incur any indebtedness, other than indebtedness incurred in the ordinary course of business or outstanding on the date hereof, unless such indebtedness is subordinated to the prior payment in full of this Note on terms reasonably satisfactory to the Lender;

 

(iii) Not (i) directly or indirectly sell, lease or otherwise dispose of (A) any of its property or assets other than in its ordinary course of business or (B) substantially all of its properties and assets, in the aggregate, to any person(s), whether in one transaction or in a series of transactions over any period of time, (ii) merge into or with or consolidate with any other person or (iii) adopt any plan or arrangement for the dissolution or liquidation of the Borrower;

 

(iv) Give written notice to Lender upon the occurrence of an Event of Default (as defined below) or any event but for the giving of notice or lapse of time, or both, would constitute an Event of Default within five (5) Business Days of such event;

 

 

 

 

(v) Not use the proceeds from the issuance of this Note in any way for any purpose that entails a violation of, or is inconsistent with, Regulation U of the Board of Governors of the Federal Reserve System of the United States of America.

 

(vi) Comply in all material respects with all applicable laws (whether federal, state or local and whether statutory. administrative or judicial or other) and with every applicable lawful governmental order (whether administrative or judicial);

 

(vii) Not redeem or repurchase any of its capital stock;

 

(viii) Not (i) make any advance or loan to any person, firm or corporation, except for reasonable travel or business expenses advanced to the Company’s employees or independent contractors in the ordinary course of business, or (ii) acquire all or substantially all of the assets of another entity;

 

(ix) Not prepay any indebtedness, except for trade payables incurred in the ordinary course of the Borrower’s business; and

 

(x) Not take any action which would impair the rights and privileges of this Note set forth herein or the rights and privileges of the holder of this Note.

 

7. Events of Default. Each and any of the following shall constitute a default and, after expiration of a grace period, if any, shall constitute an “Event of Default” hereunder:

 

(i) the nonpayment of principal, late charges or any other costs or expenses promptly when due of any amount payable under this Note or the nonpayment by the Borrower of any other obligation to the Lender;

 

(ii) an Event of Default under this Note (other than a payment default described above), or any other failure of the Borrower to observe or perform any present or future agreement of any nature whatsoever with Lender, including, without limitation, any covenant set forth in this Note;

 

(iii) if Borrower shall commence any case, proceeding or other action: (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution, composition or other relief with respect to it or its debts; or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, or the Borrower shall make a general assignment for the benefit of its creditors; or (iii) there shall be commenced against the Borrower any case, proceeding or other action of a nature referred to above or seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its property, which case, proceeding or other action results in the entry of any order for relief or remains undismissed, undischarged or unhanded for a period of sixty (60) days; or (iii) the Borrower shall take any action indicating its consent to, approval of, or acquiescence in, or in furtherance of, any of the acts set forth; or (iv) the Borrower shall generally not, or shall be unable to, pay its debts as they become due or shall admit in writing its inability to pay its debts;

 

 

 

 

(iv) any representation or warranty made by the Borrower or any other person or entity under this Note or under any other Loan Documents shall prove to have been incorrect in any material respect when made;

 

(v) an event of default or default shall occur and be continuing under any other material agreement, document or instrument binding upon the Borrower including, without limitation, any instrument for borrowed money in excess of fifty thousand dollars ($50,000) (whether or not any such event of default or default is waived by the holder thereof) and including, without limitation, under any other Transaction Document (as defined in the Securities Purchase Agreement);

 

(vi) the entry of any judgment against Borrower or any of its property for an amount in excess of fifty thousand dollars ($50,000) that remains unsatisfied for thirty (30) days;

 

(vii) any material adverse change in the condition or affairs (financial or otherwise) of the Borrower shall occur which, in the sale opinion of the Lender, increases its risk with respect to loans evidenced by this Note;

 

(viii) the sale of all or substantially all of the assets, or change in ownership or the dissolution, liquidation, merger, consolidation, or reorganization of Borrower without the Lender’s prior written consent; or

 

(ix) the Borrower’s shares of Common Stock are suspended from trading or delisted from trading on the Over the Counter Bulletin Board.

 

8. Lender’s Rights Upon Default. Upon the occurrence of any Event of Default, the Lender may, at its sole and exclusive option, do any or all of the following, either concurrently or separately: (a) accelerate the maturity of this Note and demand immediate payment in full, whereupon the outstanding principal amount of the Note and all obligations of Borrower to Lender, together with accrued interest thereon and accrued charges and costs, shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived; and (b) exercise all legally available rights and privileges.

 

9. Default Interest Rate. Upon an Event of Default, without any further action on the Part of Lender, interest will thereafter accrue at the rate equal to the lesser of (i) 15% per annum or (ii) the highest rate permitted by applicable law, per annum (the Default Rate”), until all outstanding principal, interest and fees are repaid in full by Borrower.

 

10. Security. This Note shall be secured by the following (each, a “Security Document”): (a) a security interest in any and all of Borrower’s tangible or intangible assets, including any and all intellectual property, already acquired or hereinafter acquired, including but not limited to: machinery, inventory, accounts receivable, cash, computers, hardware, etc. (the “Property”); (b) a security agreement executed by Borrower granting a seniority interest in the Property; and (c) a personal continuing guaranty signed and executed by Lloyd Spencer in favor of Lender.

 

11. Usury. In no event shall the amount of interest paid or agreed to be paid hereunder exceed the highest lawful rate permissible under applicable law. Any excess amount of deemed interest shall be null and void and shall not interfere with or affect the Borrower’s obligation to repay the principal of and interest on the Note. This confirms that the Borrower and, by its acceptance of this Note, the Lender intend to contract in strict compliance with applicable usury laws from time to time in effect. Accordingly, the Borrower and the Lender stipulate and agree that none of the terms and provisions contained herein shall ever be construed to create a contract to pay, for the use or forbearance of money, interest in excess of the maximum amount of interest permitted to be charged by applicable law from time to time in effect.

 

 

 

 

12. No Prepayment. This Note may not he prepaid in whole or in part, at any time, without the prior written consent of the Lender.

 

13. Costs of Enforcement. Borrower hereby covenants and agrees to indemnify, defend and hold Lender harmless from and against all costs and expenses, including reasonable attorneys’ fees and their costs, together with interest thereon at the Prime Rate, incurred by Lender in enforcing its rights under this Note; or if Lender is made a party as a defendant in any action or proceeding arising out of or in connection with its status as a lender, or if Lender is requested to respond to any subpoena or other legal process issued in connection with this Note; or reasonable disbursements arising out of any costs and expenses, including reasonable attorneys’ fees and their costs incurred in any bankruptcy case; or for any legal or appraisal reviews, advice or counsel performed for Lender following a request by Borrower for waiver, modification or amendment of this Note or any of the other Loan Documents.

 

14. Governing Law. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that the Borrower may not assign this Note, in whole or in part, by operation of law or otherwise, without the prior written consent of the Lender. The Lender may assign or otherwise participate out all or part of, or any interest in, its rights and benefits hereunder and to the extent of such assignment or participation such assignee shall have the same rights and benefits against the Borrower as it would have had if it were the Lender. This Note, and any claims arising out of relating to this Note, whether in contract or tort, statutory or common law, shall be governed exclusively by, and construed in accordance with the laws of the State of Georgia without regard to principles of conflicts of laws.

 

15. Jurisdiction. THE BORROWER CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS NOTE, OR ANY OTHER INSTRUMENT OR DOCUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH SHALL BE BROUGHT EXCLUSIVELY IN ANY COURT OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE BORROWER, BY THE EXECUTION AND DELIVERY OF THIS NOTE, EXPRESSLY AND IRREVOCABLY CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDINGS. THE BORROWER AGREES THAT PERSONAL JURISDICTION OVER IT MAY BE OBTAINED BY THE DELIVERY OF A SUMMONS BY PERSONAL DELIVERY OR OVERNIGHT COURIER AT THE ADDRESS PROVIDED IN SECTION 15 OF THIS NOTE. ASSUMING DELIVERY OF THE SUMMONS IN ACCORDANCE WITH THIS PROVISION, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON-CONVENIENS OR ANY SIMILAR BASIS.

 

 

 

 

16. Miscellaneous. (a) Borrower hereby waives protest, notice of protest, presentment, dishonor, and demand. (b) Time is of the essence for each of Borrower’s covenants under this Note. (c) The rights and privileges of Lender under this Note shall inure to the benefit of its successors and assigns. All obligations of Borrower in connection with this Note shall bind Borrower’s successors and assigns, and Lender’s conversion rights shall succeed to any successor securities to Borrower’s common stock. (d) If any provision of this Note shall for any reason be held to be invalid or unenforceable, such invalidity or un enforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein. (e) The waiver of any Event of Default or the failure of Lender to exercise any right or remedy to which it may be entitled shall not be deemed a waiver of any subsequent Event of Default or Lender’s right to exercise that or any other right or remedy to which Lender is entitled. No delay or omission by Lender in exercising, or failure by Lender to exercise on anyone or more occasions, shall be construed as a waiver or novation of this Note or prevent the subsequent exercise of any or all such rights. (f) This Note may not be waived, changed, modified, or discharged orally, but only in writing.

 

17. Notice, Etc. Any notice required by the provisions of this Note will be in writing and will be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt, and delivered as follows:

 

If to the Borrower:

Lloyd Spencer

President and CEO

CoroWare, Inc.,

4056 148th Avenue NE

Redmond, Washington 98052

 

If to Lender:

 

Barclay Lyons, LLC

c/o Brinen & Associates, LLC

7 Dey Street, Suite 1503

New York, NY 10007

 

or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties.

 

18. Definitions. As used herein, the term “Solvent” shall mean, with respect to any person or entity on a particular date, that on such date (i) the fair value of the property of such person or entity is not less than the total amount of the liabilities of such person or entity, (ii) the present fair salable value of the assets of such person or entity is not less than the amount required to pay the probable liability on such person’s existing debts as they become absolute and matured, (iii) such person or entity is able to realize upon its assets and pay its debts and other liabilities, (iv) such person or entity does not intend to, and does not believe that it will, incur debts or liabilities beyond such person or entity’s ability to pay as such debts and liabilities mature and (v) such person or entity is not engaged in business or a transaction, and is not about to engage in a business or a transaction, for which such person’s or entity’s property would constitute unreasonably small capital. As used herein, the term “Securities Purchase Agreement,” shall mean the Securities Purchase Agreement dated the date hereof among the Borrower, the Lender and the other purchasers identified therein.

 

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK/

 

(SIGNATURE PAGE TO FOLLOW.I

 

 

 

 

IN WITNESS WHEREOF, the undersigned has executed this Secured Convertible Promissory Note as of the date first set forth above.

 

  CoroWare Inc.,
     
  /s/ Lloyd Spencer
  By: Lloyd Spencer
    President & CEO

 

 

 

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

(to be signed upon conversion of the Note)

 

TO: CoroWare; Inc.:

 

The undersigned, the holder of the foregoing Note, hereby surrenders such Note for conversion into shares of Common Stock of CoroWare, Inc., and requests that the certificates for such shares be issued in the name of _________________ and delivered to, _________________, whose address is __________________________

 

Dated:      
       
     

 

      (signature)
       
     

 

       
       
     

 

       
      (address)

 

 

 

 

Exhibit 10.61

 

NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE NOR ANY INTEREST THEREIN NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.

 

CONVERTIBLE PROMISSORY NOTE

 

Principal Amount: $5,000.00   Issue Date: February 21, 2014
     
    Maturity Date: September 2l, 2014

 

For good and valuable consideration, COROWARE, INC., a Delaware corporation (“Maker”), hereby makes and delivers this Promissory Note (this “Note”) in favor of Blackbridge Capital, LLC, or its assigns (“Holder”), and hereby agrees as follows:

 

ARTICLE I.

PRINCIPAL AND INTEREST

 

Section 1.1 For value received, Maker promises to pay to Holder at such place as Holder or its assigns may designate in writing, in currently available funds of the United States, the principal sum of Five Thousand Dollars. Maker’s obligation under this Note shall accrue interest at the rate of Eight (8.0%) per annum from the date hereof until paid in full. Interest shall be computed on the basis of a 365-day year or 366-day year, as applicable and actual days lapsed. Accrual of interest shall commence on the first business day to occur after the Issue Date and continue until payment in full of the principal sum has been made or duly provided for.

 

Section 1.2

 

a. All payments shall be applied fust to interest, then to principal and shall be credited to the Maker’s account on the date that such payment is physically received by the Holder.

 

b. All principal and accrued interest then outstanding shall be due and payable by the Maker to the Holder on or before February 21, 2014 (the “Maturity Date”).

 

c. Maker shall have the right to prepay all or any part of the principal under this Note.

 

d. This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Maker and will not impose personal liability upon the holder thereof.

 

1

 

 

Section 1.3 This Note is issued in exchange solely for Holder’s surrender of the Promissory Notes previously issued by Maker, and subsequently acquired by Holder, as specifically listed on Schedule A hereto, each of which represents amounts due and owing by Maker to the original holder thereof as of at least one (1) year prior to the date of this Note, and for no other consideration from Holder. All obligations of Maker to Holder, as represented in the Promissory Notes listed in Schedule A hereto, are replaced and superseded in their entirety by the terms of this Note.

 

ARTICLE II.

CONVERSION RIGHTS; CONVERSION PRICE

 

Section 2.1  Conversion. The Holder or its assigns shall have the right, from time to time, commencing on the Issuance Date of this Note, to convert any part of the outstanding interest or Principal Amount of this Note into fully paid and non-assessable shares of Common Stock of the Maker (the “Conversion Stock”) at the Conversion Price determined as provided herein. Promptly after delivery to Maker of a Notice of Conversion of Convertible Note in the form attached hereto as Exhibit 1, properly completed and duly executed by the Holder or its assigns (a “Conversion Notice”), the Maker shall issue and deliver to or upon the order of the Holder that number of shares of Common Stock for the that portion of this Note to be converted as shall be determined in accordance herewith.

 

No fraction of a share or scrip representing a fraction of a share will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. The date on which Notice of Conversion is given (the “Conversion Date”) shall be deemed to be the date on which the Holder faxes or emails the Notice of Conversion duly executed to the Maker. Certificates representing Common Stock upon conversion will be- delivered to the Holder within five (5) trading days from the date the Notice of Conversion is delivered to the -Maker. Delivery of shares upon conversion shall be made to the address specified by the Holder or its assigns in the Notice of Conversion.

 

Section 2.2. Conversion Price. Upon any conversion of this Note, the conversion price shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 55%). “Market Price” means the lowest of the daily VWAPs Trading Price (as defined below) for the Common Stock during the thirty (30) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the intraday price on the OTC Bulletin Board, or other applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the intraday price of such security on the principal securities exchange or trading market where such security is listed or traded. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Maker and the holders of a majority in interest of the Note being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tractable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

2

 

 

Section 2.3. Reorganization, Reclassification. Merger, Con olidation or Disposition of Assets. In case the Maker shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Maker is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Maker), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Maker, then Holder shall have the right thereafter to receive, upon conversion of this Note, the number of shares of common stock of the successor or acquiring corporation or of the Maker, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock into which this Note is convertible immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Maker) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Note to be performed and observed by the Maker and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Maker) in order to provide for adjustments of the number of shares of common stock into which this Note is convertible which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 2.3(a). For purposes of this Section 2.3(a), “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 2.3(a) shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

 

Section 2.4. Restrictions on Securities. This Note has been issued by the Maker pursuant to the exemption from registration under the Securities Act of 1933, as amended (the “Act”). None of this Note or the shares of Common Stock issuable upon conversion of this Note may be offered, sold or otherwise transferred unless (i) they first shall have been registered under the Act and applicable state securities laws or (ii) the Maker shall have been furnished with an opinion of legal counsel (in form, substance and scope reasonably acceptable to Maker) to the effect that such sale or transfer is exempt from the registration requirements of the Act. Each certificate for shares of Common Stock issuable upon conversion of this Note that have not been so registered and that have not been sold pursuant to an exemption that permits removal of the applicable legend, shall bear a legend substantially in the following form, as appropriate:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”). THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

 

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Upon the request of a holder of a certificate representing any shares of Common Stock issuable upon conversion of this Note, the Maker shall remove the foregoing legend from the certificate or issue to such Holder a new certificate free of any transfer legend, if (a) with such request, the Maker shall have received an opinion of counsel, reasonably satisfactory to the Maker in form, substance and scope, to the effect that any such legend may be removed from such certificate or

(b) a registration statement under the Act covering such securities is in effect.

 

Section 2.5. Reservation of Common Stock.

 

(a) The Maker covenants that during the period the Note is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock of the Maker upon the Conversion of the Note. The Maker further covenants that its issuance of this Note shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock of the Maker issuable upon the conversion of this Note. The Maker will take all such reasonable action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the OTC Bulletin Board (or such other principal market upon which the Common Stock of the Maker may be listed or quoted).

 

(b) The Maker shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of 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 this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Maker will (a) not increase the par value of any shares of Common Stock issuable upon the conversion of this Note above the amount payable therefor upon such conversion immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Maker may validly and legally issue fully paid and nonassessable shares of Common Stock upon the conversion of this Note, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Maker to perform its obligations under this Note.

 

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(c) Upon the request of Holder, the Maker will at any time during the period this Note is outstanding acknowledge in writing, in form reasonably satisfactory to Holder, the continuing validity of this Note and the obligations of the Maker hereunder.

 

(d) Before taking any action which would cause an adjustment reducing the current Conversion Price below the then par value, if any, of the shares of Common Stock issuable upon conversion of the Notes, the Maker shall take any corporate action which may be necessary in order that the Maker may validly and legally issue fully paid and non-assessable shares of such Common Stock at such adjusted Conversion Price.

 

(e) Before taking any action which would result in an adjustment in the number of shares of Common Stock into which this Note is convertible or in the Conversion Price, the Maker shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

(f) If at any time the Maker does not have a sufficient number of authorized and available shares of Common Stock for issuance upon conversion of the Note, then the Maker shall call and hold a special meeting of its stockholders within forty-five (45) days of that time for the sole purpose of increasing the number of authorized shares of Common Stock.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

Section 3.1. The Holder represents and warrants to the Maker:

 

(a) The Holder of this Note, by acceptance hereof, agrees that this Note is being acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Note or the Common Stock issuable upon conversion hereof except under circumstances that will not result in a violation of the Act or any application state securities laws or similar laws relating to the sale of securities;

 

(b) That Holder understands that none of this Note or the Common Stock issuable upon conversion hereof have been registered under the Securities Act of 1933, as amended (the “Act”), in reliance upon the exemptions from the registration provisions of the Act and any continued reliance on such exemption is predicated on the representations of the Holder set forth herein;

 

(c) Holder (i) has adequate means of providing for his current needs and possible contingencies, (ii) has no need for liquidity in this investment, (iii) is able to bear the substantial economic risks of an investment in this Note for an indefinite period, (iv) at the present time, can afford a complete loss of such investment, and (v) does not have an overall commitment to investments which are not readily marketable that is disproportionate to Holder’s net worth, and Holder’s investment in this Note will not cause such overall commitment to become excessive;

 

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(d) Holder is an “accredited investor” (as defined in Regulation D promulgated under the Act) and the Holder’s total investment in this Note does not exceed 10% of the Holder’s net worth; and

 

(e) Holder recognizes that an investment in the Maker involves significant risks and only investors who can afford the loss of their entire investment should consider investing in the Maker and this Note.

 

Section 3.2 The Maker represents and warrants to Holder:

 

(a) Organization and Qualification. The Maker and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Maker and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Maker or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Maker owns, directly or indirectly, any equity or other ownership interest.

 

(b) Authorization; Enforcement. (i) The Maker has all requisite corporate power and authority to enter into and perform this Note and to consummate the transactions contemplated hereby and thereby and to issue the Common Stock, in accordance with the terms hereof, (ii) the execution and delivery of this Note by the Maker and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Common Stock issuable upon conversion or exercise hereof) have been duly authorized by the Maker’s Board of Directors and no further consent or authorization of the Maker, its Board of Directors, or its shareholders is required, (iii) this Note has been duly executed and delivered by the Maker by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Note and the other documents executed in connection herewith and bind the Maker accordingly, and (iv) this Note constitutes, a legal, valid and binding obligation of the Maker enforceable against the Maker in accordance with its terms.

 

(c) Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Maker and will not impose personal liability upon the holder thereof.

 

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(d) Acknowledgment of Dilution. The Maker understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of this Note. The Maker further acknowledges that its obligation to issue Conversion Shares upon conversion of this Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Maker.

 

ARTICLE IV.

EVENTS OF DEFAULT

 

Section 4.1. Default. The following events shall be defaults under this Note: (“Events of Default”):

 

(a) default in the due and punctual payment of all or any part of any payment of interest or the Principal Amount as and when such amount or such part thereof shall become due and payable hereunder; or

 

(b) failure on the part of the Maker duly to observe or perform in all material respects any of the covenants or agreements on the part of the Maker contained herein (other than those covered by clause (a) above) for a period of 10 business days after the date on which written notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Maker remedy the same, shall have been given by the Holder by registered or certified mail, return receipt requested, to the Maker; or

 

(c) any representation, warranty or statement of fact made by the Maker herein when made or deemed to have been made, false or misleading in any material respect; provided, however, that such failure shall not result in an Event of Default to the extent it is corrected by the Maker within a period of 5 business days after the date on which written notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Maker remedy same, shall have been given by the Holder by registered or certified mail, return receipt requested; or

 

(d) any of the following actions by the Maker pursuant to or within the meaning title 11, U.S. Code or any similar federal or state law for the relief of debtors (collectively, the “Bankruptcy Law”): (A) commencement of a voluntary case or proceeding, (B) consent to the entry of an order for relief against it in an involuntary case or proceeding, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law (each, a “Custodian”), of it or for all or substantially all of its property, (D) a general assignment for the benefit of its creditors, or (E) admission in writing its inability to pay its debts as the same become due; or

 

(e) entry by a court of competent jurisdiction of an order or decree under any Bankruptcy Law that: (A) is for relief against the Maker in an involuntary case, (B) appoints a Custodian of the Maker or for all or substantially all of the property of the Maker, or (C) orders the liquidation of the Maker, and such order or decree remains unstayed and in effect for 60 days.

 

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Section 4.2. Remedies Upon Default. Upon the occurrence of an event of default by Maker under this Note or at any time before default when the Holder reasonably feels insecure, then, in addition to all other rights and remedies at law or in equity, Holder may exercise any one or more of the following rights and remedies:

 

a. Accelerate the time for payment of all amounts payable under this Note by written notice thereof to Maker, whereupon all such amounts shall be immediately due and payable.

 

b. Pursue any other rights or remedies available to Holder at law or in equity.

 

Section 4.3. Payment of Costs. The Maker shall reimburse the Holder, on demand, for any and all reasonable costs and expenses, including reasonable attorneys’ fees and disbursement and court costs, incurred by the Holder in collecting or otherwise enforcing this Note or in attempting to collect or enforce this Note.

 

Section 4.4. Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default. No right or remedy herein conferred upon or reserved to the Holder is intended to be exclusive of any other right or remedy available to Holder under applicable law, and every such right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Holder to exercise any right or power accruing upon any Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Default or an acquiescence therein; and every power and remedy given by this Note or by law may be exercised from time to time, and as often as shall be deemed expedient, by the Holder.

 

Section 4.5. Waiver of Past Defaults. The Holder may waive any past default or Event of Default hereunder and its consequences but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

 

Section 4.6. Waiver of Presentment etc. The Maker hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically provided herein.

 

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ARTICLEV.

MISCELLANEOUS

 

Section 5.1. Notices. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or sent by United States mail and shall be deemed to have been given upon receipt if personally served (which shall include telephone line facsimile transmission) or sent by courier or three (3) days after being deposited in the United States mail, certified, with postage pre-paid and properly addressed, if sent by mail. For the purposes hereof, the address of the Holder shall be 79 Chestnut Avenue. Closter, New Jersey 07624 ; and the address of the Maker shall be 460 Park Avenue, 17th Floor. New York, NY 10022. Both the Holder or its assigns and the Maker may change the address for service by delivery of written notice to the other as herein provided.

 

Section 5.2. Amendment. This Note and any provision hereof may be amended only by an instrument in writing signed by the Maker and the Holder.

 

Section 5.3. Assignability. This Note shall be binding upon the Maker and its successors and assigns and shall inure to be the benefit of the Holder and its successors and assigns; provided, however, that so long as no Event of Default has occurred, this Note shall only be transferable in whole subject to the restrictions contained in the restrictive legend on the first page of this Note.

 

Section 5.4. Governing Law. This Note shall be governed by the internal laws of the State of Delaware, without regard to conflicts of laws principles.

 

Section 5.5.  Replacement of Note. The Maker covenants that upon receipt by the Maker of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which shall not include the posting of any bond), and upon surrender and cancellation of such Note, if mutilated, the Maker will make and deliver a new Note of like tenor.

 

Section 5.6. This Note shall not entitle the Holder to any of the rights of a stockholder of the Maker, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholder or any other proceedings of the Maker, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

Section 5.7. Severability. In case any provision of this Note 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 Note will not in any way be affected or impaired thereby.

 

Section 5.8. Headings. The headings of the sections of this Note are inserted for convenience only and do not affect the meaning of such section.

 

Section 5.9. Counterparts. This Note may be executed in multiple counterparts, each of which shall be an original, but all of which shall be deemed to constitute one instrument.

 

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IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Maker as executed this Note as of the date first written above.

 

COROWARE, INC.  
     
/s/ Lloyd Spencer  
By: Lloyd Spencer.  
Its: CEO  

 

Acknowledged and Agreed: Blackbridge Capital, LLC.  
     
/s/ Alexander Dillon  
By: Alexander Dillon  
Its: Partner  

 

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Exhibit 10.62

 

Patrick Tuohy Debneture

 

Issuance Date: August 22, 2006

 

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.

 

No. IVHG-2-1 PT $40,000

 

COROWARE INC.

 

Amended and Restated Secured Convertible Debenture

 

Due: August 22, 2009

 

This Amended and Restated Secured Convertible Debenture (including all secured convertible debentures issued in exchange, transfer or replacement hereof, this “Debenture”) was originally issued pursuant to that certain Securities Purchase Agreement (the “Securities Purchase Agreement”) dated July 20, 2006 in the original principal amount of $1,250,000 by COROWARE, INC. (f/k/a INNOVA ROBOTICS & AUTOMATION, INC., f/k/a INNOVA HOLDINGS, INC.), a Delaware corporation (the “Company”), to YA GLOBAL INVESTMENTS, LTD. (f/k/a CORNELL CAPITAL PARTNERS, LP) (the “Former Holder”). As of April 1, 2014 the Former Holder sold, transferred, and assigned to PATRICK TUOHY (the “Holder”) a portion of the Original Debenture (as defined herein) representing the outstanding principal balance at such time of $40,000. This Debenture (No. IVHG-2-1 PT) does not effect a refinancing of all or any portion of the obligations under the Original Debenture, it being the intention of the Company and the Holder to avoid effectuating a novation of any such obligations. All amounts due under the Original Debenture being assigned to this Debenture, including the principal amount of $40,000.00 as set forth above (the “Assigned Principal Amount”) shall henceforth be evidenced by and paid, redeemed, and/or converted in accordance with the terms and conditions of this Debenture.

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order of the Holder, or its registered assigns, the amount set out above as the Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof). Certain capitalized terms used herein are defined in Section 6.

 

 

 

 

Section 1. General Terms

 

(a) Obligations Due and Payable. Notwithstanding anything contained herein to the contrary, the Company acknowledges that the obligations evidenced by this Debenture matured as of December 31, 2014 (the “Maturity Date”) and are currently due and payable in full.

 

(b) Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to fourteen percent (14%) per annum. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures in cash or in Common Stock (valued at the Closing Bid Price on the Trading Day immediately prior to the date paid) at the option of the Company.

 

(c) Security. The Debenture is secured by all collateral granted by the Company and its affiliates to the Former Holder, in accordance with the terms and conditions of the Assignment Agreement.

 

Section 2. Events of Default.

 

(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i) Any default in the payment of the principal of, interest on or other charges in respect of this Debenture, free of any claim of subordination, as and when the same shall become due and payable whether upon a Mandatory Redemption (as defined in Section 3(b)), an Optional Redemption (as defined in Section 3(a)), or the Maturity Date or by acceleration or otherwise;

 

(ii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

 

 

 

 

(iii) The Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

(iv) The Common Stock shall cease to be quoted for trading or listing for trading on any of (a) the NYSE Amex, (b) New York Stock Exchange, (c) the Nasdaq Stock Market, or (d) the OTC Bulletin Board (“OTC”) (each, a “Primary Market”) and shall not again be quoted or listed for trading on any Primary Market within five (5) Trading Days of such delisting; Primary Market

 

(v) The Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6);

 

(vi) The Company shall fail for any reason to deliver Common Stock certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion Date or after a Redemption Date if the Company chose to settle a Mandatory Redemption in shares of Common Stock, or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions, or settlements of Mandatory Redemptions in shares of Common Stock, in accordance with the terms hereof;

 

(vii) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) days after notice is claimed delivered hereunder;

 

(viii) The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(ix) hereof) or any Transaction Document (as defined in Section 6) which is not cured within a period of ten (10) days after notice of such breach has been sent by the Holder to the Company;

 

 

 

 

(b) During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Company. If an Event of Default shall occur the Conversion Price shall be reduced to $0.02 (the “Default Conversion Price”). Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Debenture or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Debenture or the sale of the Underlying Shares.

 

Section 3. Redemptions.

 

(a) Company’s Optional Cash Redemption. The Company at its option shall have the right to redeem (“Optional Redemption”) a portion or all amounts outstanding under this Debenture prior to the Maturity Date provided that as of the date of the Holder’s receipt of a Redemption Notice (as defined herein) (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price, and (ii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption Premium”) equal to ten percent (10%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the “Redemption Amount”). In order to make a redemption, the Company shall first provide written notice to the Holder of its intention to make a redemption (the “Redemption Notice”) setting forth the amount of principal it desires to redeem. After receipt of the Redemption Notice the Holder shall have three (3) business days to elect to convert all or any portion of this Debenture, subject to the limitations set forth in Section 4(b). On the fourth (4th) business day after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the principal amount redeemed after giving effect to conversions effected during the three (3) business day period.

 

(b) Mandatory Redemptions.

 

(i) Holder’s Right. Beginning on January 1, 2007, and continuing on the first Trading Day of each calendar month thereafter (each, a “Redemption Date”), the Holder shall have the right to force the Company to redeem (“Mandatory Redemptions”) up to $500,000 of the remaining principal amount of the Debenture (the “Maximum Redemption Amount”) per calendar month by transmitting a copy of a Redemption Notice in the form attached hereto as Exhibit A (the “Redemption Notice”) requiring the Company to redeem (as set forth below in Section 3(b)(ii) hereof) the principal amount set forth in the Redemption Notice (the “Mandatory Redemption Amount”). The Company, in its sole discretion, may increase the Maximum Redemption Amount and, upon an Event of Default the Maximum Redemption Amount shall be automatically increased to an amount up to the remaining principal amount of the Debenture.

 

 

 

 

Notwithstanding the foregoing, if (A) the Closing Bid Price of the Common Stock exceeds the Conversion Price for each of the five consecutive Trading Days immediately prior to the Redemption Date, and (B) no Event of Default shall have occurred, then the Holder shall not be permitted to require the Company to make a Mandatory Redemption in that month.

 

(ii) Company’s Settlement Options. The Company has the option, in its sole discretion, to settle Mandatory Redemptions by (A) paying the Holder cash in an amount equal to the Mandatory Redemption Amount plus the Redemption Premium.

 

(iii) Redemption Notice Procedures.

 

(A) On or prior to 5:00 pm New York City time on the Trading Day immediately following the Redemption Date, the Company shall return a copy of the Redemption Notice via facsimile (or other delivery) to the Holder, which Redemption Notice shall note the Company’s choice of settlement options with respect to such Redemption Notice and shall be signed by an officer of the Company.

 

(B) The Company shall settle all Redemption Notices within 5 Trading Days of the Redemption Date.

 

(iv) Settlement of Put Notice in shares of Common Stock. In the event that the Company chooses (if available) to settle a Redemption Notice in shares of Common Stock pursuant to option (B) of Section 3(b)(ii), upon notice to the Holder of such selection, the Redemption Notice shall effectively be treated the same as a Conversion Notice submitted by the Holder and processed in accordance with the provisions for Conversion Notices set forth in Section 4. The limitations on Conversions set forth in Section 4(b) hereof shall apply to any shares of Common Stock issued pursuant to this Section 3. In the event that the Company fails to notify the Holder of its election of settlement options in accordance with Section 3(b)(iii) hereof, then if applicable, the Company hereby designates all such Redemption Notices to automatically be settled in shares of Common Stock.

 

Section 4. Conversion.

 

(a) Conversion at Option of Holder.

 

(i) This Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as defined in Section 6) (subject to the limitations on conversion set forth in Section 4(b) hereof). The number of shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing (x) the outstanding amount of this Debenture to be converted by (y) the Conversion Price (as defined in Section 4(c)(i)). The Company shall deliver Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a Conversion Date.

 

 

 

 

(ii) Notwithstanding anything to the contrary contained herein, if on any Conversion Date: (1) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder in shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on a Primary Market; or (3) the Company has failed to timely satisfy a conversion; then, at the option of the Holder, the Company, in lieu of delivering shares of Common Stock pursuant to Section 4(a)(i), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an amount in cash equal to the product of the outstanding principal amount to be converted divided by the applicable Conversion Price, and multiplied by the highest Closing Bid Price of the stock from date of the conversion notice till the date that such cash payment is made.

 

Further, if the Company shall not have delivered any cash due in respect of conversion of this Debenture by the fifth (5th) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue shares of Common Stock pursuant to Section 4(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such shares will be subject to the provisions of this Section.

 

(iii) The Holder shall effect conversions by delivering to the Company a completed notice in the form attached hereto as Exhibit B (a “Conversion Notice”). The date on which a Conversion Notice is delivered is the “Conversion Date.”Unless the Holder is converting the entire principal amount outstanding under this Debenture, the Holder is not required to physically surrender this Debenture to the Company in order to effect conversions. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

 

(b) Certain Conversion Restrictions.

 

(i) A Holder may not convert this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent such conversion or receipt of such interest payment would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of, and payment of interest on, this Debenture held by such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with the periods described in Section 4(a)(i) and, at the option of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future conversions or return such excess principal amount to the Holder. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.

 

 

 

 

(c) Conversion Price and Adjustments to Conversion Price.

 

(i) The conversion price in effect on any Conversion Date shall be equal to the lower of $0.02 per share or fifty percent (50%) of the lowest Volume Weighted Average Price in the thirty (30) Trading Days prior to the Conversion Date (the “Conversion Price”). The Conversion Price may be adjusted pursuant to the terms of this Debenture.

 

(ii) If the Company, at any time while this Debenture is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

(iii) If the Company, at any time while this Debenture is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants (plus the number of additional shares of Common Stock offered for subscription or purchase), and of which the numerator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants, plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Conversion Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. However, upon the expiration of any such right, option or warrant to purchase shares of the Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section, if any such right, option or warrant shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of the Common Stock actually purchased upon the exercise of such rights, options or warrants actually exercised.

 

 

 

 

(iv) If the Company or any subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall issue shares of Common Stock or rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at a price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than one (1) business day following the issuance of any Common Stock or Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms. No adjustment under this Section 4(c)(iv) shall be made as a result of issuances of Excluded Securities.

 

(v) If the Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which this Debenture shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Bid Price determined as of the record date mentioned above, and of which the numerator shall be such Closing Bid Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

 

 

 

(vi) In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to, at its option, (A) convert the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Common Stock following such reclassification or share exchange, and the Holder of this Debenture shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture could have been converted immediately prior to such reclassification or share exchange would have been entitled, or (B) require the Company to prepay the outstanding principal amount of this Debenture, plus all interest and other amounts due and payable thereon. The entire prepayment price shall be paid in cash. This provision shall similarly apply to successive reclassifications or share exchanges.

 

(vii) Whenever the Conversion Price is adjusted pursuant to Section 4 hereof, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(viii) If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last address as it shall appear upon the stock books of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day calendar period commencing the date of such notice to the effective date of the event triggering such notice.

 

 

 

 

(ix) In case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

 

(d) Other Provisions.

 

(i) Conversion at the Option of the Company. The Company shall have the right to force the Holder to convert this Debenture into shares of Common Stock in accordance with this Section 3 hereof, in amounts not to exceed $200,000 in any thirty (30) day period, after the Original Issue Date, subject to the limitations on conversions set forth in Section 3(b) hereof and provided that the following conditions are satisfied: (a) the Closing Bid Price of the Common Stock is greater than 110% of the Conversion Price on each of the five Trading Days immediately preceding the Conversion Date, (b) the average daily trading volume for the Common Stock on a Primary Market shall have been greater than $200,000 over the five Trading Days prior to the Conversion Date, and (c) no Event of Default has occurred.

 

(ii) The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Debenture; and within three (3) Business Days following the receipt by the Company of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement.

 

(iii) All calculations under this Section 4 shall be rounded up to the nearest $0.0001 or whole share.

 

 

 

 

(iv) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in this Debenture or in the Transaction Documents) be issuable (taking into account the adjustments and restrictions set forth herein) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.

 

(v) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Closing Bid Price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

(vi) The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(vii) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company ‘s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(viii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(a)(i) by the fifth (5th) Trading Day after the Conversion Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either reissue a Debenture in the principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements under Section 4(a)(i). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which the market price of the Underlying Shares on the date of conversion was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

 

 

 

Section 5. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Trading 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, to: Coroware, Inc.
  1410 Market Street, Suite 200
  Kirkland, WA 98033
  Attention: Lloyd Spencer
  Telephone: (425) 818-8990
  Facsimile: (800) 641-2676
     
With a copy to: Sichenzia Ross Friedman Ference LLP
  1065 Avenue of the Americas
  New York, NY 10018
  Attention: Gregory Sichenzia
  Telephone: (212) 930-9700
  Facsimile: (212) 930-9725

 

If to the Holder:

Patrick Tuohy

139 Sanford Ave

North Plainfield NJ 07060

Email: coachtuohy@gmail.com

(T): 908.397.4113

 

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) business days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

 

 

 

Section 6. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Approved Stock Plan”means a stock option plan that has been approved by the Board of Directors of the Company prior to the date of the Securities Purchase Agreement, pursuant to which the Company’s securities may be issued only to any employee, officer or director for services provided to the Company.

 

“Assignment Agreement”means that certain Nonrecourse Assignment Agreement dated as of April 1, 2014 by and between the Former Holder and the Holder.

 

“Business Day”means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

 

“Change of Control Transaction”means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Company (except that the acquisition of voting securities by the Holder shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c).

 

“Closing Bid Price”means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock is then listed as quoted by Bloomberg, LP.

 

“Commission”means the Securities and Exchange Commission.

 

“Common Stock”means the common stock, par value $.001, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.

 

“Conversion Date”shall mean the date upon which the Holder gives the Company notice of their intention to effectuate a conversion of this Debenture into shares of the Company’s Common Stock as outlined herein.

 

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

 

 

 

 

“Excluded Securities”means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right, option, obligation or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the date of the Securities Purchase Agreement, and (c) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of this Debenture.

 

“Original Issue Date”shall mean the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.

 

“Person”means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

“Securities Act”means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading Day”means a day on which the shares of Common Stock are quoted on the OTC or quoted or traded on such Primary Market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

 

“Transaction Documents”means the Securities Purchase Agreement or any other agreement delivered in connection with the Securities Purchase Agreement, including, without limitation, the Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer Agent Instructions.

 

“Underlying Shares”means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms hereof.

 

Section 7. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

Section 8. This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

 

 

 

Section 9. If this Debenture is mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

Section 10. No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.

 

Section 11. This Debenture shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

 

Section 12. If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

 

Section 13. Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.

 

Section 14. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

 

 

 

Section 15. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 16. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations but with the same terms and conditions, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

 

Section 17. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Amended and Restated Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.

 

  COMPANY:
  COROWARE, INC.
     
  By:  
  Name: Lloyd T. Spencer
  Title: Chief Executive Officer

 

 

 

 

EXHIBIT A

 

REDEMPTION NOTICE

 

Redemption Date: ______________   Mandatory Redemption Amount: ______________

 

Settlement in Common Stock
 
☐         All Conditions to Company’s option to settle in Common Stock (Section 3(b)) are satisfied
Mandatory Redemption Amount: $_________________________________________________________________
Redemption Conversion Price: $_______
Number of shares of Common Stock to be issued: __________________________________________________________________
 
Please issue the shares of Common Stock in the following name and to the following address:
 
Issue to:

Patrick Tuohy

139 Sanford Ave

North Plainfield NJ 07060

Email: coachtuohy@gmail.com

(T): 908.397.4113

Broker DTC Participant Code:  
Account Number:  

 

Settlement in Cash
 
Mandatory Redemption Amount: $_________________________________________________________________
Redemption Premium: $_________________________________________________________________
Total Cash Settlement: $_________________________________________________________________

 

Notification of Settlement Option
 
☐ Settlement in Common Stock ☐ Settlement in Cash
   
_______________________________________________
Coroware, Inc.  
By:
Its:

 

 

 

 

EXHIBIT B

 

CONVERSION NOTICE

 

(To be executed by the Holder in order to Convert the Debenture)

 

TO:

 

The undersigned hereby irrevocably elects to convert $___________________________ of the principal amount of the above Debenture into Shares of Common Stock of COROWARE, INC., according to the conditions stated therein, as of the Conversion Date written below.

 

Conversion Date: _______________________________________________________________
Amount to be converted: $______________________________________________________________
Conversion Price: $______________________________________________________________
Number of shares of Common Stock to be issued: _______________________________________________________________

Amount of Debenture Unconverted:

 $______________________________________________________________
 
Please issue the shares of Common Stock in the following name and to the following address:
 
Issue to:

Patrick Tuohy

139 Sanford Ave

North Plainfield NJ 07060

Email: coachtuohy@gmail.com

(T): 908.397.4113

   
Authorized Signature: _______________________________________________________________
Name: _______________________________________________________________
Title: _______________________________________________________________
Broker DTC Participant Code:  
Account Number:  

 

 

 

 

Exhibit 10.63

 

Note: March 9, 2013

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION 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.

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.

 

10% CONVERTIBLE NOTE DUE MARCH 9, 2014

 

OF

 

COROWARE, INC.

 

Issuance Date: March 9, 2013

Beginning Principal Amount of this Note: $15,000

Original Issue Discount (OID): $1,000

Legal Fees: $1,000

Total Face Value of this Note: $17,000

 

THIS NOTE (“Note” or “Note”) is a duly authorized Promissory Note of COROWARE, INC. a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), designated as the Company’s 10% Convertible Note Due March 9, 2014 (“Maturity Date”) in the original principal amount of seventeen thousand dollars ($17,000) (the “Note”).

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order of Tangiers Investment Group, LLC or its registered assigns or successors-in-interest (“Holder”) the principal sum of Seventeen Thousand Dollars ($17,000.00) together with all accrued but unpaid interest thereon, if any, on the Maturity Date, to the extent such principal amount and interest has not been repaid or converted into the Company’s Common Stock, $0.0001 par value per share (the “Common Stock”), in accordance with the terms hereof.

 

1
 

 

Interest on the unpaid principal balance hereof shall accrue at the rate of 10% per annum from the date of original issuance hereof (the “Issuance Date”) until the same becomes due and payable on the Maturity Date, or such earlier date upon acceleration or by conversion or redemption in accordance with the terms hereof or of the other Agreements. Notwithstanding anything contained herein, this Note shall bear interest on the due and unpaid Principal Amount from and after the occurrence and during the continuance of an Event of Default pursuant to Section 1(j) at the rate (the “Default Rate”) equal to the lower of twenty (20%) per annum or the highest rate permitted by law. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs, then to unpaid interest and fees and any remaining amount to principal.

 

This Note may not be prepaid in whole or in part except as otherwise provided herein. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day.

 

For purposes hereof the following terms shall have the meanings ascribed to them below:

 

“Bankruptcy Event” means any of the following events: (a) the Company commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company thereof; (b) there is commenced against the Company any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Company makes a general assignment for the benefit of creditors; (f) the Company fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Company calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Company, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.

 

“Change in Control Transaction” will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company with or into any other corporation or other entity or person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power, or corresponding voting equity interests, of the surviving corporation after such event (including without limitation any “going private” transaction under Rule 13e-3 promulgated pursuant to the Exchange Act or tender offer by the Company under Rule 13e-4 promulgated pursuant to the Exchange Act for 20% or more of the Company’s Common Stock), (ii) there is a replacement of more than one-half of the members of the Company’s Board of Directors which is not approved by those individuals who are members of the Company’s Board of Directors on the date thereof, (iii) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company,determined on a consolidated basis, or (iv) the Company enters into any agreement providing for an event set forth in (i), (ii), (iii) or (iv) above.

 

2
 

 

“Conversion Ratio” means, at any time, a fraction, of which the numerator is the entire outstanding Principal Amount of this Note (or such portion thereof that is being redeemed or repurchased), and of which the denominator is the Conversion Price as of the date such ratio is being determined.

 

“Conversion Price” shall be equal to fifty percent (50%) of the lowest trading price of any day during the ten (10) consecutive trading days prior to the date on which Holder elects to convert all or part of the Note.

 

“Floor Price” is not applicable

 

“Convertible Securities” means any convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Stock.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Market Price” shall equal the closing sale price per share of the Common Stock on the Principal Market on the Trading Day next preceding the date on which such price is being determined.

 

“Principal Amount” shall refer to the sum of (i) the original principal amount of this Note, (ii) all accrued but unpaid interest hereunder, and (iii) any default payments owing under the Agreements but not previously paid or added to the Principal Amount.

 

“Principal Market” shall mean the OTC Bulletin Board or such other principal market or exchange on which the Common Stock is then listed for trading.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Trading Day” shall mean a day on which there is trading on the Principal Market.

 

“Underlying Shares” means the shares of Common Stock into which the Note is convertible (including interest or principal payments in Common Stock as set forth herein) in accordance with the terms hereof.

 

The following terms and conditions shall apply to this Note:

 

Section 1.00 Conversion.

 

(a) Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at the Holder’s option, at any time and from time to time to convert the outstanding Principal Amount and Interest under this Note in whole or in part by delivering to the Company, or directly to Company’s Transfer Agent, a fully executed notice of conversion in the form of conversion notice attached hereto as Exhibit A (the “Conversion Notice”), which may be transmitted by facsimile.

 

3
 

 

(b) The date of any Conversion Notice hereunder and any Payment Date shall be referred to herein as the “Conversion Date”. If the Holder is converting less than all of the outstanding Principal Amount hereunder pursuant to a Conversion Notice, the Company shall promptly deliver to the Holder (but no later than five Trading Days after the Conversion Date) a Note for such outstanding Principal Amount as has not been converted if this Note has been surrendered to the Company for partial conversion. The Holder and the Company shall maintain records showing the outstanding Principal Amount so converted and repaid and the dates of such conversions or repayments or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon each such conversion or repayment.

 

(i) Stock Certificates or DWAC. The Company will deliver to the Holder, or Holder’s authorized designee) not later than two (2) Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions) representing the number of shares of Common Stock being acquired upon the conversion of this Note. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note, provided the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) prime broker with DTC through its Deposits and Withdrawal at Custodian (DWAC) program (provided that the same time periods herein as for stock certificates shall apply). If in the case of any conversion hereunder, such certificate or certificates are not delivered to or as directed by the Holder by the fifth Trading Day after the Conversion Date, the Holder shall be entitled by notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return this Note tendered for conversion.

 

If the Company fails to deliver to the Holder such certificate or certificates (or shares through DTC) pursuant to this Section (free of any restrictions on transfer or legends) in accordance herewith, prior to the third Trading Day after the Conversion Date, the Company shall pay to the Holder as liquidated damages, in cash, an amount equal to One Thousand Dollars ($1000) per day, until such certificate or certificates are delivered. Such liquidated damages will be added to the principal value of the Note. The Company acknowledges that it would be extremely difficult or impracticable to determine Tangiers’ actual damages and costs resulting from the delay in making delivery of the unrestricted stock certificate and the inclusion herein of any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs and do not constitute a penalty.

 

4
 

 

(c) Conversion Price Adjustments.

 

(i) Stock Dividends, Splits and Combinations. If the Company or any of its subsidiaries, at any time while this First Note is outstanding (A) shall pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (B) subdivide outstanding Common Stock into a larger number of shares, or (C) combine outstanding Common Stock into a smaller number of shares, then each Affected Conversion Price (as defined below) shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.

 

(ii) Distributions. If the Company or any of its subsidiaries, at any time while the Note is outstanding, shall distribute to all holders of Common Stock evidences of its indebtedness or assets or cash or rights or warrants to subscribe for or purchase any security of the Company or any of its subsidiaries (excluding those referred to in the Section above), then concurrently with such distributions to holders of Common Stock, the Company shall distribute to the Holder the amount of such indebtedness, assets, cash or rights or warrants which the Holder would have received had the Note been converted into Common Stock at the Conversion Price immediately prior to the record date for such distribution.

 

(iii) Rounding of Adjustments. All calculations under this Section 1 or any other provision of this Note shall be made to 4 decimal places for dollar amounts or the nearest 1/100th of a share, as the case may be.

 

(iv) Notice of Certain Events. If:

 

  A. the Company shall declare a dividend (or any other distribution) on its Common Stock; or
  B. the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or
  C. the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or
  D. the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property; or
  E. the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company;

 

5
 

 

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be mailed to the Holder at its last address as it shall appear upon the books of the Company, on or prior to the date notice to the Company’s stockholders generally is given, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange.

 

(d) Reservation and Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (including repayments in stock), free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than three times (3x) the number of shares of Common Stock as shall be issuable (taking into account the adjustments under this Section 1 but without regard to any ownership limitations contained herein) upon the conversion of this Note hereunder in Common Stock (including repayments in stock). The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully-paid, non-assessable and freely-tradable. The Company agrees that this is a material term of this Note.

 

(e) Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the conversion of this Note (including repayment in stock) shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder.

 

(f) Cancellation. After all of the Principal Amount (including accrued but unpaid interest and default payments at any time owed on this Note) have been paid in full or converted into Common Stock, this Note shall automatically be deemed canceled and the Holder shall promptly surrender the Note to the Company at the Company’s principal executive offices.

 

6
 

 

(g) Conversion Limitation. Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon conversion pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by the Holder (other than by virtue of the ownership of securities or rights to acquire securities (including this Note) that have limitations on the Holder’s right to convert, exercise or purchase similar to the limitation set forth herein), together with all shares of Common Stock deemed beneficially owned at such time (other than by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) by the Holder’s “affiliates” at such time (as defined in Rule 144 of the Act) (“Aggregation Parties”) that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934 as amended, exists, would exceed 4.9% of the total issued and outstanding shares of the Common Stock (the “Restricted Ownership Percentage”) unless the Holder elects to exceed said percentage amount, as noted below. The Holder shall have the right (w) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (x) (subject to waiver) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the event of the announcement as pending or planned, of a Change in Control Transaction.

 

Section 2.00 Defaults and Remedies.

 

(h) Events of Default. Events of Default. An “Event of Default” is: (i) a default in payment of any amount due hereunder which default continues for more than two (2) business days after the due date thereof; (ii) a default in the timely issuance of Underlying Shares upon and in accordance with terms hereof, which default continues for two (2) Business Days after the Company has received notice informing the Company that it has failed to issue shares or deliver stock certificates within the second (2nd) day following the Conversion Date; (iii) failure by the Company for two (2) days after notice has been received by the Company to comply with any material provision of the Exchange Agreement (including without limitation the failure to issue the requisite number of shares of Common Stock upon conversion hereof and the failure to redeem Notes upon the Holder’s request following a Change in Control Transaction pursuant to Section 1(c); (iv) any default after any cure period under, or acceleration prior to maturity of, any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company in excess of $50,000 or for money borrowed the repayment of which is guaranteed by the Company in excess of $50,000, whether such indebtedness or guarantee now exists or shall be created hereafter; (v) any failure of the Company to satisfy its “filing” obligations under the rules and guidelines issued by OTC Markets News Service, OTC Markets.com and their affiliates; (vi) any failure of the Company to issue all of the shares of the Company’s Common Stock due the Holder upon conversion of this Note; (vii) failure to have sufficient number of authorized but unissued shares of the Company’s Common Stock available for any said conversion; (ix) any delisting for any reason; (viii) any trading suspension imposed by the Securities and Exchange Commission under Sections 12(j) or 12(k) of the 1934 Act; or (x) if the Company is subject to any Bankruptcy Event.

 

(k) Remedies. If an Event of Default occurs and is continuing with respect to the Note, the Holder may declare all of the then outstanding Principal Amount of this Note, including any interest due thereon, to be due and payable immediately, except that in the case of an Event of Default arising from events described in Section 2(h), this Note shall become due and payable without further action or notice. In the event of such acceleration, the amount due and owing to the Holder shall be the 100% of the outstanding Principal Amount of the Notes held by the Holder plus all accrued and unpaid interest, fees, and liquidated damages, if any. Additionally, this Note shall bear interest on any unpaid principal from and after the occurrence and during the continuance of an Event of Default pursuant to Section 2(h) at the Default Rate. Finally, the Note will accrue liquidated damages of two hundred fifty dollars ($250) per day from and after the occurrence and during the continuance of an Event of Default pursuant to Section 2(h). The Company acknowledges that it would be extremely difficult or impracticable to determine Tangiers’ actual damages and costs resulting from the delay in making delivery of the unrestricted stock certificate and the inclusion herein of any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs and do not constitute a penalty. The remedies under this Note shall be cumulative and added to the principal value of the Note.

 

7
 

 

Section 3.00 General.

 

(i) Payment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys’ fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.

 

(j) Savings Clause. In case any provision of this Note 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 Note will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum allowable under law.

 

(k) Amendment. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.

 

(l) Assignment, Etc. The Holder may assign or transfer this Note to any transferee only with the prior written consent of the Company, which may not be unreasonably withheld or delayed, provided that (i) the Holder may assign or transfer this Note to any of such Holder’s affiliates without the consent of the Company and (ii) upon any Event of Default, the Holder may assign or transfer this Note without the consent of the Company. The Holder shall notify the Company of any such assignment or transfer promptly. This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.

 

(m) No Waiver. No failure on the part of the Holder to exercise, and no delay in exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder from time to time.

 

8
 

 

(n) Governing Law; Jurisdiction.

 

(i) Governing Law. THIS NOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

 

(ii) Jurisdiction. Any dispute or claim arising to or in any way related to this Note or the rights and obligations of each of the parties hereto shall be settled by binding arbitration in San Diego, California. All arbitration shall be conducted in accordance with the rules and regulations of the American Arbitration Association (“AAA”). AAA shall designate an arbitrator from an approved list of arbitrators following both parties’ review and deletion of those arbitrators on the approved list having a conflict of interest with either party. Each party shall pay its own expenses associated with such arbitration. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter has arisen and in no event shall such demand be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statutes of limitations. The decision of the arbitrators shall be rendered within 60 days of submission of any claim or dispute, shall be in writing and mailed to all the parties included in the arbitration. The decision of the arbitrator shall be binding upon the parties and judgment in accordance with that decision. The Company agrees that the service of process upon it mailed by certified or registered mail (and service so made shall be deemed complete three days after the same has been posted as aforesaid) or by personal service shall be deemed in every respect effective service of process upon it in any such suit or proceeding. Nothing herein shall affect the Holder’s right to serve process in any other manner permitted by law. The Company agrees that a final non-appealable judgement in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.

 

(II) NO JURY TRIAL. THE COMPANY HERETO KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE.

 

(o) Replacement Notes. This Note may be exchanged by the Holder at any time and from time to time for a Note or Notes with different denominations representing an equal aggregate outstanding Principal Amount, as reasonably requested by the Holder, upon surrendering the same. No service charge will be made for such registration or exchange. In the event that Holder notifies the Company that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to the original Note (except for registration number and Principal Amount, if different than that shown on the original Note), shall be issued to the Holder, provided that the Holder executes and delivers to the Company an agreement reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with this Note. If such replacement occurs, the term “Note” as used herein shall be deemed to refer to any such replacement Note.

 

[The remainder of this page has been left intentionally blank.]

 

[Signature Page Follows]

 

9
 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on the day and in the year first above written.

 

COROWARE, INC.
     
  By:
     
  Name: Lloyd Spencer
     
  Title: President and CEO
     
  Date: 3/8/2013

 

This Note is acknowledged as: Note of March 9, 2013

 

10
 

 

EXHIBIT A

 

FORM OF CONVERSION NOTICE

 

(To be executed by the Holder in order to convert that certain $17,000 Promissory Note identified as the Note)

 

DATE:      
     
FROM:   Tangiers Investment Group, LLC

 

  Re: $17,000 Note (this “Note”) originally issued by Coroware, Inc., a Delaware corporation, to Tangiers Investment Group, LLC on March 9, 2013.

 

The undersigned on behalf of Tangiers Investment Group, LLC, hereby elects to convert $_________________________of the aggregate outstanding Principal Amount (as defined in the Note) indicated below of this Note into shares of Common Stock, $0.0001 par value per share, of Coroware, Inc. (the “Company”) according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. The undersigned represents as of the date hereof that, after giving effect to the conversion of this Note pursuant to this Conversion Notice, the undersigned will not exceed the “Restricted Ownership Percentage” contained in this Note.

 

Conversion information:    
    Date to Effect Conversion
     
     
    Aggregate Principal Amount of Note Being Converted
     
     
    Aggregate Interest on Amount Being Converted
     
     
    Number of Shares of Common Stock to be Issued
     
     
    Applicable Conversion Price
     
     
    Signature
     
     
    Name
     
     
    Address

 

11

 

 

Exhibit 10.64

 

Note: March 27, 2014

 

THIS 10% CONVERTIBLE NOTE IS ISSUED IN EXCHANGE FOR A PORTION OF THAT CERTAIN CONVERTIBLE PROMISSORY NOTE ISSUED TO ZOOM MARKETING ON AUGUST 23, 2013 BY THE COMPANY. FOR PURPOSES OF RULE 144, THIS NOTE SHALL BE DEEMED TO HAVE BEEN ISSUED ON AUGUST 23, 2013.

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION 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.

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.

 

10% CONVERTIBLE PROMISSORY NOTE

 

OF

 

COROWARE, INC.

 

Issuance Date: March 27, 2014

Issuance Date of Original Note: August 23, 2013

Exchange Date: March 27, 2014

Original Principal Amount of this Exchange Note: $75,000

 

THIS NOTE (“Note” or “Note”) is a duly authorized Convertible Promissory Note of COROWARE, INC. a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), designated as the Company’s 10% Convertible Promissory Note Due March 27, 2015 (“Maturity Date”) in the principal amount of seventy five thousand dollars ($75,000) (the “Note”).

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order of Tangiers Investment Group, LLC or its registered assigns or successors-in-interest (“Holder”) the principal sum of seventy five thousand dollars ($75,000) together with all accrued but unpaid interest, if any, on the Maturity Date, to the extent such principal amount and interest has not been repaid or converted into the Company’s Common Stock, $0.001 par value per share (the “Common Stock”), in accordance with the terms hereof.

 

$75,000.00 Exchange Note1
Coroware, Inc. 
Tangiers Investment Group, LLC 

 

 

Interest on any outstanding principal balance shall accrue at a rate of 10% per annum. In the Event of Default pursuant to Section 2(e), interest will accrue at the rate equal to the lower of twenty (20%) per annum or the highest rate permitted by law (the “Default Rate”).

 

This Note may not be prepaid in whole or in part except as otherwise provided herein. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day.

 

For purposes hereof the following terms shall have the meanings ascribed to them below:

 

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.

 

“Conversion Price” shall be equal to fifty percent (50%) of the lowest trading price of the Company’s common stock during the twenty (20) consecutive trading days prior to the date on which Holder elects to convert all or part of the Note.

 

“Principal Amount” shall refer to the sum of (i) the original principal amount of this Note, (ii) all accrued but unpaid interest hereunder, and (iii) any default payments owing under the Agreements but not previously paid or added to the Principal Amount.

 

“Trading Day” shall mean a day on which there is trading on the Principal Market.

 

“Underlying Shares” means the shares of common stock into which the Note is convertible (including interest or principal payments in common stock as set forth herein) in accordance with the terms hereof.

 

The following terms and conditions shall apply to this Note:

 

Section 1.00 Conversion.

 

(a) Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at the Holder’s option, at any time to convert the outstanding Principal Amount and Interest under this Note in whole or in part.

 

(b) The date of any Conversion Notice hereunder and any Payment Date shall be referred to herein as the “Conversion Date”.

 

(i) Stock Certificates or DWAC. The Company will deliver to the Holder, or Holder’s authorized designee, no later than two (2) Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions) representing the number of shares of Common Stock being acquired upon the conversion of this Note. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note, provided the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) prime broker with DTC through its Deposits and Withdrawal at Custodian (DWAC) program (provided that the same time periods herein as for stock certificates shall apply).

 

$75,000.00 Exchange Note2
Coroware, Inc. 
Tangiers Investment Group, LLC 

 

 

(ii) Charges, Expenses. Issuance of Common Stock to Holder, or any of its assignees, upon the conversion of this Note shall be made without charge to the Holder for any issuance fee, transfer tax, postage/mailing charge or any other expense with respect to the issuance of such Common Stock. Company shall pay all Transfer Agent fees incurred from the issuance of the Company stock to Holder and acknowledges that this is a material obligation of this Note.

 

If the Company fails to deliver to the Holder such certificate or certificates (or shares through DTC) pursuant to this Section (free of any restrictions on transfer or legends) prior to the third Trading Day after the Conversion Date, the Company shall pay to the Holder as liquidated damages, in cash, an amount equal to One Thousand Dollars ($1,000) per day, until such certificate or certificates are delivered. The Company acknowledges that it would be extremely difficult or impracticable to determine the Holder’s actual damages and costs resulting from a failure to deliver the Common stock and the inclusion herein of any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs. Such liquidated damages will be added to the principal value of the Note.

 

(c) Reservation and Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (including repayments in stock), free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than three times (3x) the number of shares of Common Stock as shall be issuable (taking into account the adjustments under this Section 1 but without regard to any ownership limitations contained herein) upon the conversion of this Note in Common Stock. These shares shall be reserved in proportion with the Consideration actually received by the Company and the total reserve will be increased with future payments of consideration by Holder. The Company covenants that all shares of Common Stock that shall be issuable will, upon issue, be duly authorized, validly issued, fully-paid, non-assessable and freely-tradable. The Company agrees that this is a material term of this Note.

 

(d) Conversion Limitation. The holder will not submit a conversion to the Company that would result in the Holder owning more than 9.99% of the total outstanding shares of the Company.

 

$75,000.00 Exchange Note3
Coroware, Inc. 
Tangiers Investment Group, LLC 

 

 

Section 2.00 Defaults and Remedies.

 

(e) Events of Default. An “Event of Default” is: (i) a default in payment of any amount due hereunder which default continues for more than five (5) business days after the due date; (ii) a default in the timely issuance of underlying shares upon and in accordance with terms hereof, which default continues for three (3) Business Days after the Company has received notice informing the Company that it has failed to issue shares or deliver stock certificates within the third (3rd) day following the Conversion Date; (iii) failure by the Company for three (3) days after notice has been received by the Company to comply with any material provision of the Exchange Agreement (including without limitation the failure to issue the requisite number of shares of Common Stock upon conversion hereof; (iv) a material breach by the Company of its representations or warranties in the Exchange Agreement; (v) any default after any cure period under, or acceleration prior to maturity of, any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company in excess of $50,000 or for money borrowed the repayment of which is guaranteed by the Company in excess of $50,000, whether such indebtedness or guarantee now exists or shall be created hereafter; (vi) any failure of the Company to satisfy its “filing” obligations under the rules and guidelines issued by OTC Markets News Service, OTC Markets.com and their affiliates; (vii) Any failure of the Company to provide the Holder with information related to the corporate structure including, but not limited to, the number of authorized and outstanding shares, public float, etc. within one (1) day of request by Holder; (viii) failure to have sufficient number of authorized but unissued shares of the Company’s Common Stock available for any conversion; (ix) failure of Company’s stock to maintain a bid price in its trading market which occurs for at least three (3) consecutive days; (x) any delisting for any reason; (xi) failure by Company to pay any of its Transfer Agent fees or to maintain a Transfer Agent of record; (xii) any trading suspension imposed by the Securities and Exchange Commission under Sections 12(j) or 12(k) of the 1934 Act; (xiii) if the Company is subject to any Bankruptcy Event;

 

(f) Remedies. If an Event of Default occurs and is continuing with respect to the Note, the Holder may declare all of the then outstanding Principal Amount of this Note, including any interest due thereon, to be due and payable immediately without further action or notice. In the event of such acceleration, the amount due and owing to the Holder shall be increased to one hundred and fifty percent (150%) of the outstanding Principal Amount of the Note held by the Holder plus all accrued and unpaid interest, fees, and liquidated damages, if any. Additionally, this Note shall bear interest on any unpaid principal from and after the occurrence and during the continuance of an Event of Default at a rate of twenty percent (20%). Finally, the Note will accrue liquidated damages of one thousand dollars ($1,000) per day from and after the occurrence and during the continuance of an Event of Default. The Company acknowledges that it would be extremely difficult or impracticable to determine the Holder’s actual damages and costs resulting from an Event of Default and any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs. The remedies under this Note shall be cumulative and added to the principal value of the Note.

 

Section 3.00 General.

 

(f) Payment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys’ fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.

 

$75,000.00 Exchange Note4
Coroware, Inc. 
Tangiers Investment Group, LLC 

 

 

(g) Assignment, Etc. The Holder may assign or transfer this Note to any transferee at its sole discretion. This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.

 

(h) Governing Law; Jurisdiction.

 

(i) Governing Law. This note will be governed by and construed in accordance with the laws of the state of California without regard to any conflicts of laws or provisions thereof that would otherwise require the application of the law of any other jurisdiction.

 

(ii) Jurisdiction. Any dispute or claim arising to or in any way related to this Note or the rights and obligations of each of the parties hereto shall be settled by binding arbitration in San Diego, California. All arbitration shall be conducted in accordance with the rules and regulations of the American Arbitration Association (“AAA”). AAA shall designate an arbitrator from an approved list of arbitrators following both parties’ review and deletion of those arbitrators on the approved list having a conflict of interest with either party. The Company agrees that a final non-appealable judgement in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.

 

(ii) No Jury Trial. The Company hereto knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of, under, or in connection with, this note.

 

[The remainder of this page has been left intentionally blank]

 

$75,000.00 Exchange Note5
Coroware, Inc. 
Tangiers Investment Group, LLC 

 

 

IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be duly executed on the day and in the year first above written.

 

 

  COROWARE, INC.
   
  By:               
  Name:  
  Title:  
  Date:  

 

This Note is acknowledged as: Note of March 27, 2014

 

$75,000.00 Exchange Note6
Coroware, Inc. 
Tangiers Investment Group, LLC 

 

 

EXHIBIT A

 

FORM OF CONVERSION NOTICE

 

(To be executed by the Holder in order to convert that certain Promissory Note identified as the Exchange Note)

 

FROM: Tangiers Investment Group, LLC DATE:

 

  Re: Note (this “Note”), originally issued by Coroware, Inc, a Delaware corporation, to Zoom Marketing, a corporation, on or before August 23, 2013 in the original principal amount of $140,000, of which a $75,000 portion was later assigned to Tangiers Investment Group, LLC on March 27, 2014.

 

The undersigned on behalf of Tangiers Investment Group, LLC, hereby elects to convert $______________ of the aggregate outstanding Principal Amount (as defined in the Note Portion Note) indicated below of this Note into shares of Common Stock, $0.001 par value per share, of Coroware, Inc. (the “Company”) according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. The undersigned represents as of the date hereof that, after giving effect to the conversion of this Note pursuant to this Conversion Notice, the undersigned will not exceed the “Restricted Ownership Percentage” contained in this Note.

 

Conversion information:  
  Date to Effect Conversion
   
 
  Aggregate Principal Amount of Note Being Converted
   
 

  Aggregate Interest on Amount Being Converted
   
 
  Number of Shares of Common Stock to be Issued
   
 
  Applicable Conversion Price
   
 
  Signature
   
 

  Name
   
 

  Address

 

$75,000.00 Exchange Note7
Coroware, Inc. 
Tangiers Investment Group, LLC 

 

 

Exhibit 10.65

 

Note: October 11, 2016

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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.

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL SUM REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL SUM AND ACCRUED INTEREST SET FORTH BELOW.

 

0% FIXED CONVERTIBLE PROMISSORY NOTE

 

OF

 

COROWARE, INC.

 

Issuance Date: October 11, 2016

Total Face Value of Note: $85,000

 

This Note is a duly authorized Fixed Convertible Promissory Note of CoroWare, Inc. a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), designated as the Company’s 0% Fixed Convertible Promissory Note due October 20, 2017 (“Maturity Date”) in the principal amount of $85,000 (the “Note”).

 

For Value Received, the Company hereby promises to pay to the order of Tangiers Investment Group, LLC or its registered assigns or successors-in-interest (the “Holder”) the Principal Sum of $85,000 (the “Principal Sum”), to the extent such Principal Sum and any other interest, fees, liquidated damages and/or items due to Holder herein have been repaid or converted into the Company’s Common Stock (the “Common Stock”), in accordance with the terms hereof. The sum of $75,000 shall be remitted and delivered to the Company, and $10,000 shall be retained by the Purchaser through an original issue discount (the “OID”).

 

In the Event of Default pursuant to Section 2.00(a), interest will accrue from the date of the Event of Default at the rate equal to the lower of 20% per annum or the highest rate permitted by law (the “Default Rate”).

 

1
 

 

This Note will become effective only upon the execution by both parties, including the execution of Exhibits B, C, D and E and the Irrevocable Transfer Agent Instructions (the “Date of Execution”) and delivery of the initial payment of consideration by the Holder (the “Effective Date”).

 

This Note may be prepaid by the Company, in whole or in part, at any time. If the Note is in default, per Section 2.00(a) below, the Company may not prepay the Note without written consent of the Holder.

 

For purposes hereof the following terms shall have the meanings ascribed to them below:

 

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.

 

“Conversion Price” shall be equal to $.00005 per share.

 

“Principal Amount” shall refer to the sum of (i) the original principal amount of this Note (including the original issue discount, prorated if the Note has not been funded in full), (ii) all accrued but unpaid interest hereunder, (iii) any fees due hereunder, (iv) liquidated damages, and (v) any default payments owing under the Note, in each case previously paid or added to the Principal Amount.

 

“Principal Market” shall refer to the primary exchange on which the Company’s common stock is traded or quoted.

 

“Trading Day” shall mean a day on which there is trading or quoting for any security on the Principal Market.

 

“Underlying Shares” means the shares of common stock into which the Note is convertible (including interest, fees, liquidated damages and/or principal payments in common stock as set forth herein) in accordance with the terms hereof.

 

The following terms and conditions shall apply to this Note:

 

Section 1.00 Conversion.

 

(a) Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at the Holder’s sole option, at any time and from time to time to convert in whole or in part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock as per the Conversion Formula. The date of any conversion notice (“Conversion Notice”) hereunder shall be referred to herein as the “Conversion Date”.

 

2
 

 

(b) Stock Certificates or DWAC. The Company will deliver to the Holder, or Holder’s authorized designee, no later than 2 Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions if the shares of Common Stock underlying the portion of the Note being converted are eligible under a resale exemption pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii) of the Securities Act of 1933, as amended) representing the number of shares of Common Stock being acquired upon the conversion of this Note. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note, provided the Company’s transfer agent is participating in DTC’s FAST program, the Company shall instead use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) broker with DTC through its DWAC program (provided that the same time periods herein as for stock certificates shall apply).

 

(c) Charges and Expenses. Issuance of Common Stock to Holder, or any of its assignees, upon the conversion of this Note shall be made without charge to the Holder for any issuance fee, transfer tax, legal opinion and related charges, postage/mailing charge or any other expense with respect to the issuance of such Common Stock. Company shall pay all Transfer Agent fees incurred from the issuance of the Common Stock to Holder, as well as any and all other fees and charges required by the Transfer Agent as a condition to effectuate such issuance. Any such fees or charges, as noted in this Section that are paid by the Holder (whether from the Company’s delays, outright refusal to pay, or otherwise), will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144.

 

(d) Delivery Timeline. If the Company fails to deliver to the Holder such certificate or certificates (or shares through the DWAC program) pursuant to this Section (free of any restrictions on transfer or legends, if eligible) prior to 3 Trading Days after the Conversion Date, the Company shall pay to the Holder as liquidated damages an amount equal to $2,000 per day, until such certificate or certificates are delivered. The Company acknowledges that it would be extremely difficult or impracticable to determine the Holder’s actual damages and costs resulting from a failure to deliver the Common Stock and the inclusion herein of any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs. Such liquidated damages will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144.

 

(e) Reservation of Underlying Securities. The Company covenants that it will at all times reserve and keep available for Holder, out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, one times the number of shares of Common Stock as shall be issuable (taking into account the adjustments under this Section 1.00, but without regard to any ownership limitations contained herein) upon the conversion of this Note (consisting of the Principal Amount) under the formula in Section 2.00(c) below, to Common Stock (the “Required Reserve”). The Company covenants that all shares of Common Stock that shall be issuable will, upon issue, be duly authorized, validly issued, fully-paid, non-assessable and freely-tradable (if eligible). If the amount of shares on reserve in Holder’s name at the Company’s transfer agent for this Note shall drop below the Required Reserve, the Company will, within 2 Trading Days of notification from Holder, instruct the transfer agent to increase the number of shares so that the Required Reserve is met. In the event that the Company does not instruct the transfer agent to increase the number of shares so that the Required Reserve is met, the Holder will be allowed, if applicable, to provide this instruction as per the terms of the Irrevocable Transfer Agent Instructions attached to this Note. The Company agrees that the maintenance of the Required Reserve is a material term of this Note and any breach of this Section 1.00(e) will result in a default of the Note.

 

3
 

 

(f) Conversion Limitation. The Holder will not submit a conversion to the Company that would result in the Holder beneficially owning more than 9.99% of the then total outstanding shares of the Company (“Restricted Ownership Percentage”).

 

(g) Conversion Delays. If the Company fails to deliver shares in accordance with the timeframe stated in Section 1.00(b), the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares. The rescinded conversion amount will be returned to the Principal Sum with the rescinded conversion shares returned to the Company, under the expectation that any returned conversion amounts will tack back to the Effective Date.

 

(h) Shorting and Hedging. Holder may not engage in any “shorting” or “hedging” transaction(s) in the Common Stock prior to conversion.

 

(i) Conversion Right Unconditional. If the Holder shall provide a Conversion Notice as provided herein, the Company’s obligations to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment, or alleged breach by the Holder of any obligation to the Company.

 

Section 2.00 Defaults and Remedies.

 

(a) Events of Default. An “Event of Default” is: (i) a default in payment of any amount due hereunder which default continues for more than 5 Trading Days after the due date; (ii) a default in the timely issuance of underlying shares upon and in accordance with terms of Section 1.00, which default continues for 2 Trading Days after the Company has failed to issue shares or deliver stock certificates within the 3rd Trading Day following the Conversion Date; (iii) if the Company does not issue the press release in each case in accordance with the provisions and the deadlines referenced Section 4.00(i); (iv) failure by the Company for 3 days after notice has been received by the Company to comply with any material provision of this Note; (v) failure of the Company to remain compliant with DTC, thus incurring a “chilled” status with DTC; (vi) any default of any mortgage, indenture or instrument which may be issued, or by which there may be secured or evidenced any indebtedness, for money borrowed by the Company or for money borrowed the repayment of which is guaranteed by the Company, whether such indebtedness or guarantee now exists or shall be created hereafter; (vii) if the Company is subject to any Bankruptcy Event; (viii) any failure of the Company to satisfy its “filing” obligations under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the rules and guidelines issued by OTC Markets News Service, OTCMarkets.com and their affiliates; (ix) failure of the Company to remain in good standing with the State of Delaware; (x) any failure of the Company to provide the Holder with information related to its corporate structure including, but not limited to, the number of authorized and outstanding shares, public float, etc. within 1 Trading Day of request by Holder; (xi) failure by the Company to maintain the Required Reserve in accordance with the terms of Section 1.00(e); (xii) failure of Company’s Common Stock to maintain a closing bid price in its Principal Market for more than 3 consecutive Trading Days; (xiii) any delisting from a Principal Market for any reason; (xiv) failure by Company to pay any of its Transfer Agent fees in excess of $2,000 or to maintain a Transfer Agent of record; (xv) failure by Company to notify Holder of a change in Transfer Agent within 24 hours of such change; (xvi) any trading suspension imposed by the United States Securities and Exchange Commission (the “SEC”) under Sections 12(j) or 12(k) of the 1934 Act; or (xvii) failure by the Company to meet all requirements necessary to satisfy the availability of Rule 144 to the Holder or its assigns, including but not limited to the timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC, requirements for XBRL filings, and requirements for disclosure of financial statements on its website;

 

4
 

 

(b) Remedies. If an Event of Default occurs, excluding an Event of Default under Section 2.00(xix), the outstanding Principal Amount of this Note owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory Default Amount means 125% of the outstanding Principal Amount of this Note, will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, this Note shall accrue additional interest, in addition to the Note’s “guaranteed” interest, at a rate equal to the lesser of 20% per annum or the maximum rate permitted under applicable law. In connection with such acceleration described herein, the Holder need not provide, and the Issuer hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder 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 the Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the note until such time, if any, as the Holder receives full payment pursuant to this Section 2.00(b). No such rescission or annulment shall affect any subsequent event of default or impair any right consequent thereon. Nothing herein shall limit the Holder’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 the Issuer’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the Note as required pursuant to the terms hereof.

 

Section 3.00 Representations and Warranties of Holder.

 

Holder hereby represents and warrants to the Company that:

 

(a) Holder is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended (the “1933 Act”), and will acquire this Note and the Underlying Shares (collectively, the “Securities”) for its own account and not with a view to a sale or distribution thereof as that term is used in Section 2(a)(11) of the 1933 Act, in a manner which would require registration under the 1933 Act or any state securities laws. Holder has such knowledge and experience in financial and business matters that such Holder is capable of evaluating the merits and risks of the Securities. Holder can bear the economic risk of the Securities, has knowledge and experience in financial business matters and is capable of bearing and managing the risk of investment in the Securities. Holder recognizes that the Securities have not been registered under the 1933 Act, nor under the securities laws of any state and, therefore, cannot be resold unless the resale of the Securities is registered under the 1933 Act or unless an exemption from registration is available. Holder has carefully considered and has, to the extent Holder believes such discussion necessary, discussed with its professional, legal, tax and financial advisors, the suitability of an investment in the Securities for its particular tax and financial situation and its advisers, if such advisors were deemed necessary, and has determined that the Securities are a suitable investment for it. Holder has not been offered the Securities by any form of general solicitation or advertising, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or other similar media or television or radio broadcast or any seminar or meeting where, to Holders’ knowledge, those individuals that have attended have been invited by any such or similar means of general solicitation or advertising. Holder has had an opportunity to ask questions of and receive satisfactory answers from the Company, or any person or persons acting on behalf of the Company, concerning the terms and conditions of the Securities and the Company, and all such questions have been answered to the full satisfaction of Holder. The Company has not supplied Holder any information regarding the Securities or an investment in the Securities other than as contained in this Agreement, and Holder is relying on its own investigation and evaluation of the Company and the Securities and not on any other information.

 

5
 

 

(b) The Holder is a limited liability company duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted. The Holder is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.

 

(c) All corporate action has been taken on the part of the Holder, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Note. The Holder has taken all corporate action required to make all of the obligations of the Holder reflected in the provisions of this Note, valid and enforceable obligations.

 

(d) Each certificate or instrument representing Securities will be endorsed with the following legend (or a substantially similar legend), unless or until registered under the 1933 Act:

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES WHICH IS REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

 

Section 4.00 General.

 

(a) Payment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys’ fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.

 

(b) Assignment, Etc. The Holder may assign or transfer this Note to any transferee at its sole discretion. This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.

 

6
 

 

(c) Funding Window. The Company agrees that it will not enter into a convertible debt financing transaction with any party other than the Holder for a period of 20 Trading Days following the Effective Date. The Company agrees that this is a material term of this Note and any breach of this will result in a default of the Note.

 

(d) Piggyback Registration Rights. The Company shall include on the next registration statement that the Company files with the SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 30% of the outstanding Principal Sum of this Note, but not less than $20,000, being immediately due and payable to the Holder at its election in the form of a cash payment or an addition to the Principal Sum of this Note.

 

(e) Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any convertible debt security (whether such debt begins with a convertible feature or such feature is added at a later date) with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at the Holder’s option, shall become a part of this Note and its supporting documentation.. The types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion look back periods, interest rates, original issue discount percentages and warrant coverage.

 

(f) Governing Law; Jurisdiction.

 

(i) Governing Law. This Note will be governed by and construed in accordance with the laws of the state of California without regard to any conflicts of laws or provisions thereof that would otherwise require the application of the law of any other jurisdiction.

 

(ii) Jurisdiction and Venue. Any dispute or claim arising to or in any way related to this Note or the rights and obligations of each of the parties shall be brought only in the state courts of California or in the federal courts located in San Diego County, California.

 

(iii) No Jury Trial. The Company hereto knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of, under, or in connection with, this Note.

 

(iv) Delivery of Process by the Holder to the Company. In the event of an action or proceeding by the Holder against the Company, and only by the Holder against the Company, service of copies of summons and/or complaint and/or any other process that may be served in any such action or proceeding may be made by the Holder via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy of such process to the Company at its last known attorney as set forth in its most recent SEC filing.

 

(v) Notices. Any notice required or permitted hereunder (including Conversion Notices) must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier service for delivery.

 

7
 

 

(g) No Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act of 1933, as amended, on the basis of being a “bad actor” as that term is established in the September 13, 2013 Small Entity Compliance Guide published by the SEC.

 

(h) Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates any applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal, fees, liquidated damages or interest on this Note.

 

(i) Securities Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. Eastern Time on the Trading Day immediately following the Date of Execution, issue a press release disclosing the material terms of the transactions contemplated hereby or (b) file a Current Report via Form 8-K, including a copy of this Note as an exhibit thereto, with the SEC within the time required by the 1934 Act. From and after the filing of such press release or 8-K, the Company represents to the Holder that it shall have publicly disclosed all material, non- public information delivered to the Holder by the Company, or any of its officers, directors, employees, or agents in connection with the transactions contemplated by this Note. The Company and the Holder shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Holder shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Holder, or without the prior consent of the Holder, with respect to any press release of the Company, none of which consents shall be unreasonably withheld, delayed, denied, or conditioned except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Holder, or include the name of the Holder in any filing with the SEC or any regulatory agency or Principal Market, without the prior written consent of the Holder, except to the extent such disclosure is required by law or Principal Market regulations, in which case the Company shall provide the Holder with prior notice of such disclosure permitted hereunder.

 

8
 

 

 

The Company agrees that this is a material term of this Note and any breach of this Section 4.00(i) will result in a default of the Note.

 

(j) Attempted Below-par Issuance. In the event that the Holder delivers a Conversion Notice to the Company and, if as of such date, (i) the Conversion Price would be less than par value of the Company’s Common Stock and (ii) within three business days of the delivery of the Conversion Notice, the Company shall not have reduced its par value such that all of the requested conversion transaction may then be accomplished, then the Company and the Holder shall utilize the following conversion protocol for Par Value Adjustment. The Holder shall transmit to the Company: (X) a “preliminary” Conversion Notice for the full number of shares of Common Stock that would be issued at the Conversion Price without regard to any below-par value conversion issues; followed by (Y) a “par value” Conversion Notice for the number of shares of Common Stock with the Conversion Price increased from the “preliminary” Conversion Price to a Conversion Price at par value; and, finally, (Z) a “liquidated damages” Conversion Notice for that number of shares of Common Stock that represents the difference between the “preliminary” Conversion Notice full number of shares and the “par value” Conversion Notice limited number of shares. The Conversion Price of such “liquidated damages Common Shares” would be the par value of the Common Stock. Accordingly, through this protocol, the Company would issue, in two transactions, an amount of shares of its Common Stock equivalent to the full number of shares of Common Stock that would have been issued in accordance with the “preliminary” Conversion Notice without regard to any below-par value conversion issues. In the event that the Holder is precluded from exercising any or all of its conversion rights hereunder as a result of a proposed “below par” conversion, the Company agrees that, in lieu of actual damages for such failure, liquidated damages may be assessed and recovered by the Holder without being required to present any evidence of the amount or character of actual damages sustained by reason thereof. The amount of such liquidated damages shall be an amount equivalent to the trading price utilized in the “preliminary” Conversion Notice multiplied by the number of shares calculated on the “liquidated damages” Conversion Notice. Such amount shall be assessed and become immediately due and payable to the Holder (at its election) in the form of a (i) cash payment, (ii) an addition to the Principal Sum of this Note, or (iii) the immediate issuance of that number of shares of Common Stock as calculated on the “liquidated damages” Conversion Notice. Such liquidated damages are intended to represent estimated actual damages and are not intended to be a penalty, but, by virtue of their genesis and subject to the election of the Holder (as set forth in the immediately preceding sentence), will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144, as the Company’s failure to maintain the par value of its Common Stock at an amount that would not result in a “below par” conversion failure is equivalent to a default as of the Issuance Date of the Note.

 

[Signature Page to Follow.]

 

9
 

 

IN WITNESS WHEREOF, the Company has caused this Fixed Convertible Promissory Note to be duly executed on the day and in the year first above written.

 

  COROWARE,INC.
   
  By:

/s/ Lloyd spencer

     
  Name: Lloyd spencer
     
  Title: CEO
     
  Email: lspencer@coroware.com
     
  Address: 601 108th Ave NE, Bellevue, WA 98004

 

This Fixed Convertible Promissory Note of October 11, 2016 is accepted this 11th day of October, 2016 by

 

TANGIERS INVESTMENT GROUP, LLC

 

By: /s/ Michael Sobeck

  
Name: Michael Sobeck  
Title: Managing Member  

 

10
 

 

EXHIBIT A

 

FORM OF CONVERSION NOTICE

 

(To be executed by the Holder in order to convert all or part of that certain $85,000 Fixed Convertible Promissory Note identified as the Note)

 

DATE:      
FROM: Tangiers Investment Group, LLC   (the “Holder”)

 

  Re: $85,000 Fixed Convertible Promissory Note (this “Note”) originally issued by CoroWare, Inc., a Delaware corporation, to Tangiers Investment Group, LLC on October 11, 2016.

 

The undersigned on behalf of Tangiers Investment Group, LLC, hereby elects to convert $_______________of the aggregate outstanding Principal Amount (as defined in the Note) indicated below of this Note into shares of Common Stock, $0.001 par value per share, of CoroWare, Inc. (the “Company”), according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any. The undersigned represents as of the date hereof that, after giving effect to the conversion of this Note pursuant to this Conversion Notice, the undersigned will not exceed the “Restricted Ownership Percentage” contained in this Note.

 

Conversion information:

Date to Effect Conversion
   
   
  Aggregate Principal Sum of Note Being Converted
   
   
  Aggregate Interest/ Fee of Principal Amount Being Converted
   
   
  Remaining Principal Balance
   
   
  Number of Shares of Common Stock to be Issued
   
   
  Applicable Conversion Price
   
   
  Signature
   
   
  Name
   
   
  Address

 

11
 

 

EXHIBIT B

 

WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF

 

COROWARE, INC.

 

The undersigned, being directors of CoroWare, Inc., a Delaware corporation (the “Company”), acting pursuant to the Bylaws of the Corporation, do hereby consent to, approve and adopt the following preamble and resolutions:

 

Convertible Note with Tangiers Investment Group, LLC

 

The board of directors of the Company has reviewed and authorized the following documents relating to the issuance of a Fixed Convertible Promissory Note in the amount of $85,000 with Tangiers Investment Group, LLC.

The documents agreed to and dated October 11, 2016 are as follows: 0% Fixed Convertible Promissory Note of CoroWare, Inc.

Irrevocable Transfer Agent Instructions Certificate of Corporate Secretary Disbursement Instructions

 

The board of directors further agree to authorize and approve the issuance of shares to the Holder at Conversion prices that are below the Company’s then current par value.

 

IN WITNESS WHEREOF, the undersign member(s) of the board of the Company executed this unanimous written consent as of October 11, 2016.

 

   
   
By:  
   
Its:  

 

12
 

 

EXHIBIT C

 

CERTIFICATE OF CORPORATE SECRETARY OF

 

COROWARE, INC.

 

(Two Pages)

 

The undersigned, Lloyd Spencer is the duly elected Corporate Secretary of CoroWare, Inc., a Delaware corporation (the “Company”).

 

I hereby warrant and represent that I have undertaken a complete and thorough review of the Company’s corporate and financial books and records, including, but not limited to, the Company’s records relating to the following:

 

(A)The issuance of that certain Fixed Convertible Promissory Note dated October 11, 2016 (the “Note Issuance Date”) issued to Tangiers Investment Group, LLC (the “Holder”) in the stated original principal amount of $85,000 (the “Note”);
   
(B)The Company’s Board of Directors duly approved the issuance of the Note to the Holder;
   
(C)The Company has not received and does not contemplate receiving any new consideration from any persons in connection with any later conversion of the Note and the issuance of the Company’s Common Stock upon any said conversion;
   
(D)To my best knowledge and after completing the aforementioned review of the Company’s stockholder and corporate records, I am able to certify that the Holder (and the persons affiliated with the Holder) are not officers, directors, or directly or indirectly, ten percent (10.00%) or more stockholders of the Company and none of said persons has had any such status in the one hundred (100) days immediately preceding the date of this Certificate;
   
(E)The Company’s Board of Directors have approved duly adopted resolutions approving the Irrevocable Instructions to the Company’s Stock Transfer Agent dated October 11, 2016;
   
(F)Mark the appropriate selection:

 

x ____ The Company represents that it is not a “shell company,” as that term is defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, and has never been a shell company, as so defined; or

 

The Company represents that (i) it was a “shell company,” as that term is defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, (ii) since______, 201__, it has no longer been a shell company, as so defined, and (iii) on ______, 201___, it provided Form 10-type information in a filing with the Securities and Exchange Commission.

 

(G)I understand the constraints imposed under Rule 144 on those persons who are or may be deemed to be “affiliates,” as that term is defined in Rule 144(a)(1) of the Securities Act of 1933, as amended.
   
(H)I understand that all of the representations set forth in this Certificate will be relied upon by counsel to Tangiers Investment Group, LLC in connection with the preparation of a legal opinion.

 

I hereby affix my signature to this Certificate and hereby confirm the accuracy of the statements made herein.

 

Signed: /s/ Lloyd spencer   Date: 10/11/2016
         
Name: Lloyd spencer   Title: CEO

 

13
 

 

EXHIBIT D

 

TO: Tangiers Investment Group, LLC
   
FROM: CoroWare, Inc.
   
DATE: October 11, 2016
   
RE: Disbursement of Funds

 

Pursuant to that certain Fixed Convertible Promissory Note between the parties listed above and dated October 11, 2016, a disbursement of funds will take place in the amount and manner described below:

 

Please disburse to:  
Amount to disburse: $75,000
Form of distribution Wire
Name CoroWare, Inc.
Company Address

14777 NE 40th Street, Suite 101

Bellevue WA 98007

Wire Instructions:

Bank: Wells Fargo

ABA Routing Number: 121000248

Account Number: 8714570036

SWIFT Code:

Account Name:

Phone:                      CoroWare, Inc.

   
For: CoroWare, Inc. TOTAL: $75,000

 

By: /s/ Lloyd spencer   Dated: October 11, 2016
         
Name: Lloyd spencer      
         
Its: CEO      

 

14

 

Exhibit 10.66

 

Note: January 30. 2017

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHlCH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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.

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF TI:llS NOTE, THE OUTSTANDING PRINCIPAL SUM REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL SUM AND ACCRUED INTEREST SET FORTH BELOW.

 

10% CONVERTIBLE PROMISSORY NOTE

 

OF

 

COROWARE, INC.

 

Issuance Date: January 30, 2017

Total Face Value of Note: $55,000

Initial Consideration: $10,000

Initial Original Issue Discount: $1,000

Initial Principal Sum Due: $11,000

 

THIS NOTE is a duly authorized Convertible Promissory Note of CoroWare, Inc. a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), designated as the Company’s 10% Convertible Promissory Note in the principal amount of $55,000 (the “Note”). This Note will become effective only upon execution by both parties and delivery of the first payment of consideration by the Holder (the “Effective Date’}

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order ofTangiers Investment Group, LLC or its registered assigns or successors-in-interest (tbe “Holder”) the Principal Sum of $55,000 (the “Principal Sum”) and to pay “guaranteed’”interest on the principal balance hereof at an an1ount equivalent to 10% of the Principal Sum, to the extent such P1incipal Sum and “guaranteed’”interest and any other iJ1terest, fees. liquidated damages and/or items due lO Holder herein bave beeu rt:paitl ur cu11vc11cd inlu the Company’s Conunon Stock (the “Common Stock”). in accordance with the te1ms hereof. Upon the execution of this Note the sum of $10,000 shall be remitted and delivered to the Company, and $1,000 shall be retained by the Purchaser through an original issue ctiscow1t (the “OJD”) for due diligence and legal bills related to this transaction. The OID is set at 10% of any consideration paid. The Holder may pay additional Consideration to the Company in such amounts and at such dates (each, an “Additional Consideration Date”) as Holder may choose in its sole discretion. The Principal Sum due to Holder shall be prorated based on the Consideration actually paid by Holder (plus the ‘·guaranteed” interest and 10% OID. both which are prorated based on the Consideration actually paid by the Holder, as well as any other interest or fees) such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of this Note. The Matmity Date is one year from the Effective Date of each payment (the “Maturity Date”) and is the date upon which the Principal Sum of this Note. as well as any unpaid interest and other fees, shall be due and payable.

 

 
 

 

In addition to the “guaranteed” interest referenced above, and in the Event of Default pursuant to Section 2.00(a), additionaJ interest will accrue from the date of the Event of Default at the rate equal to the lower of 20% per annum or the highest rate permitted by law (the “Default Rate”)

 

This Note will become effective only upon the execution by both parties. including the execution of Exhibits B, C, Dand E and the Irrevocable Transfer Agent Instructions (the “Date of Execution”) and delivery of the initial payment of consideration by the Holder (the “Effective Date”).

 

This Note may be prepaid by the Company, i11 whole or in part, according to the following schedule:

 

Days Since Effective Date   Prepayment Amount
Under 30   100% of Principal Amount
31-60   110% of Principal Amount
61-90   120% of Principal Amount
91-120   130% of Principal Amount
121-150   140% of Principal Amount
151-180   150% of Principal Amount

 

After l80 days from the Effective Date this Note may not be prepaid without written consent from Holder. which consent may be withheld, delayed or denied in Holder’s sole and absolute discretion. Whenever any amount expressed to be due by the te1ms of this Note is due on any day which is not a Business Day (as defined below). the same shall instead be due on the next succeeding day which is a Business Day. If the Note is in default, per Section 2.00(a) below, the Company may not prepay the Note without written consent of the Holder.

 

For purposes hereof the following terms shall have the meanings ascribed to them below:

 

“Business Day” shall mean any day other than a Saturday. SW1day or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.

 

2
 

 

“Conversion Price” shall be equal to lower of: (a) 50% of the lowest trading price of the Company’s common stock during the 25 consecutive Trading Days prior to the date on which Holder elects to convert all or prut of the Note or (b) 50% of the lowest trading price of the Company’s common stock during the 25 consecutive Trading Days prior to the Effective Date. For the purpose of calculating the Conversion Price only, any time after 4:00 pm Eastern Time (the closing time of the Principal Market) shall be considered to be the beginning of the next Business Day. If the Company is placed on “chilled” status with the Depository Trust Company (“DTC”), the discount shall be increased by 10%, i.e., from 50% to 60%, until such chill is remedied. If the Company is not Deposits and Withdrawal at Custodian (“DWAC”) eligible through their Transfer Agent and DTC’s Fast Automated Securities Transfer (“FAST”) system, the discount will be increased by 5%, i.e., from 50% to 55%. In the case of both, the discount shall be a cumulative increase of 15%. i.e., from 50% to 65%. Any default of this Note not remedied within the applicable cure period will result in a permru1ent additional 10% increase, i.e., from 50% to 60%, in addition to any other discount, as provided above. to the Conversion Price discount.

 

“Principal Amount” shall refer to the sum of (i) the original principal amount of this Note (including the original issue discount, prorated if the Note has not been funded in full), (ii) any additional payments made by the Holder towards the Principal Sum (iii) all guaranteed and other accrued but unpaid interest hereunder, (iv) any fees due hereunder, (v) liquidated damages, and (vi) any default payments owing under the Note, in each case previously paid or added to the Principal Amount.

 

“Principal Market” shall refer to the primary exchange on which the Company’s common stock is traded or quoted.

 

“Trading Day” shall mean a day on which there is trading or quoting for any security on the Principal Market.

 

“Underlying Shares” means the shares of common stock into which the Note is convertible (including interest, fees, liquidated damages and/or principal payments in common stock as set forth herein) in accordance with the terms hereof.

 

The following terms and conditions shall apply to this Note:

 

Section 1.00 Conversion.

 

(a) Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at the Holder’s sole option, at any time and from time to time to convert in whole or in part the outstanding and unpaid Principal Amount under this Note into shares of Common Stock as per the Conversion Formula. The date of any conversion notice (“Conversion Notice’’) hereunder shall be referred to herein as the “Conversion Date”.

 

(b) Stock Certificates or DWAC. The Company will deliver to the Holder, or Holder’s authorized designee, no later than 2 Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions if the shares of Common Stock underlying the portion of the Note being converted are eligible under a resale exemption pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii) of the Securities Act of 1933. as amended) representing the number of shares of Common Stock being acquired upon the conversion of this Note. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note. provided the Company’s transfer agent is participating in DTC s FAST program, the Company shall instead use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) broker with DTC through its DWAC program (provided that the same time periods herein as for stock certificates shall apply).

 

3
 

 

(c) Charges and Expenses. Issuance of Common Stock to Holder, or any of its assignees, upon the conversion of this Note shall be made without charge to the Holder for any issuance fee, transfer tax. legal opinion and related charges, postage/mailing charge or any other expense with respect to the issuance of such Common Stock. Company shall pay all Transfer Agent fees incurred from the issuance of the Common Stock to Holder, as well as any and all other fees and charges required by the Transfer Agent as a condition to effectuate such issuance. Any such fees or charges, as noted in this Section that are paid by the Holder (whether from the Company’s delays, outright refusal to pay, or otherwise), will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144.

 

(d) Deliverv Timeline. If the Company fails to deliver to the Holder such certificate or certificates (or shares through the DWAC program) pursuant to this Section (free of any restrictions on transfer or legends. if eligible) prior to 3 Trading Days after the Conversion Date. the Company shall pay to the Holder as liquidated damages an amount equal to $2.000 per day, until such certificate or certificates are delivered. The Company acknowledges that it would be extremely difficult or impracticable to determine the Holder’s actual damages and costs resulting from a failure to deliver the Common Stock and the inclusion herein of any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs. Such liquidated damages will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144.

 

(e) Reservation of Underlying Securities. The Company covenants that it will at all times reserve and keep available for Holder, out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, five times the nun1ber of shares of Common Stock as shall be issuable (taking into account the adjustments under this Section 1.00, but without regard to any ownership limitations contained herein) upon the conversion of this Note (consisting of the Principal Amount) to Common Stock (the ..Required Reserve’’). The Company covenants that all shares of Common Stock that shall be issuable will. upon issue, be duly authorized. validly issued. fully-paid, non-assessable and freely-tractable (if eligible). If the amount of shares on reserve in Holder’s nan1e at the Company’s transfer agent for this Note shall drop below the Required Reserve. the Company will. within 2 Trading Days of notification from Holder. instruct the transfer agent to increase the number of shares so that the Required Reserve is met. In the event that the Company does not instrnct the transfer agent to increase the number of shares so that the Required Reserve is met, the Holder will be allowed. if applicable, to provide this instruction as per the terms of the Irrevocable Transfer Agent Instructions attached to this Note. The Company agrees that the maintenance of the Required Reserve is a material term of this Note and any breach of this Section l .00(e) will result in a default of the Note.

 

(f) Conversion Limitation. The Holder will not submit a conversion to the Company that would result in the Holder beneficially owning more than 9.99% of the then total outstanding shares of the Company (“Restricted Ownership Percentage”).

 

4
 

 

(g) Conversion Delavs. If the Company fails to deliver shares in accordance with the timeframe stated in Section 1.00(b), the Holder. at any time prior to selling all of those shares, may rescind any portion, in whole or in part of that particular conversion attributable to the unsold shares. The rescinded conversion amount will be returned to the Principal Sum with the rescinded conversion shares returned to the Company, under the expectation that any returned conversion amounts will tack back to the Effective Date.

 

(h) Shorting and Hedging. Holder may not engage in any “shorting” or “hedging·· transaction(s) in the Common Stock prior to conversion.

 

(i) Conversion Ri11ht Unconditional. If the Holder shall provide a Conversion Notice as provided herein. the Company’s obligations to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment, or alleged breach by the Holder of any obligation to the Company.

 

Section 2.00 Defaults and Remedies.

 

(a) Events of Default. An “Event of Default” is: (i) a default in payment of any amount due hereunder which default continues for more than 5 Trading Days after the due date; (ii) a default in the timely issuance of underlying shares upon and in accordance with tenns of Section 1.00, which default continues for 2 Trading Days after the Company has failed to issue shares or deliver stock certificates within the 3rd Trading Day following the Conversion Date; (iii) if the Company does not issue the press release or file the Current Report on Form 8- K, in each case in accordance with the provisions and the deadlines referenced Section 4.00(i); (iv) failure by the Company for 3 days after notice has been received by the Company to comply with any material provision of this Note; (v) failure of the Company to remain compliant with DTC, thus incurring a “chilled” status with DTC; (vi) any default of any mortgage, indenture or instrument which may be issued, or by which there may be secured or evidenced any indebtedness, for money borrowed by the Company or for money borrowed the repayment of which is guaranteed by the Company, whether such indebtedness or guarantee now exists or shall be created hereafter: (vii) if the Company is subject to any Bankruptcy Event; (viii) any failure of the Company to satisfy its “filing” obligations under the Securities Exchange Act of 1934, as amended (the ·’1934 Act’’) and the rules and guidelines issued by OTC Markets News Service, OTCMarkets.com and their affiliates; (ix) failure of the Company to remain in good standing with the State of Delaware; (x) any failure of the Company to provide the Holder with information related to its corporate structure including, but not limited to, the number of authorized and outstanding shares, public float, etc. within 1 Trading Day of request by Holder; (xi) failure by the Company to maintain the Required Reserve in accordance with the terms of Section 1.00(e); (xii) failure of Company’s Common Stock to maintain a closing bid price in its Principal Market for more than 3 consecutive Trading Days: (xiii) any delisting from a Principal Market for any reason: (xiv) failure by Company to pay any of its Transfer Agent fees in excess of $2,000 or to maintain a Transfer Agent of record; (xv) failure by Company to notify Holder of a change in Transfer Agent within 24 hours of such change; (xvi) any trading suspension imposed by the United States Securities and Exchange Commission (the “SEC”) under Sections 12(j) or l2(k) of the 1934 Act; (xvii) failure by the Company to meet all requirements necessary to satisfy the availability of Rule 144 to the Holder or its assigns, including but not limited to the timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC, requirements for XBRL filings, and requirements for disclosure of financial statements on its website; or (xviii) failure of the Company to abide by the terms of the right of first refusal contained in Section 4.00(k).

 

5
 

 

(b) Remedies. If an Event of Default occurs, the outstanding Principal Amount of this Note owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the “Mandatory Default Amount’·. The Mandatory Default Amount means 150% of the outstanding Principal Amount of this Note, will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Note. this Note shall accrue additional interest. in addition to the Note’s “guaranteed” interest, at a rate equal to the lesser of 20% per annum or the maximum rate permitted under applicable Jaw. Finally. commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, an additional permanent 10% increase to the Conversion Price discount v.rill go into effect. In connection with such acceleration described herein, the Holder need not provide, and the Issuer hereby waives. any presentment, demand. protest or other notice of any kind, and the Holder 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 the Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the note until such time, if any, as the Holder receives full payment pursuant to this Section 2.00(b). No such rescission or annulment shall affect any subsequent event of default or impair any right consequent thereon. Nothing herein shall limit the Holder’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 the Issuer’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the Note as required pursuant to the tenns hereof.

 

Section 3.00 Representations and Warranties of Holder.

 

Holder hereby represents and warrants to the Company that:

 

(a) Holder is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933. as amended (the “1933 Act”). and will acquire this Note and the Underlying Shares (collectively, the “Securities”) for its own account and not with a view to a sale or distribution thereof as that tenn is used in Section 2(a)(l 1) of the 1933 Act, in a manner which would require registration under the 1933 Act or any state securities laws. Holder has such knowledge and experience in financial and business matters that such Holder is capable of evaluating the merits and risks of the Securities. Holder can bear the economic risk of the Securities, has knowledge and experience in financial business matters and is capable of bearing and managing the risk of investment in the Securities. Holder recognizes that the Securities have not been registered under the 1933 Act, nor under the securities laws of any state and, therefore. cannot be resold unless the resale of the Securities is registered under the 1933 Act or unless an exemption from registration is available. Holder has carefully considered and has, to the extent Holder believes such discussion necessary. discussed with its professional. legal, tax and financial advisors, the suitability of an investment in the Securities for its particular tax and financial situation and its advisers, if such advisors were deemed necessary, and has determined that the Securities are a suitable investment for it. Holder has not been offered the Securities by any form of general solicitation or advertising, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or other similar media or television or radio broadcast or any seminar or meeting where, to Holders’ knowledge, those individuals that have attended have been invited by any such or similar means of general solicitation or advertising. Holder has had an opportunity to ask questions of and receive satisfactory answers from the Company, or any person or persons acting on behalf of the Company, concerning the terms and conditions of the Securities and the Company, and all such questions have been answered to the full satisfaction of Holder. The Company has not supplied Holder any information regarding the Securities or an investment in the Securities other than as contained in this Agreement. and Holder is relying on its own investigation and evaluation of the Company and the Securities and not on any other information.

 

6
 

 

(b) The Holder is a limited liability company duly organized, validly existing and in good standing under tbe laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted. The Holder is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.

 

(c) All corporate action has been taken on the part of the Holder, its officers. directors and stockholders necessary for the authorization, execution and delivery of this Note. The Holder has taken all corporate action required to make all of the obligations of the Holder reflected in the provisions of this Note. valid and enforceable obligations.

 

(d) Each certificate or instrument representing Securities will be endorsed with the following legend (or a substantially similar legend), unless or until registered under the 1933 Act or exempt from registration:

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES WHICH IS REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

 

Section 4.00 General.

 

(a) Pavment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys’ fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.

 

(b) Assignment Etc. The Holder may assign or transfer this Note to any transferee at its sole discretion. This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.

 

(c) Funding Window. The Company agrees that it will not enter into a convertible debt financing transaction with any party other than the Holder for a period of 20 Trading Days following the Effective Date and each Additional Consideration Date, as relevant. The Company agrees that this is a material term of this Note and any breach of this Section 4.00(c) will result in a default of the Note.

 

7
 

 

(d) Piggyback Registration Rights. The Company shall include on the next registration statement that the Company files with the SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 30% of the outstanding Principal Sum of this Note, but not less than $20,000, being immediately due and payable to the Holder at its election in the fo1m of a cash payment or an addition to the Principal Sum of this Note.

 

(e) Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any convertible debt security (whether such debt begins with a convertible feature or such feature is added at a later date) with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note. then the Company shall notify the Holder of such additional or more favorable term and such term, at the Holder’s option, shall become a part of this Note and its supporting documentation. The types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts. conversion look back periods. interest rates, original issue discount percentages and warrant coverage.

 

(f) Governing Law: Jurisdiction.

 

(i) Governing Law. This Note will be governed by and construed in accordance with the laws of the state of California without regard to any conflicts of laws or provisions thereof that would otherwise require the application of the law of any other jurisdiction.

 

{ii) Jurisdiction and Venue. Any dispute or claim arising to or in any way related to this Note or the rights and obligations of each of the parties shall be brought only in the state courts of California or in the federal courts located in San Diego County, California.

 

(iii) No Jury Trial. The Company hereto knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of. under. or in connection with, this Note.

 

(iv) Delivery of Process by the Holder to the Company. In the event of an action or proceeding by the Holder against the Company, and only by the Holder against the Company. service of copies of summons and/or complaint and/or any other process that may be served in any such action or proceeding may be made by the Holder via U.S. Mail. overnight delivery service such as FedEx or UPS. email, fax. or process server, or by mailing or otherwise delivering a copy of such process to the Company at its last known attorney as set forth in its most recent SEC filing.

 

(v) Notices. Any notice required or permitted hereunder (including Conversion Notices) must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier service for delivery.

 

(g) No Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act of 1933. as amended. on the basis of being a “bad actor” as that term is established in the September 13, 2013 Small Entity Compliance Guide published by the SEC.

 

8
 

 

(h) Uswy. If it shall be found that any interest or other amount deemed interest due hereunder violates any applicable law governing usury. the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a po1tion of the principal, fees, liquidated damages or interest on this Note.

 

(i) Securities Laws Disclosure; Publicitv. The Company shall (a) by 9:30 a.m. Eastern Time on the Trading Day immediately following the Date of Execution. issue a press release disclosing the material terms of the transactions contemplated hereby. and (b) file a Current Report on Form 8-K, including a copy of this Note as an exhibit thereto, with the SEC within the time required by the 1934 Act. From and after the filing of such press release, the Company represents to the Holder that it shall have publicly disclosed all material, non-public information delivered to the Holder by the Company, or any of its officers, directors. employees. or agents in connection with the transactions contemplated by this Note. The Company and the Holder shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Holder shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Holder, or without the prior consent of the Holder, with respect to any press release of the Company, none of which consents shall be unreasonably withheld, delayed. denied, or conditioned except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Holder, or include the name of the Holder in any filing with the SEC or any regulatory agency or Principal Market, without the prior written consent of the Holder, except to the extent such disclosure is required by law or Principal Market regulations, in which case the Company shall provide the Holder with prior notice of such disclosure permitted hereunder.

 

The Company agrees that this is a material term of this Note and any breach of this Section 4.00(i) will result in a default of the Note.

 

9
 

 

(j) Attempted Below-par Issuance. In the event that the Holder delivers a Conversion Notice to the Company and, if as of such date, (i) the Conversion Price would be less than par value of the Company’s Common Stock and (ii) within three business days of the delivery of the Conversion Notice, the Company shall not have reduced its par value such that all of the requested conversion transaction may then be accomplished, then the Company and the Holder shall utilize the following conversion protocol for Par Value Adjustment. The Holder shall transmit to the Company: (X) a “preliminary” Conversion Notice for the full number of shares of Common Stock that would be issued at the Conversion Price without regard to any below-par value conversion issues; followed by (Y) a ·’par value’ Conversion Notice for the number of shares of Common Stock with the Conversion Price increased from the·’preliminary” Conversion Price to a Conversion Price at par value; and, finally, (Z) a “liquidated damages” Conversion Notice for that number of shares of Common Stock that represents the difference between the “preliminary” Conversion Notice full number of shares and the “par value” Conversion Notice limited number of shares. The Conversion Price of such “liquidated damages Common Shares” would be the par value of the Common Stock. Accordingly, through this protocol, the Company would issue, in two transactions. an amount of shares of its Common Stock equivalent to the full number of shares of Common Stock that would have been issued in accordance with the “preliminary” Conversion Notice without regard to any below-par value conversion issues. In the event that the Holder is precluded from exercising any or all of its conversion rights hereunder as a result of a proposed “below par” conversion, the Company agrees that, in Lieu of actual damages for such failure, liquidated damages may be assessed and recovered by the Holder without being required to present any evidence of the amount or character of actual damages sustained by reason thereof. The amount of such liquidated damages shall be an amount equivalent to the trading price utilized in the “preliminary” Conversion Notice multiplied by the number of shares calculated on the “liquidated damages · Conversion Notice. Such amount shall be assessed and become immediately due and payable to the Holder (at its election) in the form of a (i) cash payment, (ii) an addition to the Principal Sum of this Note, or (iii) the immediate issuance of that number of shares of Common Stock as calculated on the “liquidated damages” Conversion Notice. Such liquidated damages are intended to represent estimated actual damages and are not intended to be a penalty, but, by virtue of their genesis and subject to the election of the Holder (as set forth in the immediately preceding sentence), will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144, as the Company’s failure to maintain the par value of its Common Stock at an amount that would not result in a “below par” conversion failure is equivalent to a default as of the Issuance Date of the Note.

 

(k) Right of First Refusal. From and after the date of this Note and at all times hereafter while the Note is outstanding, the Parties agree that, in the event that the Company receives any written or oral proposal (the “Proposal”) containing one or more offers to provide additional capital or equity or debt financing (the “Financing Amount”), the Company agrees that it shall provide a copy of all documents received relating to the Proposal together with a complete and accurate description of the Proposal to the Holder and all amendments, revisions, and supplements thereto (the “Proposal Documents”) no later than 3 business days from the receipt of the Proposal Documents. Following receipt of the Proposal Documents from the Company, the Holder shall have the right (the ‘·Right of First Refusal”), but not the obligation, for a period of 5 business days thereafter (the “Exercise Period”), to invest. at similar or better terms to the Company, an amount equal to or greater than the Financing Amount, upon written notice to the Company that the Holder is exercising the Right of First Refusal provided hereby. In furtherance of the Right of First Refusal, the Company agrees that it will cooperate and assist the Holder in conducting a due diligence investigation of the Company and its corporate and financial affairs and promptly provide the Holder with information and documents that the Holder may reasonably request so as to allow the Holder to make an informed investment decision. However. the Company and the Holder agree that the Holder shall have no more than 5 business days from and after the expiration of the Exercise Period to exercise its Right of First Refusal hereunder. This Right of First Refusal shall extend to all purchases of debt held by, or assigned to or from. current stockholders, vendors, or creditors, all transactions under Sections 3(a)9 and/or 3(a)IO or the Securities Act of 1933, as amended, and all equity line-of-credit transactions.

 

[Signature Page to Follow.]

 

10
 

 

IN WITNESS WHEREOF, the Company has caused this Convertible Promissory note to be duly executed on the day and in the year first above written.

 

  COROWARE, INC.
     
  By: /s/ Lloyd T Spencer
  Name: Lloyd T Spencer
  Title: President and CEO
  Email: ceo coronoware.com
  Address: 601 108th Avenue E. Suite 1900.
    Bellevue WA 98004

 

This Convertible Promissory note of January 30, 2017 is accepted this_27th_day of January, 2017 by

 

TANGIERS INVESTMENT GROUP, LLC  

 

By: /s/ Michael Sobeck  
Name: Michael Sobeck  
Title: Managing Member  

 

11
 

 

EXHIBIT A

 

FORM OF CONVERSION NOTICE

 

(To be executed by the Holder in order to convert all or part of that certain $55.000 Convertible Promissory Note identified as the Note)

 

DATE:    
FROM: Tangiers Investment Group, LLC (the ‘‘Holder”)

 

  Re: $55,000 Convertible Promissory Note (this “Note”) originally issued by CoroWare. Inc., a Delaware corporation. to Tangiers Investment Group, LLC on January 30, 2017.

 

The undersigned on behalf of Tangiers Investment Group, LLC, hereby elects to convert $                             of the aggregate outstanding Principal Amount (as defined in the Note) indicated below of this Note into shares of Common Stock, $0.0001 par value per share, of CoroWare, Inc. (the “Company”), according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any. The undersigned represents as of the date hereof that after giving effect to the conversion of this Note pursuant to this Conversion Notice, the undersigned will not exceed the ··Restricted Ownership Percentage·· contained in this Note.

 

Conversion information:  
  Date to Effect Conversion
   
   
 

Aggregate Principal Sum of Note Being Converted

   
   
  Aggregate Interest/Fees Being Converted
   
   
  Remaining Principal Balance
   
   
  Number of Shares of Common Stock to be issued
   
   
  Applicable Conversion Price
   
   
  Signature
   
   
  Name
   
   
  Address

 

12
 

 

EXHIBIT B

 

WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF

 

COROWARE, INC.

 

The undersigned. being directors of CoroWare, Inc.. a Delaware corporation (the “Company”). acting pursuant to the Bylaws of the Corporation. do hereby consent to. approve and adopt the following preamble and resolutions:

 

Convertible Note with Tangiers Investment Group, LLC

 

The board of directors of the Company has reviewed and authorized the following documents relating to the issuance of a Convertible Promissory Note in the amount of $55,000 with Tangiers Investment Group. LLC.

 

The documents agreed to and dated January 30, 2017 are as follows:

 

10% Convertible Promissory Note of CoroWare, Inc.

Irrevocable Transfer Agent Instructions

Notarized Certificate of Chief Executive Officer

Disbursement Instructions

Company Capitalization Table

 

The board of directors further agree to authorize and approve the issuance of shares to the Holder at Conversion prices that are below the Company’s then current par value.

 

IN WITNESS WHEREOF, the undersign member(s) of the board of the Company executed this unanimous written consent as of January 30, 2017.

 

  /s/ Lloyd T Spencer  
By: Lloyd T Spencer  

 

Its: President and CEO  

 

13
 

 

EXHIBITC

 

NOTARIZED CERTIFICATE OF CHIEF EXECUTIVE OFFICER OF

 

COROWARE, INC.

 

(Two Pages)

 

The undersigned. Lloyd T Spencer am the duly elected Chief Executive Officer of CoroWare, Inc., a Delaware corporation (the “Company”).

 

1 hereby warrant and represent that I have undertaken a complete and thorough review of the Company’s corporate and financial books and records, including, but not limited to, the Company’s records relating to the following:

 

(A)The issuance of that certain Convertible Promissory Note dated January 30. 2017 (the “Note Issuance Date”) issued to Tangiers Investment Group, LLC (the ·’Holder·’) in the stated original principal amount of $55.000 (the ·’Note’’);

 

(B)The Company’s Board of Directors duly approved the issuance of the Note to the Holder;

 

(C)The Company has not received and does not contemplate receiving any new consideration from any persons in connection with any later conversion of the Note and the issuance of the Company’s Common Stock upon any said conversion;

 

(D)To my best knowledge and after completing the aforementioned review of the Company’s stockholder and corporate records, I am able to certify that the Holder (and the persons affiliated with the Holder) are not officers, directors. or directly or indirectly. ten percent (10.00%) or more stockholders of the Company and none of said persons has had any such status in the one hundred (100) days immediately preceding the date of this Certificate;

 

(E)The Company’s Board of Directors have approved duly adopted resolutions approving the Irrevocable Instructions to the Company’s Stock Transfer Agent dated January 30, 2017;

 

(F)Mark the appropriate selection:

 

x The Company represents that it is not a “shell company”; as that term is defined in Section 12b-2 of the Securities Exchange Act of 1934. as amended, and has never been a shell company. as so defined; or

 

The Company represents that (i) it was a “shell company,” as that term is defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, (ii) since ____, 201_, it has no longer been a shell company: as so defined, and (iii) on _____ , 201_, it provided Form 10-type information in a filing with the Securities and Exchange Commission.

 

14
 

 

(G)I understand the constraints imposed under Rule 144 on those persons who are or may be deemed to be “affiliates,” as that term is defined in Rule 144(a)(l) of the Securities Act of 1933, as amended.

 

(H)I understand that all of the representations set forth in this Certificate will be relied upon by counsel to Tangiers Investment Group, LLC in connection with the preparation of a legal opinion.

 

I hereby affix my signature to this Notarized Certificate and hereby confirm the accuracy of the statements made herein.

 

Signed: /s/ Lloyd T. Spencer   Date:
Name: Lloyd T. Spencer   Title:  

 

SUBSCRIBED AND SWORN TO BEFORE ME ON THIS                  DAY OF

 

    Commission Expires:  

 

Notary Public

 

 

15
 

 

EXHIBIT D

 

TO: Tangiers Investment Group, LLC

 

FROM: CoroWare, Inc.

 

DATE: January 30, 2017

 

RE: Disbursement of Funds

 

Pursuant to that certain Convertible Promissory Note between the parties listed above and dated January 30, 2017, a disbursement of funds will take place in the amount and manner described below:

 

Please disburse to:  
Amount to disburse:   $6,000
Form of distribution   Wire
Name   CoroWare, Inc.
Company Address  

601 108th Avenue NE Suite 1900

Bellevue, WA 98004

Wire Instructions:  

Bank: Wells Fargo Bank

ABA Routing Number: 121000248 / 125008547

Account Number: 8714570036

SWIFT Code:

Account Name:

Phone:

 

Please disburse to:    
Amount to disburse:   $4,000
Form of distribution   Credit Card
Name   OTC Markets
Company Address    
Wire Instructions:   Pay via Credit Card

 

TOTAL: $10,000

 

    Dated: January 30, 2017
Name    
Its;    

 

16
 

 

COMPANY CAPITALIZATION TABLE AS OF JANUARY 30, 2017

 

COMMON STOCK AND COMMON STOCK EQUIVALENTS

ISSUED, OUTSTANDING AND RESERVED

 

DESCRIPTION  AMOUNT 
Authorized Common Stock     
Authorized Capital Stock     
Authorized Common Stock   35,000,000,000 
Issued Common Stock   13.051,764,208 
Outstanding Common Stock     
Treasury Stock     
*Authorized, but unissued   l 0.139.625,79 
    

5,000,000.000

Reserved for Tangiers

 
Authorized Preferred Stock     
Issued Preferred Stock     
      
Reserved for Equity Incentive Plans   0 
Reserved for Convertible Debt   11,808,610.000 
Reserved for Options and Warrants   0 
Reserved for Otl1er Purposes   0 
      
TOTAL COMMON STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING   13,051,764,208 

 

* This number includes all shares reserved for Convertible Debt

 

Note: If not applicable, enter “n/a” or “zero” in Column 2.

 

17
 

 

CURRENT DEBT AND LIABILITIES TABLE

CONVERTIBLE PROMISSORY NOTE BALANCES AND PROMISSORY NOTE BALANCES

 

DESCRIPTION   ISSUANCE DATE   AMOUNT
Convertible Promissory Note        
Refer to CoroWare IOQ 2016-Q2        
         
         
         
         
Promissory Note        
Refer to CoroWare 10Q 2016-Q2        
         
         
         
         
Other Debt and Liabilities        
Refer to CoroWare 10Q 2016-Q2        
         
         
         

 

Note: If not applicable, enter “n/a’’ or ..zero’· in Column 2.

 

To my best knowledge and after completing the aforementioned review of the Company’s stockholder and corporate records, I am able to certify the accuracy of the statements made herein.

 

COROWARE, INC.      
         
By /s/ Lloyd T. Spencer   Dated: January 30, 2017
Name: Lloyd T. Spencer    
Title: President and CEO    

 

18

 

Exhibit 10.67

 

Exhibit A.

 

THIS FOURTEEN PERCENT (14%) CONVERTIBLE PROMISSORY NOTE IS ISSUED IN EXCHANGE FOR THAT CERTAIN PROMISSORY NOTE ISSUED TO DAVID RATZKER ON JULY 20, 2006. FOR PURPOSES OF RULE 144, THIS NOTE SHALL BE DEEMED TO HAVE BEEN ISSUED ON JULY 20, 2006.

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION.

 

COROWARE, INC.

 

$131,377.39

 

FOURTEEN PERCENT (14%) CONVERTIBLE PROMISSORY NOTE DATED FEBRUARY 25, 2013

 

FOR VALUE RECEIVED of $131,377.39 less a $81,377.39 discount COROWARE, INC., a Delaware corporation (hereinafter called “Borrower” or the “Company”), hereby promises to pay to AGS CAPITAL GROUP, LLC or its assigns or successors-in-interest (the “Holder”) or order, without demand, the aggregate principal amount of ONE HUNDRED THIRTY ONE THOUSAND THREE HUNDRED AND SEVENTY SEVEN DOLLARS AND THIRTY NINE CENTS ($131,377.39) (the “Principal Amount”), together with interest thereon from the Issue Date, payable on February 25, 2014 (the “Maturity Date”). Interest shall accrue at a rate of fourteen percent (14%) per annum, compounded monthly. “Outstanding Balance” means the Original Principal Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued but unpaid interest (including with limitation Default Interest), collection and enforcements costs, and any other fees or charges incurred under this Note or under the Purchase Agreement.

 

ARTICLE I

GENERAL PROVISIONS

 

1.1 Conversion Privileges. The conversion privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until Note is paid in full regardless of the occurrence of an Event of Default but subject to Article II. The Principal Amount of Note together with all unpaid interest accrued thereon and any other amounts payable hereunder, or such portion thereof, that has not previously been converted into common stock, of the Company (the “Common Stock”) in accordance with Article II hereof, if any, shall be payable in full on the Maturity Date.

 

1.2 Payment of Interest. There shall be no periodic payments of interest on this Note.

 

ARTICLE II

CONVERSION RIGHTS

 

The Holder shall have the right to convert the Principal Amount together with all unpaid interest accrued thereon of this Note into shares of the Borrower’s Common Stock as set forth below.

 

 
 

 

2.1 Conversion into the Borrower’s Common Stock.

 

(a) Conversion Price. The conversion price (the “Conversion Price”) shall the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean thirty five percent (35%) multiplied by the Market Price (as defined herein); provided, however, that if, after the Issue Date, the Borrower issues a convertible promissory note to any Person other than the Holder or its Affiliates which contains a conversion price (the “Third-Party Conversion Price”) which the Borrower and the Holder agree in writing, after good faith negotiations, is less than the effective Variable Conversion Price (after giving effect to any shares of Common Stock issued, or issuable, to the Holder or its Affiliates in connection with this Note or any other agreement between the Borrower and the Holder), then the Variable Conversion Price shall be reduced to the Third-Party Conversion Price. Should the Variable Conversion Price be less than the Par Value ($.0001) of the company’s Common Stock, the principal reduction resulting from this conversion will be less than the dollar amount of the conversion and shall be added back to the principal amount of the Note. “Market Price” means the lowest closing bid price in the twenty Trading Days prior to the applicable Conversion Date) “Trading Day” shall mean any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time). The Conversion Price set forth herein shall be reduced an additional ten percent of the lowest closing bid price in the twenty Trading Days prior to the applicable Conversion Date for each Public Information Failure. If the Company is late in any of their filings with the SEC, such lateness shall constitute a Public Information Failure. For purposes of clarity, it is understood that if there shall be a Public Information Failure which is cured and then repeated once, the Conversion Price shall be reduced an additional twenty percent of the lowest closing bid price in the twenty Trading Days prior to the applicable Conversion Date. The Conversion Price may be adjusted pursuant to the other terms of this Note.

 

(b) Conversion. The Holder shall have the option, but shall not be required, to convert all or a portion of the Note into a number of fully paid and non-assessable shares of Common Stock (the “Conversion Shares”). The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding Principal Amount together with all unpaid interest accrued thereon of this Note to be converted by (y) the Conversion Price. The Company may deliver an objection to any Notice of Conversion within one Business Day of delivery of such Notice of Conversion. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company.

 

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(c) Mechanics of Conversion. As a condition to effecting the conversion set forth in Section 2.1(b) above, the Holder shall properly complete and deliver to the Company a Notice of Conversion, a form of which is annexed hereto as Exhibit B. The Notice of Conversion shall set forth the Principal Amount together with all unpaid interest accrued thereon of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. Upon timely delivery to the Borrower of the Notice of Conversion, certificates evidencing that number of shares of Common Stock for the portion of the Note converted in accordance herewith shall be transmitted by the Company’s transfer agent to the Holder by crediting the account of the Holder’s broker with The Depository Trust Company through its Deposit / Withdrawal at Custodian system if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Conversion Shares to, or resale of the Conversion Shares by, the Holder or (B) the shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the address specified by the Holder in the Notice of Conversion by the date that is three (3) Trading Days after the Conversion Date (such third day being the “Share Delivery Date”). The Borrower will not issue fraction shares or scrip representing fractions of shares upon conversion, but the Borrower will round the number of the she shares up to the nearest whole share.

 

(d) Obligation to Deliver Conversion Shares Absolute; Certain Remedies.

 

(i) Obligation Absolute. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares. The Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. All payments under this Note (whether made by the Borrower or any other person) to or for the account of the Holder hereunder shall be made free and clear of and without reduction by reason of any present and future income, stamp, registration and other taxes, levies, duties, costs and charges whatsoever imposed, assessed, levied or collected by the United States or any political subdivision or taxing authority thereof or therein, together with interest thereon and penalties with respect thereto, if any on or in respect of this Note (such taxes, levies, duties, costs and charges being herein collectively called “Taxes”).

 

(ii) Failure to Deliver Common Stock Prior to Delivery Date. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered as required by Section 2.1(c) by the Share Delivery Date (a “Conversion Default”), the Borrower shall pay in cash to the Holder for each calendar day beyond the Delivery Date that the Borrower fails to deliver such Common Stock an amount equal to the greater of (i) $2,000.00 and (ii) 2% of the product of (1) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled multiplied by (2) the Closing Trading Price of the Common Stock on the Trading Day immediately preceding the last possible date on which the Borrower could have issued such shares of Common Stock to the Holder without violating Section 2.1(c) (the “Conversion Default Payment”). Such cash amount shall be paid to the Holder by the fifth day of the month following the month in which it has accrued (the “Conversion Default Payment Due Date”). In the event such cash amount is not received by the Holder by the Conversion Default Payment Due Date, at the option of the Holder (without notice to the Borrower), the Conversion Default Payment shall be added to the Outstanding Balance of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note.

 

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(iii) Rescission. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

 

(e) Adjustment. The number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(b), shall be subject to adjustment, from time to time, upon the happening of certain events while this conversion right remains outstanding, as follows:

 

(f) Reservation of Shares. The Borrower represents at all times to have authorized and reserved four times the number of shares that is actually issuable upon full conversion of this Note (based on the Conversion Price in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased from time to time as required to insure compliance with this provision. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which this Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of this Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue shares of the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of issuing the necessary shares of Common Stock in accordance with the terms and conditions of this Note. If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default.

 

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2.2 Effect of Certain Events.

 

(a) Fundamental Transaction Consent Right. The Borrower shall not enter into or be party to a Fundamental Transaction (as defined below), unless the Borrower obtains the prior written consent of the Holder to enter into such Fundamental Transaction. For purposes of this Note, “Fundamental Transaction” means that (i) (1) the 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 the Borrower or any of its subsidiaries is the surviving corporation) any other individual, corporation, limited liability company, partnership, association, trust or other entity or organization (collectively, “Person”), or (2) the 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 (3) the Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other Person 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 the Borrower (not including any shares of voting stock of the Borrower held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) the 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 whereby such other Person acquires more than 50% of the outstanding shares of voting stock of the Borrower (not including any shares of voting stock of the Borrower held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) the 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 the Borrower’s Common Stock, or (ii) 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 the Borrower. The provisions of this Section 2.2(a) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note. As a condition to pre-approving any Fundamental Transaction in writing, which approval may be withheld in the Holder’s sole discretion, Holder may require the resulting successor or acquiring entity (if not the Borrower) to assume by written instrument all of the obligations of the Borrower under this Note and all the other Transaction Documents with the same effect as if such successor or acquirer had been named as the Borrower hereto and thereto.

 

(b) Adjustment Due to Fundamental Transactions. If, at any time when this Note is issued and outstanding and prior to conversion of all of this Note, there shall be any Fundamental Transaction that is pre-approved in writing by the Holder pursuant to Section 2.2(a) above, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of this Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The above provisions shall similarly apply to successive Fundamental Transactions.

 

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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s stockholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining stockholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution.

 

(d) Adjustment Due to Dilutive Issuance. If, at any time when this Note is issued and outstanding, the Borrower issues or sells, or in accordance with this section hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

 

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

 

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Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible, and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (1) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (2) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

(e) Purchase Rights. If, at any time when this Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

(f) Adjustment Due to Non-DWAC Eligibility. If, at any time when this Note is issued and outstanding thereafter, the Holder delivers a Notice of Conversion and at such time all DWAC Eligible Conditions are not then satisfied, the Borrower shall deliver certificated Conversion Shares to the Holder pursuant to Section 2.1(c) and the Non-DWAC Eligible Adjustment Amount shall be added to the Outstanding Balance of this Note, without limiting any other rights of the Holder under this Note or the other Transaction Documents. The “Non-DWAC Eligible Adjustment Amount” is the amount equal to the number of applicable Conversion Shares multiplied by the excess, if any, of (i) the Trading Price of the Common Stock on the Conversion Date, over (ii) the Trading Price of the Common Stock on the date the certificated Conversion Shares are freely tradable, clear of any restrictive legend and deposited in the Holder’s brokerage account. In any such case, Holder will use reasonable efforts to timely deposit such certificates in its brokerage account after it receives them and cause such restrictive legends to be removed, and, without limiting any other provision hereof, Borrower agrees to fully cooperate with Holder in accomplishing the same. Any fees charged to Holder for the stock being Non-DWAC Eligible shall be paid by the Borrower.

 

(g) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price or the addition of the Non-DWAC Eligible Adjustment Amount to the Outstanding Balance as a result of the events described in this Note, the Borrower, the Non-DWAC Eligible Adjustment Amount shall be added to the Outstanding Balance of this Note, without limiting any other rights of the Holder under this Note or the other Transaction Documents. The “Non-DWAC Eligible Adjustment Amount” is the amount equal to the number of applicable Conversion Shares multiplied by the excess, if any, of (i) the Trading Price of the Common Stock on the Conversion Date, over (ii) the Trading Price of the Common Stock on the date the certificated Conversion Shares are freely tradable, clear of any restrictive legend and deposited in the Holder’s brokerage account. at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of this Note.

 

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2.3 Method of Conversion. Note may be converted by the Holder, in whole or in part, as described in Section 2.1(a) hereof and the Purchase Agreement. Upon partial conversion of Note, a new Note containing the same date and provisions of Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of Note and interest which shall not have been converted or paid.

 

2.4 Limitations on Conversion. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible by the Holder hereof, and the Company shall not effect any conversion of this Note or otherwise issue any shares of Common Stock pursuant hereto, to the extent (but only to the extent) that the Holder or any of its affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provision of this section, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provision of this section shall continue to apply. To the extent the above limitation applies, the determination of whether this Note shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Note, or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Act of 1934, as amended, and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Note. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Trading Days confirm orally to the Holder and, if requested, in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Note or securities issued pursuant to the Purchase Agreement.

 

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ARTICLE III

EVENT OF DEFAULT

 

The occurrence of any of the following events of default (“Event of Default”) shall be an event of default hereunder (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

3.1 Failure to Pay. The Borrower fails to pay the Principal Amount, interest, damages or other sum due under this Note or any other note when due;

 

3.2 Breach of Covenant. The Borrower breaches any material covenant of the Purchase Agreement or Note in any material respect and such breach, if subject to cure, continues for a period of FIFTEEN (15) Trading Days after written notice to the Borrower from the Holder;

 

3.3 Breach of Representations and Warranties. Any representation or warranty of the Borrower made, in the Purchase Agreement, this Note or in any certificate delivered pursuant to the Purchase Agreement, said statement or certificate given in writing pursuant hereto or in connection therewith or any other report, financial statement or certificate shall be false or misleading in any material respect as of the date made and the Closing Date;

 

3.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed;

 

3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than ONE MILLION DOLLARS ($1,000,000.00) and shall remain unvacated, unbonded or unstayed for a period of THIRTY (30) days;

 

3.6 Bankruptcy. Bankruptcy, reorganization, insolvency proceeding, liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower and if instituted against them are not dismissed within THIRTY (30) days of initiation. The Borrower suffers any appointment of any custodian or the like for it or any substantial art of its property that is not discharged or stayed within 30 days; the Borrower makes a general assignment of the benefit of creditors; the Borrower fails to pay or states that it is unable to pay, or is unable to pay its debts generally as they become due;

 

3.7 Non-Payment. A default by the Borrower under any one or more obligations in, unless the Borrower is contesting the validity of such obligation in good faith and has segregated cash funds equal to not less than one-half of the contested amount;

 

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3.8 Public Information Failure. A Public Information Failure occurs and continues for a period of FIFTEEN (15) Days after written notice to the Borrower from the Holder of such Public Information Failure;

 

3.9 Beginning 30 days after the Issue Date, the failure of any of the DWAC Eligible Conditions to be satisfied at any time thereafter during which the Borrower has obligations under this Note;

 

3.10 Reservation Default. Failure by the Borrower to have reserved for issuance upon conversion of this Note the amount of Common stock as set forth in this Note for more than FORTY FIVE (45) days after notice to the Borrower from the Holder;

 

3.11 Withdrawal from registration of the Issuer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), either voluntary or involuntary;

 

3.12 Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due;

 

3.13 The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future;

 

3.14 The Borrower shall fail to maintain the listing and/or quotation, as applicable, of the Common Stock on the Principal Market;

 

3.15 The Borrower shall fail to comply with the reporting requirements of the 1934 Act; and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act;

 

3.16 Any cessation of operations by the Borrower or the Borrower admits it is otherwise generally unable to pay its debts and such debts become due;

 

3.17 The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or any other Transaction Documents;

 

3.18 The Borrower effectuates a reverse split of its Common Stock without twenty (20) calendar days prior written notice to the Holder;

 

3.19 In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered (including but not limited to the provision to irrevocably reserve shares of Common Stock in the reserved amount) signed by the successor transfer agent to the Borrower and the Borrower;

 

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3.20 In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocable reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Holder and the Borrower;

 

3.21 The Company shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date or the company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversion of any Notes in accordance with the terms hereof;

 

3.22 The Company shall fail to increase their authorized shares by an additional one hundred billion shares by March 20, 2013 or the Company shall fail to have their transfer agent reserve seventy billion shares for the Holder by March 20, 2013.

 

Upon the occurrence of any Event of Default, (a) the Outstanding Balance shall immediately increase to 150% of the Outstanding Balance immediately prior to the occurrence of the Event of Default and (b) this Note shall then accrue interest at the Default Interest rate (collectively, the “Default Effects”); provided, however, that (x) in no event shall the Default Effects be applied more than two times, and a particular Event of Default that triggers the Default Effects will not cause the Default Effects to be triggered again unless such Event of Default is cured after triggering the Default Effects and then occurs again thereafter, and (y) notwithstanding any provision to the contrary herein, in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. The Default Effects shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action. Further, upon the occurrence and during the continuation of any Event of Default, the Holder may by written notice to the Borrower declare the entire Outstanding Balance 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 other Transaction Documents to the contrary notwithstanding; provided, however, that upon the occurrence or existence of any Event of Default, immediately and without notice, all outstanding obligations payable by the 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 Transaction Documents to the contrary (“Automatic Acceleration”). The Holder shall retain all rights under this Note and the Transaction Documents, including the ability to convert the then Outstanding Balance of this Note at all times following the occurrence of an Automatic Acceleration until the entire then Outstanding Balance has been paid in full. If one or more of the “Events of Default” as described in the Agreement shall occur, the Borrower agrees to pay all costs and expenses, including reasonable attorney’s fees, which the Holder may incur in collecting any amount due under, or enforcing any terms of, this Note. The Borrower covenants that until all amounts due under this Note are paid in full, by conversion or otherwise, the Borrower shall notify Holder in writing within one day of any of the above Events of Default.

 

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ARTICLE IV

NEGATIVE COVENANTS

 

4.1. Negative Covenants. As long as any portion of this Note remains outstanding, unless the Holder shall have otherwise given prior written consent, the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

(a) other than Permitted Indebtedness (as defined below), enter into, create, incur, assume, guarantee or suffer to exist any secured indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

(b) other than Permitted Liens (as defined below), enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

(c) repay, repurchase or offer to repay, repurchase or otherwise acquire for cash more than a de minimis number of shares of its Common Stock other than repurchases of Common Stock of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 during the term of this Note; or

 

(d) pay cash dividends or distributions on any equity securities of the Company.

 

(e) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

 

(f) repay, repurchase or offer to repay, repurchase or otherwise acquire any indebtedness, other than the Debentures if on a pro-rata basis, other than regularly scheduled principal and interest payments as such terms are in effect as of the Original Issue Date, provided that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist or occur;

 

(g) enter into any transaction with any affiliate of the Company which would be required to be disclosed in any public filing with the SEC, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval;

 

(h) enter into any agreement with respect to any of the foregoing.

 

4.2. Definitions. For the purpose of this Note, the following definitions shall apply:

 

(i) “Permitted Indebtedness” means (i) the Indebtedness evidenced by the Note, (ii) the Indebtedness existing on the Issue Date and set forth on Schedule 5.19 attached to the Purchase Agreement, (iii) unsecured Indebtedness incurred by the Company, which Indebtedness is not senior in rank to the Note and does not mature prior to six months from the issue date of such Indebtedness, (iv) Indebtedness secured by Permitted Liens, and (v) extensions, refinancings and renewals of any items in clauses (i) through (iv) above, provided that the principal amount is not increased (other than with respect to the addition of existing or future interest due and payable thereunder to the principal thereunder) or the terms modified to impose materially more burdensome terms upon the Company or its Subsidiaries, as the case may be.

 

(j) “Permitted Lien” means the individual and collective reference to the following: (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, (viii) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default, (ix) Liens incurred in connection with Permitted Indebtedness under clause (i) and, solely to the extent existing as of the Issue Date, clause (ii) of the definition thereof (including any extensions, refinancings and renewals of such Indebtedness that constitute Permitted Indebtedness).

 

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Article V

REDEMPTION RIGHTS

 

5.1. Optional Redemption Right. Subject to the provisions of this Article V, at any time (a) within ninety (90) days after the Effective Date, the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem all of the then outstanding principal amount together with all unpaid interest accrued thereon of this Note for cash at a redemption price equal to 150% multiplied by all of the then outstanding principal amount together with all unpaid interest accrued thereon of this Note, on the 20th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date”, such 20 Trading Day period, the “Optional Redemption Period” and such redemption, the “Optional Redemption”), The Optional Redemption Amount is payable in full on the Optional Redemption Date. The Company may only effect an Optional Redemption if each of the Equity Conditions (as defined below) shall have been met (unless waived in writing by the Holder) on each Trading Day during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including the date payment of the Optional Redemption Amount is actually made in full. If any of the Equity Conditions shall cease to be satisfied at any time during the Optional Redemption Period, then the Holder may elect to nullify the Optional Redemption Notice by notice to the Company after the day on which any such Equity Condition has not been met in which case the Optional Redemption Notice shall be null and void, ab initio. The Company covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date all amounts owing thereon are due and paid in full. “Equity Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Note, (c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the Conversion Shares issuable upon conversion of such portion of this Note subject to an Optional Redemption (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for such period) or (ii) all of the Conversion Shares issuable upon conversion of such portion of this Note subject to an Optional Redemption may be resold pursuant to Rule 144 during such period, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the Conversion Shares issuable upon conversion of such portion of this Note being redeemed at such time, (f) there is no existing Event of Default and, to the actual knowledge of the Company, no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (g) the issuance of the shares issuable to the Holder upon conversion of such portion of this Note subject to an Optional Redemption would not violate the limitations set forth in Section 2.3 under this Note, (h) there has been no public announcement of a pending or proposed Fundamental Transaction that has not been consummated or abandoned, and (i) the applicable Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public information. Notwithstanding the foregoing, the Holder may elect to convert the outstanding principal amount of the Note subject to an Optional Redemption Notice pursuant to Article II at any time prior to actual payment in cash for any redemption under this Section 5 by the delivery of an irrevocable Notice of Conversion to the Company.

 

ARTICLE IV

UNSECURED NOTE

 

4.1 Unsecured Note. Note is an unsecured obligation of the Borrower.

 

ARTICLE V

MISCELLANEOUS

 

5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and either faxed, mailed, e- mailed or delivered to each party at the respective addresses of the parties. All such notices and communications shall be effective (a) when sent by Federal Express or other overnight service of recognized standing on the Trading Day following the deposit with such service; (b) when mailed, by registered or certified mail, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; (d) when faxed, upon confirmation of receipt; (e) when e-mailed, upon e-mail being sent.

 

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5.3 Amendment Provision. No provision of this Note may be modified or amended without the prior written consent of the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

5.4 Assignability. Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. The Holder may assign or transfer this Note to any transferee.

 

5.5 Cost of Collection. If default is made in the payment of Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.

 

5.6 Governing Law. Note shall be only be governed by and construed in accordance with the laws of the State of Florida, including, but not limited to, Florida statutes of limitations. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the civil or state courts in Miami, Florida or in the federal courts located in Miami, Florida. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit only to the jurisdiction of such courts in Miami, Florida. 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 Note 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 such provision, which may prove invalid or unenforceable under any law, shall not affect the validity or unenforceability of any other provision of Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, or to enforce a judgment or other decision in favor of the Holder. This Note shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder, may be enforced against Borrower by summary proceeding or summary judgment or any similar rule or statute in the jurisdiction where enforcement is sought. For purposes of such rule or statute, any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient or necessary to determine Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of Note, whether or not such other document or agreement was delivered together herewith or was executed apart from Note.

 

5.7 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of Note. However, the Holder will have the rights of a shareholder of the Borrower with respect to the Shares of Common Stock to be received after delivery by the Holder of a Conversion Notice to the Borrower.

 

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5.8 Non-Business Days. Whenever any payment or any action to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of Florida, such payment may be due or action shall be required on the next succeeding Trading Day and, for such payment, such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

 

5.9 Unenforceability. If any term in this Note is found by a court of competent jurisdiction to be unenforceable, then the entire Note shall be rescinded, the consideration proffered by the Holder for the remaining Debt acquired by the Holder not converted by the Holder in accordance with this Note shall be returned in its entirety and any Conversion Shares in the possession or control of the Investor shall be returned to the Issuer.

 

5.10 Entire Understanding. The Note and the Purchase Agreement between the Borrower and the Holder (including all Exhibits thereto) constitute the full and entire understanding and agreement between the Borrower and the Holder with respect to the subject hereof. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Borrower and the Holder.

 

5.11 Registration Rights. The Issuer hereby grants the right to the Investor, at Investor’s expense, to require Issuer to register any and all issuances, past, present and future, directly connected to this specific Debt. If the Investor shall request the registration, the Issuer shall begin the registration process within 30 days and the Investor shall have the following rights.

 

5.12 Recoupment of Registration Fees. If the Investor shall invoke his rights under section 5.11 of this Agreement, the Issuer shall reimburse to the Investor all fees, costs, and disbursements, inclusive of attorney’s fees, paid for by Investor, in common stock under the same terms and conditions provided for herein.

 

5.13 Legal Opinion. The Issuer’s counsel has provided an opinion regarding the applicable exemption from registration under the Securities Act for the issuance of the Conversion Shares pursuant to the terms and conditions of this Agreement and the Note, which provides that upon conversion at any time following the date hereof, the shares received as a result of the conversion shall be issued unrestricted in accordance with the appropriate exemption.

 

5.14 Post-Closing Expenses. The Borrower will bear any and all miscellaneous expenses of the Borrower and Holder that may arise as a result of this Agreement post-closing. These expenses include, but are not limited to, the cost of legal opinion production, transfer agent fees, equity issuance fees, fees charged for vetting and accepting physical certificates, etc. The failure to pay any and all Post-Closing Expenses will be deemed an Event of Default.

 

5.15 Savings Clause. In case any provision of this Note 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 provision of this Note will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum allowable under law.

 

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5.16 Attorneys’ Fees and Cost of Collection. In the event of any action at law or in equity to enforce or interpret the terms of this Note or any of the other documents related to this financing, the parties agree that the party who is awarded the most money shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by 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.

 

5.17 Fees and Charges. The parties acknowledge and agree that upon the Borrower’s failure to comply with the provisions of this Note, the Holder’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, the Holder’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder, among other reasons. Accordingly, any fees, charges, and interest due under this Note are intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not a penalty, and shall not be deemed in any way to limit any other right or remedy Holder may have hereunder, at law or in equity.

 

5.18 Notice of Corporate Events. Except as otherwise provided herein, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s stockholders (and copies of proxy materials and other information sent to stockholders). In the event of any taking by the Borrower of a record of its stockholders for the purpose of determining stockholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining stockholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) calendar days prior to the record date specified therein (or thirty (30) calendar days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this section.

 

5.19 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the charges assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

[SIGNATURES ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Borrower has caused Note to be signed in its name by an authorized officer as of the I’1... day of Fehfttftf)’ 2013.

 

  MARl-H
   
COROWARE, INC.
   
  By: /s/ Lloyd T. Spencer
  Name: Lloyd T. Spencer
  Title: Chief Executive Officer

 

NOTARY PUBLIC WITNESS:
 

Notary Public
State of Washington

LINDA R RUBEL

MY COMMISSION EXPIRES

June 12, 2015

 

 
 

 

Exhibit B

 

NOTICE OF CONVERSION

 

(To be executed by the Registered Holder in order to convert the Note)

 

The undersigned hereby elects to convert $_____ of the principal amount and $______ of the interest due on the Note issued by COROWARE, INC. on February 18, 2013 into shares of common stock of COROWARE, INC. (the “Borrower”) according to the conditions set forth in such Note, as of the date written below. Should the Conversion Price in effect for this conversion be less than the Par Value ($0.0001) of the Company’s common Stock, the principal reduction resulting from this conversion will be less than the dollar amount of the conversion as set forth below.

 

Date of Conversion:

 

Amount to be converted:

 

Conversion Price per share:

 

Price Per Share for Stock Issuable pursuant to this Conversion Notice*:

 

Number of shares of Common Stock to be issued:

 

Amount of Principal Reduced**:

 

*Pursuant to State Securities Rules and Regulations, the Company may be prohibited from issuing shares of stock at a price per share that is less than its Par Value ($0.0001).

 

**Principal shall be reduced based upon value received for the shares issued (as determined by multiplying the number of shares to be issued by the Conversion Price per share).

 

Notwithstanding anything to the contrary contained herein, this Conversion Notice shall constitute a representation by the Holder of the Note submitting this Conversion Notice that, after giving effect to the conversion provided for in this Conversion Notice, such Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such person’s affiliates) of a number of shares Common Stock which exceeds the Maximum Percentage (as defined in the Note) of the total outstanding shares Common Stock of the Company as determined pursuant to the provisions of Section 2.3 of the Note.

 

Signature:  
Allen Silberstein, CEO of AGS Capital Group, LLC  

 

 
 

 

Exhibit 10.68

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION.

 

COROWARE, INC.

 

$42,000

 

FOURTEEN PERCENT (14%) CONVERTIBLE PROMISSORY NOTE DATED FEBRUARY 25, 2013

 

FOR VALUE RECEIVED of $42,000 less a $8,000 Original Issue discount and a $6,000 fee paid to Company’s Consultant and a legal fee of $3,000, COROWARE, INC., a Delaware corporation (hereinafter called “Borrower” or the “Company”), hereby promises to pay to AGS CAPITAL GROUP, LLC or its assigns or successors-in-interest (the “Holder”) or order, without demand, the aggregate principal amount of FORTY TWO THOUSAND DOLLARS ($42,000.00) (the “Principal Amount”), together with interest thereon from the Issue Date, payable on February 25, 2014 (the “Maturity Date”). Interest shall accrue at a rate of fourteen percent (14%) per annum, compounded monthly. “Outstanding Balance” means the Original Principal Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued but unpaid interest (including with limitation Default Interest), collection and enforcements costs, and any other fees or charges incurred under this Note or under the Purchase Agreement.

 

ARTICLE I

GENERAL PROVISIONS

 

1.1 Conversion Privileges. The conversion privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until Note is paid in full regardless of the occurrence of an Event of Default but subject to Article II. The Principal Amount of Note together with all unpaid interest accrued thereon and any other amounts payable hereunder, or such portion thereof, that has not previously been converted into common stock, of the Company (the “Common Stock”) in accordance with Article II hereof, if any, shall be payable in full on the Maturity Date.

 

1.2 Payment of Interest. There shall be no periodic payments of interest on this Note.

 

 
 

 

ARTICLE II

CONVERSION RIGHTS

 

The Holder shall have the right to convert the Principal Amount together with all unpaid interest accrued thereon of this Note into shares of the Borrower’s Common Stock as set forth below.

 

2.1 Conversion into the Borrower’s Common Stock.

 

(a) Conversion Price. The conversion price (the “Conversion Price”) shall the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean thirty five percent (35%) multiplied by the Market Price (as defined herein); provided, however, that if, after the Issue Date, the Borrower issues a convertible promissory note to any Person other than the Holder or its Affiliates which contains a conversion price (the “Third-Party Conversion Price”) which the Borrower and the Holder agree in writing, after good faith negotiations, is less than the effective Variable Conversion Price (after giving effect to any shares of Common Stock issued, or issuable, to the Holder or its Affiliates in connection with this Note or any other agreement between the Borrower and the Holder), then the Variable Conversion Price shall be reduced to the Third-Party Conversion Price. Should the Variable Conversion Price be less than the Par Value ($.0001) of the company’s Common Stock, the principal reduction resulting from this conversion will be less than the dollar amount of the conversion and shall be added back to the principal amount of the Note. “Market Price” means the lowest closing bid price in the twenty Trading Days prior to the applicable Conversion Date) “Trading Day” shall mean any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time). The Conversion Price set forth herein shall be reduced an additional ten percent of the lowest closing bid price in the twenty Trading Days prior to the applicable Conversion Date for each Public Information Failure. If the Company is late in any of their filings with the SEC, such lateness shall constitute a Public Information Failure. For purposes of clarity, it is understood that if there shall be a Public Information Failure which is cured and then repeated once, the Conversion Price shall be reduced an additional twenty percent of the lowest closing bid price in the twenty Trading Days prior to the applicable Conversion Date. The Conversion Price may be adjusted pursuant to the other terms of this Note.

 

(b) Conversion. The Holder shall have the option, but shall not be required, to convert all or a portion of the Note into a number of fully paid and non-assessable shares of Common Stock (the “Conversion Shares”). The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding Principal Amount together with all unpaid interest accrued thereon of this Note to be converted by (y) the Conversion Price. The Company may deliver an objection to any Notice of Conversion within one Business Day of delivery of such Notice of Conversion. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company.

 

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(c) Mechanics of Conversion. As a condition to effecting the conversion set forth in Section 2.1(b) above, the Holder shall properly complete and deliver to the Company a Notice of Conversion, a form of which is annexed hereto as Exhibit B. The Notice of Conversion shall set forth the Principal Amount together with all unpaid interest accrued thereon of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. Upon timely delivery to the Borrower of the Notice of Conversion, certificates evidencing that number of shares of Common Stock for the portion of the Note converted in accordance herewith shall be transmitted by the Company’s transfer agent to the Holder by crediting the account of the Holder’s broker with The Depository Trust Company through its Deposit / Withdrawal at Custodian system if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Conversion Shares to, or resale of the Conversion Shares by, the Holder or (B) the shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the address specified by the Holder in the Notice of Conversion by the date that is three (3) Trading Days after the Conversion Date (such third day being the “Share Delivery Date”). The Borrower will not issue fraction shares or scrip representing fractions of shares upon conversion, but the Borrower will round the number of the she shares up to the nearest whole share.

 

(d) Obligation to Deliver Conversion Shares Absolute; Certain Remedies.

 

(i) Obligation Absolute. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares. The Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. All payments under this Note (whether made by the Borrower or any other person) to or for the account of the Holder hereunder shall be made free and clear of and without reduction by reason of any present and future income, stamp, registration and other taxes, levies, duties, costs and charges whatsoever imposed, assessed, levied or collected by the United States or any political subdivision or taxing authority thereof or therein, together with interest thereon and penalties with respect thereto, if any on or in respect of this Note (such taxes, levies, duties, costs and charges being herein collectively called “Taxes”).

 

(ii) Failure to Deliver Common Stock Prior to Delivery Date. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered as required by Section 2.1(c) by the Share Delivery Date (a “Conversion Default”), the Borrower shall pay in cash to the Holder for each calendar day beyond the Delivery Date that the Borrower fails to deliver such Common Stock an amount equal to the greater of (i) $2,000.00 and (ii) 2% of the product of (1) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled multiplied by (2) the Closing Trading Price of the Common Stock on the Trading Day immediately preceding the last possible date on which the Borrower could have issued such shares of Common Stock to the Holder without violating Section 2.1(c) (the “Conversion Default Payment”). Such cash amount shall be paid to the Holder by the fifth day of the month following the month in which it has accrued (the “Conversion Default Payment Due Date”). In the event such cash amount is not received by the Holder by the Conversion Default Payment Due Date, at the option of the Holder (without notice to the Borrower), the Conversion Default Payment shall be added to the Outstanding Balance of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note.

 

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(iii) Rescission. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

 

(e) Adjustment. The number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(b), shall be subject to adjustment, from time to time, upon the happening of certain events while this conversion right remains outstanding, as follows:

 

(f) Reservation of Shares. The Borrower represents at all times to have authorized and reserved four times the number of shares that is actually issuable upon full conversion of this Note (based on the Conversion Price in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased from time to time as required to insure compliance with this provision. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which this Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of this Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue shares of the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of issuing the necessary shares of Common Stock in accordance with the terms and conditions of this Note. If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default.

 

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2.2 Effect of Certain Events.

 

(a) Fundamental Transaction Consent Right. The Borrower shall not enter into or be party to a Fundamental Transaction (as defined below), unless the Borrower obtains the prior written consent of the Holder to enter into such Fundamental Transaction. For purposes of this Note, “Fundamental Transaction” means that (i) (1) the 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 the Borrower or any of its subsidiaries is the surviving corporation) any other individual, corporation, limited liability company, partnership, association, trust or other entity or organization (collectively, “Person”), or (2) the 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 (3) the Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other Person 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 the Borrower (not including any shares of voting stock of the Borrower held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) the 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 whereby such other Person acquires more than 50% of the outstanding shares of voting stock of the Borrower (not including any shares of voting stock of the Borrower held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) the 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 the Borrower’s Common Stock, or (ii) 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 the Borrower. The provisions of this Section 2.2(a) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note. As a condition to pre-approving any Fundamental Transaction in writing, which approval may be withheld in the Holder’s sole discretion, Holder may require the resulting successor or acquiring entity (if not the Borrower) to assume by written instrument all of the obligations of the Borrower under this Note and all the other Transaction Documents with the same effect as if such successor or acquirer had been named as the Borrower hereto and thereto.

 

(b) Adjustment Due to Fundamental Transactions. If, at any time when this Note is issued and outstanding and prior to conversion of all of this Note, there shall be any Fundamental Transaction that is pre-approved in writing by the Holder pursuant to Section 2.2(a) above, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of this Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The above provisions shall similarly apply to successive Fundamental Transactions.

 

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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s stockholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining stockholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution.

 

(d) Adjustment Due to Dilutive Issuance. If, at any time when this Note is issued and outstanding, the Borrower issues or sells, or in accordance with this section hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

 

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

 

Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible, and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (1) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (2) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

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(e) Purchase Rights. If, at any time when this Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

(f) Adjustment Due to Non-DWAC Eligibility. If, at any time when this Note is issued and outstanding thereafter, the Holder delivers a Notice of Conversion and at such time all DWAC Eligible Conditions are not then satisfied, the Borrower shall deliver certificated Conversion Shares to the Holder pursuant to Section 2.1(c) and the Non-DWAC Eligible Adjustment Amount shall be added to the Outstanding Balance of this Note, without limiting any other rights of the Holder under this Note or the other Transaction Documents. The “Non-DWAC Eligible Adjustment Amount” is the amount equal to the number of applicable Conversion Shares multiplied by the excess, if any, of (i) the Trading Price of the Common Stock on the Conversion Date, over (ii) the Trading Price of the Common Stock on the date the certificated Conversion Shares are freely tradable, clear of any restrictive legend and deposited in the Holder’s brokerage account. In any such case, Holder will use reasonable efforts to timely deposit such certificates in its brokerage account after it receives them and cause such restrictive legends to be removed, and, without limiting any other provision hereof, Borrower agrees to fully cooperate with Holder in accomplishing the same. Any fees charged to Holder for the stock being Non-DWAC Eligible shall be paid by the Borrower.

 

(g) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price or the addition of the Non-DWAC Eligible Adjustment Amount to the Outstanding Balance as a result of the events described in this Note, the Borrower, the Non-DWAC Eligible Adjustment Amount shall be added to the Outstanding Balance of this Note, without limiting any other rights of the Holder under this Note or the other Transaction Documents. The “Non-DWAC Eligible Adjustment Amount” is the amount equal to the number of applicable Conversion Shares multiplied by the excess, if any, of (i) the Trading Price of the Common Stock on the Conversion Date, over (ii) the Trading Price of the Common Stock on the date the certificated Conversion Shares are freely tradable, clear of any restrictive legend and deposited in the Holder’s brokerage account. at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of this Note.

 

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2.3 Method of Conversion. Note may be converted by the Holder, in whole or in part, as described in Section 2.1(a) hereof and the Purchase Agreement. Upon partial conversion of Note, a new Note containing the same date and provisions of Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of Note and interest which shall not have been converted or paid.

 

2.4 Limitations on Conversion. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible by the Holder hereof, and the Company shall not effect any conversion of this Note or otherwise issue any shares of Common Stock pursuant hereto, to the extent (but only to the extent) that the Holder or any of its affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provision of this section, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provision of this section shall continue to apply. To the extent the above limitation applies, the determination of whether this Note shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Note, or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Act of 1934, as amended, and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Note. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Trading Days confirm orally to the Holder and, if requested, in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Note or securities issued pursuant to the Purchase Agreement.

 

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ARTICLE III

EVENT OF DEFAULT

 

The occurrence of any of the following events of default (“Event of Default”) shall be an event of default hereunder (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

3.1 Failure to Pay. The Borrower fails to (i) pay the Principal Amount, interest, damages or other sum due under this Note or any other note when due or (ii) fails to use $25,000 of the funds provided for this Note to engage a firm to provide investor relations for the Company;

 

3.2 Breach of Covenant. The Borrower breaches any material covenant of the Purchase Agreement or Note in any material respect and such breach, if subject to cure, continues for a period of FIFTEEN (15) Trading Days after written notice to the Borrower from the Holder;

 

3.3 Breach of Representations and Warranties. Any representation or warranty of the Borrower made, in the Purchase Agreement, this Note or in any certificate delivered pursuant to the Purchase Agreement, said statement or certificate given in writing pursuant hereto or in connection therewith or any other report, financial statement or certificate shall be false or misleading in any material respect as of the date made and the Closing Date;

 

3.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed;

 

3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than ONE MILLION DOLLARS ($1,000,000.00) and shall remain unvacated, unbonded or unstayed for a period of THIRTY (30) days;

 

3.6 Bankruptcy. Bankruptcy, reorganization, insolvency proceeding, liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower and if instituted against them are not dismissed within THIRTY (30) days of initiation. The Borrower suffers any appointment of any custodian or the like for it or any substantial art of its property that is not discharged or stayed within 30 days; the Borrower makes a general assignment of the benefit of creditors; the Borrower fails to pay or states that it is unable to pay, or is unable to pay its debts generally as they become due;

 

3.7 Non-Payment. A default by the Borrower under any one or more obligations in, unless the Borrower is contesting the validity of such obligation in good faith and has segregated cash funds equal to not less than one-half of the contested amount;

 

3.8 Public Information Failure. A Public Information Failure occurs and continues for a period of FIFTEEN (15) Days after written notice to the Borrower from the Holder of such Public Information Failure;

 

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3.9 Beginning 30 days after the Issue Date, the failure of any of the DWAC Eligible Conditions to be satisfied at any time thereafter during which the Borrower has obligations under this Note;

 

3.10 Reservation Default. Failure by the Borrower to have reserved for issuance upon conversion of this Note the amount of Common stock as set forth in this Note for more than FORTY FIVE (45) days after notice to the Borrower from the Holder;

 

3.11 Withdrawal from registration of the Issuer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), either voluntary or involuntary;

 

3.12 Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due;

 

3.13 The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future;

 

3.14 The Borrower shall fail to maintain the listing and/or quotation, as applicable, of the Common Stock on the Principal Market;

 

3.15 The Borrower shall fail to comply with the reporting requirements of the 1934 Act; and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act;

 

3.16 Any cessation of operations by the Borrower or the Borrower admits it is otherwise generally unable to pay its debts and such debts become due;

 

3.17 The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or any other Transaction Documents;

 

3.18 The Borrower effectuates a reverse split of its Common Stock without twenty (20) calendar days prior written notice to the Holder;

 

3.19 In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered (including but not limited to the provision to irrevocably reserve shares of Common Stock in the reserved amount) signed by the successor transfer agent to the Borrower and the Borrower;

 

3.20 In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocable reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Holder and the Borrower;

 

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3.21 The Company shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date or the company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversion of any Notes in accordance with the terms hereof;

 

Upon the occurrence of any Event of Default, (a) the Outstanding Balance shall immediately increase to 150% of the Outstanding Balance immediately prior to the occurrence of the Event of Default and (b) this Note shall then accrue interest at the Default Interest rate (collectively, the “Default Effects”); provided, however, that (x) in no event shall the Default Effects be applied more than two times, and a particular Event of Default that triggers the Default Effects will not cause the Default Effects to be triggered again unless such Event of Default is cured after triggering the Default Effects and then occurs again thereafter, and (y) notwithstanding any provision to the contrary herein, in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law. The Default Effects shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action. Further, upon the occurrence and during the continuation of any Event of Default, the Holder may by written notice to the Borrower declare the entire Outstanding Balance 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 other Transaction Documents to the contrary notwithstanding; provided, however, that upon the occurrence or existence of any Event of Default, immediately and without notice, all outstanding obligations payable by the 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 Transaction Documents to the contrary (“Automatic Acceleration”). The Holder shall retain all rights under this Note and the Transaction Documents, including the ability to convert the then Outstanding Balance of this Note at all times following the occurrence of an Automatic Acceleration until the entire then Outstanding Balance has been paid in full. If one or more of the “Events of Default” as described in the Agreement shall occur, the Borrower agrees to pay all costs and expenses, including reasonable attorney’s fees, which the Holder may incur in collecting any amount due under, or enforcing any terms of, this Note. The Borrower covenants that until all amounts due under this Note are paid in full, by conversion or otherwise, the Borrower shall notify Holder in writing within one day of any of the above Events of Default.

 

ARTICLE IV

NEGATIVE COVENANTS

 

4.1. Negative Covenants. As long as any portion of this Note remains outstanding, unless the Holder shall have otherwise given prior written consent, the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

(a) other than Permitted Indebtedness (as defined below), enter into, create, incur, assume, guarantee or suffer to exist any secured indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

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(b) other than Permitted Liens (as defined below), enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

(c) repay, repurchase or offer to repay, repurchase or otherwise acquire for cash more than a de minimis number of shares of its Common Stock other than repurchases of Common Stock of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 during the term of this Note; or

 

(d) pay cash dividends or distributions on any equity securities of the Company.

 

(e) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

 

(f) repay, repurchase or offer to repay, repurchase or otherwise acquire any indebtedness, other than the Debentures if on a pro-rata basis, other than regularly scheduled principal and interest payments as such terms are in effect as of the Original Issue Date, provided that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist or occur;

 

(g) enter into any transaction with any affiliate of the Company which would be required to be disclosed in any public filing with the SEC, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval;

 

(h) enter into any agreement with respect to any of the foregoing.

 

4.2. Definitions. For the purpose of this Note, the following definitions shall apply:

 

(i) “Permitted Indebtedness” means (i) the Indebtedness evidenced by the Note, (ii) the Indebtedness existing on the Issue Date and set forth on Schedule 5.19 attached to the Purchase Agreement, (iii) unsecured Indebtedness incurred by the Company, which Indebtedness is not senior in rank to the Note and does not mature prior to six months from the issue date of such Indebtedness, (iv) Indebtedness secured by Permitted Liens, and (v) extensions, refinancings and renewals of any items in clauses (i) through (iv) above, provided that the principal amount is not increased (other than with respect to the addition of existing or future interest due and payable thereunder to the principal thereunder) or the terms modified to impose materially more burdensome terms upon the Company or its Subsidiaries, as the case may be.

 

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(j) “Permitted Lien” means the individual and collective reference to the following: (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, (viii) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default, (ix) Liens incurred in connection with Permitted Indebtedness under clause (i) and, solely to the extent existing as of the Issue Date, clause (ii) of the definition thereof (including any extensions, refinancings and renewals of such Indebtedness that constitute Permitted Indebtedness).

 

Article V

REDEMPTION RIGHTS

 

5.1. Optional Redemption Right. Subject to the provisions of this Article V, at any time (a) within ninety (90) days after the Effective Date, the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem all of the then outstanding principal amount together with all unpaid interest accrued thereon of this Note for cash at a redemption price equal to 150% multiplied by all of the then outstanding principal amount together with all unpaid interest accrued thereon of this Note, on the 20th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date”, such 20 Trading Day period, the “Optional Redemption Period” and such redemption, the “Optional Redemption”), The Optional Redemption Amount is payable in full on the Optional Redemption Date. The Company may only effect an Optional Redemption if each of the Equity Conditions (as defined below) shall have been met (unless waived in writing by the Holder) on each Trading Day during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including the date payment of the Optional Redemption Amount is actually made in full. If any of the Equity Conditions shall cease to be satisfied at any time during the Optional Redemption Period, then the Holder may elect to nullify the Optional Redemption Notice by notice to the Company after the day on which any such Equity Condition has not been met in which case the Optional Redemption Notice shall be null and void, ab initio. The Company covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date all amounts owing thereon are due and paid in full. “Equity Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Note, (c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the Conversion Shares issuable upon conversion of such portion of this Note subject to an Optional Redemption (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for such period) or (ii) all of the Conversion Shares issuable upon conversion of such portion of this Note subject to an Optional Redemption may be resold pursuant to Rule 144 during such period, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the Conversion Shares issuable upon conversion of such portion of this Note being redeemed at such time, (f) there is no existing Event of Default and, to the actual knowledge of the Company, no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (g) the issuance of the shares issuable to the Holder upon conversion of such portion of this Note subject to an Optional Redemption would not violate the limitations set forth in Section 2.3 under this Note, (h) there has been no public announcement of a pending or proposed Fundamental Transaction that has not been consummated or abandoned, and (i) the applicable Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public information. Notwithstanding the foregoing, the Holder may elect to convert the outstanding principal amount of the Note subject to an Optional Redemption Notice pursuant to Article II at any time prior to actual payment in cash for any redemption under this Section 5 by the delivery of an irrevocable Notice of Conversion to the Company.

 

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ARTICLE IV

UNSECURED NOTE

 

4.1 Unsecured Note. Note is an unsecured obligation of the Borrower.

 

ARTICLE V

MISCELLANEOUS

 

5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and either faxed, mailed, e- mailed or delivered to each party at the respective addresses of the parties. All such notices and communications shall be effective (a) when sent by Federal Express or other overnight service of recognized standing on the Trading Day following the deposit with such service; (b) when mailed, by registered or certified mail, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; (d) when faxed, upon confirmation of receipt; (e) when e-mailed, upon e-mail being sent.

 

5.3 Amendment Provision. No provision of this Note may be modified or amended without the prior written consent of the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

5.4 Assignability. Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. The Holder may assign or transfer this Note to any transferee.

 

5.5 Cost of Collection. If default is made in the payment of Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.

 

5.6 Governing Law. Note shall be only be governed by and construed in accordance with the laws of the State of Florida, including, but not limited to, Florida statutes of limitations. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the civil or state courts in Miami, Florida or in the federal courts located in Miami, Florida. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit only to the jurisdiction of such courts in Miami, Florida. 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 Note 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 such provision, which may prove invalid or unenforceable under any law, shall not affect the validity or unenforceability of any other provision of Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, or to enforce a judgment or other decision in favor of the Holder. This Note shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder, may be enforced against Borrower by summary proceeding or summary judgment or any similar rule or statute in the jurisdiction where enforcement is sought. For purposes of such rule or statute, any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient or necessary to determine Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of Note, whether or not such other document or agreement was delivered together herewith or was executed apart from Note.

 

5.7 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of Note. However, the Holder will have the rights of a shareholder of the Borrower with respect to the Shares of Common Stock to be received after delivery by the Holder of a Conversion Notice to the Borrower.

 

5.8 Non-Business Days. Whenever any payment or any action to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of Florida, such payment may be due or action shall be required on the next succeeding Trading Day and, for such payment, such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

 

5.9 Unenforceability. If any term in this Note is found by a court of competent jurisdiction to be unenforceable, then the entire Note shall be rescinded, the consideration proffered by the Holder for the remaining Debt acquired by the Holder not converted by the Holder in accordance with this Note shall be returned in its entirety and any Conversion Shares in the possession or control of the Investor shall be returned to the Issuer.

 

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5.10 Entire Understanding. The Note and the Purchase Agreement between the Borrower and the Holder (including all Exhibits thereto) constitute the full and entire understanding and agreement between the Borrower and the Holder with respect to the subject hereof. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Borrower and the Holder.

 

5.11 Registration Rights. The Issuer hereby grants the right to the Investor, at Investor’s expense, to require Issuer to register any and all issuances, past, present and future, directly connected to this specific Debt. If the Investor shall request the registration, the Issuer shall begin the registration process within 30 days and the Investor shall have the following rights.

 

5.12 Recoupment of Registration Fees. If the Investor shall invoke his rights under section 5.11 of this Agreement, the Issuer shall reimburse to the Investor all fees, costs, and disbursements, inclusive of attorney’s fees, paid for by Investor, in common stock under the same terms and conditions provided for herein.

 

5.13 Legal Opinion. The Issuer’s counsel has provided an opinion regarding the applicable exemption from registration under the Securities Act for the issuance of the Conversion Shares pursuant to the terms and conditions of this Agreement and the Note, which provides that upon conversion at any time following the date hereof, the shares received as a result of the conversion shall be issued unrestricted in accordance with the appropriate exemption.

 

5.14 Post-Closing Expenses. The Borrower will bear any and all miscellaneous expenses of the Borrower and Holder that may arise as a result of this Agreement post-closing. These expenses include, but are not limited to, the cost of legal opinion production, transfer agent fees, equity issuance fees, fees charged for vetting and accepting physical certificates, etc. The failure to pay any and all Post-Closing Expenses will be deemed an Event of Default.

 

5.15 Savings Clause. In case any provision of this Note 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 provision of this Note will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum allowable under law.

 

5.16 Attorneys’ Fees and Cost of Collection. In the event of any action at law or in equity to enforce or interpret the terms of this Note or any of the other documents related to this financing, the parties agree that the party who is awarded the most money shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by 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.

 

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5.17 Fees and Charges. The parties acknowledge and agree that upon the Borrower’s failure to comply with the provisions of this Note, the Holder’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, the Holder’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder, among other reasons. Accordingly, any fees, charges, and interest due under this Note are intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not a penalty, and shall not be deemed in any way to limit any other right or remedy Holder may have hereunder, at law or in equity.

 

5.18 Notice of Corporate Events. Except as otherwise provided herein, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s stockholders (and copies of proxy materials and other information sent to stockholders). In the event of any taking by the Borrower of a record of its stockholders for the purpose of determining stockholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining stockholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) calendar days prior to the record date specified therein (or thirty (30) calendar days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this section.

 

5.19 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the charges assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

[SIGNATURES ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Borrower has caused Note to be signed in its name by an authorized officer as of the day of February, 2013.

 

    COROWARE, INC.
       
    By:  
    Name:  Lloyd T. Spencer
    Title: Chief Executive Officer
       
NOTARY PUBLIC WITNESS:      
       

 

 
 

 

Exhibit B

 

NOTICE OF CONVERSION

 

(To be executed by the Registered Holder in order to convert the Note)

 

The undersigned hereby elects to convert $_______ of the principal amount and $_______ of the interest due on the Note issued by COROWARE, INC. on February 18, 2013 into shares of common stock of COROWARE, INC. (the “Borrower”) according to the conditions set forth in such Note, as of the date written below. Should the Conversion Price in effect for this conversion be less than the Par Value ($0.0001) of the Company’s common Stock, the principal reduction resulting from this conversion will be less than the dollar amount of the conversion as set forth below.

 

Date of Conversion:

 

Amount to be converted:

 

Conversion Price per share:

 

Price Per Share for Stock Issuable pursuant to this Conversion Notice*:

 

Number of shares of Common Stock to be issued:

 

Amount of Principal Reduced**:

 

*Pursuant to State Securities Rules and Regulations, the Company may be prohibited from issuing shares of stock at a price per share that is less than its Par Value ($0.0001).

 

**Principal shall be reduced based upon value received for the shares issued (as determined by multiplying the number of shares to be issued by the Conversion Price per share).

 

Notwithstanding anything to the contrary contained herein, this Conversion Notice shall constitute a representation by the Holder of the Note submitting this Conversion Notice that, after giving effect to the conversion provided for in this Conversion Notice, such Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such person’s affiliates) of a number of shares Common Stock which exceeds the Maximum Percentage (as defined in the Note) of the total outstanding shares Common Stock of the Company as determined pursuant to the provisions of Section 2.3 of the Note.

 

Signature:   
 Allen Silberstein, CEO of AGS Capital Group, LLC  

 

 

 

 

 

Exhibit 10.69

 

CoroWare, INC.

A Delaware Corporation

 

2% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECA TED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

$94,177.93   Date: March 12, 2015   Note RC-20150312-A

 

FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Raphael Cariou (“Holder”) or his assignee, in lawful money of and within the United States of America and in immediately available funds, the principal sum of $94,177.93 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein.

 

Borrower further agrees to pay interest on the Principal Amount at the compounded rate per month of 2% (two per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated monthly from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be accrued monthly and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

Borrower further agrees to accrue interest on Outstanding Past Due Employee Compensation owed to Raphael Cariou at the rate of compounded rate per month of 2% (two per cent). The Outstanding Past Due Employee Compensation due as of December 10, 2014 is $94,177.93.

 

1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on September 12, 2015 (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2. Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below..

 

2.1 Conversion into the Borrower’s Common Stock

 

(a) The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default, as the case may be, into fully paid and nonassessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”). Upon delivery to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request for conversion (the date of giving such notice of conversion being a “Conversion Date”), the Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of the Note to be converted and interest, if any, by the Conversion Price, and then multiplied by One Hundred Fifteen Percent (115%).

 

 

 

 

(b) Subject to adjustment as provided in Section 2. l(c) hereof, the Conversion Price per share shall be the average closing bid prices for the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the Common Stock is listed or traded, for the five (5) trading days prior to but not including the Conversion Date.

 

(c) The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.

 

B. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

 

C. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

 

D. Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.

 

2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2. l(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

 

 

 

 

2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation l 3d-3 thereunder.

 

3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4. Default. The following events shall each be an “Event of Default” under this Note:

 

A. Bankruptcy or insolvency of Borrower;

 

B. Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C. Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.

 

5. Covenants.

 

A. Use of Proceeds. The Borrower has used the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

 

 

 

C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E. Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

6. Waiver. TO THE FULLEST EXTENT PERMITIED BYLAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WANED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WANES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIM1TATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WANED TO THE FULLEST EXTENT PERMJTTED BYLAW.

 

7. Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

 

 

 

8. Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

CoroWare, Inc.

60 I I 08th Avenue Northeast

Suite 1900

Bellevue, WA 98004

Attention: President

 

lfto the Lender, at:

 

Raphael Cariou

3518 Fremont Ave N

#252

Seattle, WA 98103

 

or at any address specified by Borrower or Lender in writing.

 

9. Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

10. No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

11. Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

 

 

 

12. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

13. Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

14. Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

15. Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

COROWARE, INC.  
     
By: /s/ Lloyd T. Spencer  
Name: Lloyd T. Spencer  
     
Title: President and CEO  
     
Date: March 12, 2015  
     
HOLDER    
     
By: /s/ Raphael Cariou  
     
Name: Raphael Cariou  
     
Date: March 12 2015  

 

 

 

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

The undersigned hereby elects to convert$___________ of the principal and$_________ of the interest due on the Note issued by COROWARE, INC. on December 10, 2014 into shares of common stock of COROWARE, INC. (the “Company”) according to the conditions set forth in such Note, as of the date written below.

 

Date of

Conversion: _______________________________________________________________________________________

 

Conversion

Price: ________________________________________________________________________________________ ___

 

Shares To Be

Delivered: ________________________________________________________________________________________

 

Signature:, ____________________________________________________________________________________ ___

 

Print

Name:, _______________________________________________________________________________________ ___

Address:, _____________________________________________________________________________________ ___

 

________________________________________________________________________________________

 

 

 

Exhibit 10.70

 

CoroWare, INC.

A Delaware Corporation

 

2% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURJTIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURJTIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUlRED.

 

$94J 77.93 Date: March 12, 2015 Note RC-20150312-B

 

FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Raphael Cariou (“Holder”) or his assignee, in lawful money of and within the United States of America and in immediately available funds, the principal sum of $94,177.93 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein.

 

Borrower further agrees to pay interest on the Principal Amount at the compounded rate per month of 2% (two per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated monthly from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be accrued monthly and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

Borrower further agrees to accrue interest on Outstanding Past Due Employee Compensation owed to Raphael Cariou at the rate of compounded rate per month of 2% (two per cent). The Outstanding Past Due Employee Compensation due as of December 10, 2014 is $94,177.93.

 

1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on September 12, 2015 (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2. Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below..

 

2.1 Conversion into the Borrower’s Common Stock

 

(a) The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default, as the case may be, into fully paid and nonassessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”). Upon delivery to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request for conversion (the date of giving such notice of conversion being a “Conversion Date”), the Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of the Note to be converted and interest, if any, by the Conversion Price, and then multiplied by One Hundred Fifteen Percent (115%).

 

 
 

 

(b) Subject to adjustment as provided in Section 2. l(c) hereof, the Conversion Price per share shall be the average closing bid prices for the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the Common Stock is listed or traded, for the five (5) trading days prior to but not including the Conversion Date.

 

(c) The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.

 

B. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

 

C. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

 

D. Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.

 

2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.l(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

 

 
 

 

2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation l 3d-3 thereunder.

 

3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4. Default. The following events shall each be an “Event of Default” under this Note:

 

A. Bankruptcy or insolvency of Borrower;

 

B. Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C. Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.

 

5. Covenants.

 

A. Use of Proceeds. The Borrower has used the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, alI of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

 
 

 

C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E. Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

6. Waiver. TO THE FULLEST EXTENT PERMITIED BYLAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.

 

7. Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

 
 

 

8. Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

CoroWare, Inc.

601 108th Avenue Northeast

Suite 1900

Bellevue, WA 98004

Attention: President

 

If to the Lender, at:

 

Raphael Cariou

3518 Fremont Ave N

#252

Seattle, WA 98103

 

or at any address specified by Borrower or Lender in writing.

 

9. Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

10. No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

11. Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

 
 

 

12. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

13. Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

14. Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

15. Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

COROW ARE, INC.  
   
By:  
     
Name: Lloyd T. Spencer
     
Title: President and CEO  
     
Date: March 12, 2015  

 

HOLDER

 

By:  
     
Name: Raphael Cariou  
     
Date: March 12 2015  

 

 
 

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

The undersigned hereby elects to convert$__________of the principal and$______of the interest due on the Note issued by COROWARE, INC. on December 10, 2014 into shares of common stock of COROWARE, INC. (the “Company”) according to the conditions set forth in such Note, as of the date written below.

 

Date of Conversion:  
   
Conversion  Price:  
   
Shares To Be Delivered:  
   
Signature:  
   
Print Name:  
   
Address:  

 

 

 

Exhibit 10.71

 

CONVERTIBLE NOTE PURCHASE AGREEMENT

 

AGREEMENT (the “Agreement”) made as of this 21” day of March, 2011 , by and among David Ratzker (the “Seller”) and Redwood Management, LLC (the “Buyer”).

 

WITNESSETH:

 

WHEREAS, the Seller purchased, or received by assignment, a 14% convertible note issued by Coroware Technologies, Inc. (the “Company”) July 20, 2006 in the aggregate outstanding principal and interest amount of $568,263.00 (the “Note”), substantially in the form annexed hereto as Exhibit A; and

 

WHEREAS, the Buyer desires to purchase a portion of the rights under the Note equal to $284,131.50, which amount consists of $170,561.50 in principal and $113,570.00 of accumulated interest (including the right to convert such Notes into the Company’s common stock (the “Transferred Rights”)) upon the terms and conditions hereinafter set forth herein] rights under the Notes; and

 

NOW THEREFORE, in consideration of the mutual covenants and promises herein contained and upon the tenns and conditions hereinafter set forth, the parties hereto, intending to be legally bound,agree as follows:

 

I. PURCHASE AND SALE OF THE CONVERTIBLE NOTE.

 

Upon the terms and conditions herein contained, at the Closing (as hereinafter defined), the Seller hereby sells, assigns and transfers to the Buyer and the Buyer agrees to purchase from the Seller all of the Transferred Rights under the Notes, as of the date of the Closing, free and clear of all liens, claims, pledges, mortgages, restrictions, obligations, security interests and encumbrances of any kind, nature and description.

 

2. CONSIDERATION.

 

The purchase price for the Transferred Rights (the “Purchase Price”) shall be the Buyer’s aggregate payment of One Hundred Fifty Thousand Dollars ($150,000.00) to the Seller.

 

3. CLOSING.

 

The first closing of the transaction contemplated by this Agreement (the “First Closing”) shall take place simultaneously with the delivery of the first of three payments of Fifty Thousand Dollars ($50,000.00) via wire transfer of immediately available funds.

 

4. SUBSEQUENT CLOSINGS.

 

On the thirty (30) day anniversary of the First Closing, and on the sixty (60) day anniversary of the First Closing (each, a “Funding Date”), the remaining balance of the Purchase Price shall be paid by the Buyer in two (2) tranches of Fifty Thousand Dollars ($50,000.00). On each Funding Date, the Buyer will transfer by wire transfer of immediately available funds to the Seller. In addition, on each Funding Date, the Seller shall have delivered to the Buyer a closing certificate in form and substance reasonably satisfactory to the Buyer. Notwithstanding the foregoing, the Seller may terminate his obligations under this Agreement should the Buyer fail to meet their obligations to make timely payments.

 

 

-1-
 

 

5. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller hereby represents and warrants to the Buyer as follows:

 

5.1 Status of the Seller and the Note. The Seller is the beneficial owner of the Notes, aud such Notes are free and clear of all mortgages, pledges, restrictions, liens, charges, encumbrances, security interests, obligations or other claims. The Notes are currently outstanding and represents a bona tide debt obligation of the Company.

 

5.2 Authorization; Enforcement. (i) Seller has all requisite corporate power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby and to sell the Notes, in accordance with the terms hereof,(ii) the execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby (including without limitation, the sale of the Notes to the Buyer) have been duly authorized by the Seller and no further consent or authorization of the Seller orits members is required, (iii) this Agreement has been duly executed and delivered by the Seller,and (iv) this Agreement constitutes a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general application

 

5.3 No Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby (including, without limitation, the sale of the Note to the Buyer) will not (i) conflict with or result in a violation of any provision of its certificate of formation or other organizational documents, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, note, bond, indenture or other instrument to which Seller are a party, or (iii) result in a violation of any law, rule, regulation,order,judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Seller arc subject) applicable to the Seller or the Note are bound or affected. The Seller is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance with the terms hereof.

 

5.4 Title; Rule 144 Matters. Seller has good and marketable title to the Notes,free and clear of all liens, pledges and encumbrances of any kind. Seller is not, and for a period of at least ninety (90) days prior to the date hereof has not been, an “Affiliate” of the Company, as that term is defined in Rule 144 of the 1933 Act. Subsequent to the Closing, Seller will take no action which would adversely affect the tacking for the benefit of the Purchaser of Seller’s holding period under Rule 144.

 

5.5 Consent of the Company.

 

(i) The Company, as evidenced by its signature at the foot of this Agreement, hereby represents and warrants that, upon delivery to the Company of the Note for transfer to Buyer, the Company shall promptly cause to be issued to and in the name of Buyerone or more new executed Notes in the aggregate principal amount of the Notes, but otherwise having the same terms (including, but not necessarily limited to, referring to the original issue date) as in the Note, except that interest on the Note shall accrue only as of and from the Closing (and no such interest with respect to the Note shall be payable to Seller thereafter). The Note may contain the same restrictive legend as provided in the original Note, but no stop transfer order.

 

-2-
 

 

(ii) The signature by the Company also represents the Company’s agreement to (x) pay to Buyer any liquidated damages or other damages relating to the Note or with respect to the other Transferred Rights which may accrne after the Closing or issue to Seller any shares in payment thereof to the extent contemplated in the Note on the same terms as if Seller continued to be the holder of the Note (and Seller shall continue to have all rights with respect thereto even after the Closing), and (y) treat Buyer as a party to, and having all the rights in the place and stead of Seller with respect to the Transferred Rights.

 

(iii) The Company acknowledges that, for purposes of Rule 144 under the 1933 Act, the holding period of the Note in the hands of a Buyer tacks onto the holding period of the Note in the hands of Seller.

 

6. REPRESENTATIONS. WARRANTIES AND ACKNOWLEDGEMENTS OF THE BUYER. The Buyer hereby represents warrants and acknowledges to the Seller as follows:

 

Sophisticated Investor. The Buyer has sufficient knowledge and experience of financial and business matters, is able to evaluate the merits and risks of purchasing the Note and has had substantial experience in previous private and public purchases of securities.

 

7. Miscellaneous

 

7.1 Binding Effect; Benefits. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors and permitted assigns. Except as otherwise set forth herein, this Agreement may not be assigned by any party hereto without the prior written consent of the other party hereto. Except as otherwise set forth herein, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

7.2 Notices. All notices, requests, demands and other communications which arc required to be or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person, or transmitted by telecopy or telex,orupon receipt after dispatch by certified or registered first class mail, postage prepaid, return receipt requested, to the party to whom the same is so given or made,at the following addresses (or such others as shall be provided in writing hereinafter):

 

  (a) If to the Seller, to:
     
    David Ratzker
    59 Westminster Avenue
    Bergenfield, NJ 07621
     
  (b) If to the Buyer, to:
     
    Redwood Management, LLC
    16850 Collins Avenue, No. 112-341
    Sunny Isles Beach, Florida 33160
    Attention: Gary Rogers
    Facsimile:

 

-3-
 

 

7.3 Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings,oral and written, between the parties hereto with respect to the subject matter hereof.

 

7.4 Further Assurances. After the Closing, at the request of either party, the other party shall execute, acknowledge and deliver, without further consideration, all such further assignments, conveyances, endorsements, deeds, powers of auomey, consents and other documents and take such other action as may be reasonably requested to consummate the transactions contemplated by this Agreement.

 

7.5 Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to affect the meaning or interpretation of this Agreement.

 

7.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

 

7.7 Governing Law. This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by the laws of the State of New York, without giving effect to the conflicts of law principles thereof.

 

7.8 Severability. If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of the Agreement shall be valid and enforced to the fullest extent permitted by law.

 

7.9 Amendments. This Agreement may not be modified or changed except by an instrument or instruments in writing executed by the parties hereto.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK!

 

-4-
 

 

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

 

  SELLER:
 

  /s/ David Ratzker
  David Ratzker
   
  BUYER:
   
  REDWOOD MANAGEMENT, LLC
 
  By
   
  /s/ Gary Rogers
  Gary Rogers
  Manager

 

-5-
 

 

Issuance Date: July 20, 2006

 

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.

 

No. IVHG-2-1 RZ $341,123

 

COROWAREINC.

 

Amended and Restated Secured Convertible Debenture

 

Due: July 20, 2009

 

This Amended and Restated Secured Convertible Debenture (including all secured convertible debentures issued in exchange, transfer or replacement hereof, this “Debenture”) was originally issued pursuant to that certain Securities Purchase Agreement (the “Securities Purchase Agreement”) dated July 20, 2006 in the original principal amount of $1,250,000 COROWARE, INC. (f/k/a INNOVA ROBOTICS & AUTOMATION, INC., f/k/a INNOVA HOLDINGS, INC.), a Delaware corporation (the “Company”), to YA GLOBAL INVESTMENTS, LTD. (f/k/a CORNELL CAPITAL PARTNERS, LP) (the “Former Holder”). As of December 31, 2010 the Former Holder sold, transferred, and assigned to Mr. David Ratzker (the “Holder”) a portion of the Original Debenture (as defined herein) representing $341,123 of the outstanding principal balance at such time, along with the corresponding accrued and unpaid interest thereon of $227,140. This Debenture (No. IVHG-2-1 RZ) is being re-issued and registered in the name of the Holder to reflect the $341,123 of the outstanding principal balance, along with accrued and unpaid interest thereon of $227,140 that was sold transferred, and assigned to the Holder.

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the Holder or its successors and assigns the principal sum of $341,123 together with accrued but unpaid interest of $227,140 as of December 31, 2010, plus interest accruing thereafter, in accordance with the following terms:

 

Section I. General Terms

 

(a) Obligations Due and Pavable. Notwithstanding anything contained herein to the contrary, the Company acknowledges that the obligations evidenced by this Debenture matured as of July 20, 2009 (the “Maturity Date”) and are currently due and payable in full.

 

 
 

 

(b) Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to fourteen percent (14%) per annum. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures in cash or in Common Stock (valued at the Closing Bid Price on the Trading Day immediately prior to the date paid) at the option of the Company.

 

(c) Security. This Debenture is secured by, among other things, a Security Agreement (the “Security Agreement”) dated November 2, 2007 granted by the Company and its subsidiaries. In connection therewith, and to secure the obligations owed pursuant to this Debenture, the Company hereby grants to the Holder a security interest in all of its Pledged Property (as defined in the Security Agreement).

 

Section 2. Events of Default.

 

(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i) Any default in the payment of the principal of, interest on or other charges in respect of this Debenture, free of any claim of subordination, as and when the same shall become due and payable whether upon a Mandatory Redemption (as defined in Section 3(b)), an Optional Redemption (as defined in Section 3( a)), or the Maturity Date or by acceleration or otherwise;

 

(ii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to,approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

 

 
 

 

(iii) The Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

(iv) The Common Stock shall cease to be quoted for trading or listing for trading on any of (a) the NYSE Amex, (b) New York Stock Exchange, (c) the Nasdaq Stock Market, or (d) the OTC Bulletin Board (“OTC”) (each, a “Primary Market”) and shall not again be quoted or listed for trading on any Primary Market within five (5) Trading Days of such delisting; Primary Market

 

(v) The Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6);

 

(vi) The Company shall fail to file the Underlying Shares Registration Statement (as defined in Section 6) with the Commission (as defined in Section 6), or the Underlying Shares Registration Statement shall not have been declared effective by the Commission, in each case within the time periods set forth in the Investor Registration Rights Agreement (“Registration Rights Agreement”) dated July 20, 2006 between the Company and the Holder;

 

(vii) If the effectiveness of the Underlying Shares Registration Statement lapses for any reason or the Holder shall not be permitted to resell the shares of Common Stock underlying this Debenture under the Underlying Shares Registration Statement, in either case, for more than five (5) consecutive Trading Days or an aggregate of eight Trading Days (which need not be consecutive Trading Days);

 

(viii) The Company shall fail for any reason to deliver Common Stock certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion Date or after a Redemption Date if the Company chose to settle a Mandatory Redemption in shares of Common Stock, or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions, or settlements of Mandatory Redemptions in shares of Common Stock, in accordance with the terms hereof;

 

(ix) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) days after notice is claimed delivered hereunder;

 

 
 

 

(x) The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(ix) hereof) or any Transaction Document (as defined in Section 6) which is not cured within a period of ten (10) days after notice of such breach has been sent by the Holder to the Company;

 

(b) During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Company. If an Event of Default shall occur the Conversion Price shall be reduced to $0.02 (the “Default Conversion Price”). Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Debenture or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Debenture or the sale of the Underlying Shares.

 

Section 3. Redem.12.tions.

 

(a) Company’s Optional Cash Redemption. The Company at its option shall have the right to redeem (“Optional Redemption”) a portion or all amounts outstanding under this Debenture prior to the Maturity Date provided that as of the date of the Holder’s receipt of a Redemption Notice (as defined herein) (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price, (ii) the Underlying Share Registration Statement is effective, and (iii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption Premium”) equal to ten percent (10%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the “Redemption Amount”). In order to make a redemption, the Company shall first provide written notice to the Holder of its intention to make a redemption (the “Redemption Notice”) setting forth the amount of principal it desires to redeem. After receipt of the Redemption Notice the Holder shall have three (3) business days to elect to convert all or any portion of this Debenture, subject to the limitations set forth in Section 4(b). On the fourth (4th) business day after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the principal amount redeemed after giving effect to conversions effected during the three (3) business day period.

 

 
 

 

(b) Mandatory Redemptions.

 

(i) Holder’s Right. Beginning on the earlier of (A) the first Trading Day immediately following the date in which the Underlying Shares Registration Statement is first declared effective or (B) December I, 2006, and continuing on the first Trading Day of each calendar month thereafter (each, a “Redemption Date”), the Holder shall have the right to force the Company to redeem (“Mandatory Redemptions”) up to $500,000 of the remaining principal amount of the Debenture (the “Maximum Redemption Amount”) per calendar month by transmitting a copy of a Redemption Notice in the form attached hereto as Exhibit A (the “Redemption Notice”) requiring the Company to redeem (as set forth below in Section 3(b)(ii) hereof) the principal amount set forth in the Redemption Notice (the “Mandatory Redemption Amount”). The Company, in its sole discretion, may increase the Maximum Redemption Amount and, upon an Event of Default the Maximum Redemption Amount shall be automatically increased to an amount up to the remaining principal amount of the Debenture.

 

Notwithstanding the foregoing, if (A) the Closing Bid Price of the Common Stock exceeds the Conversion Price for each of the five consecutive Trading Days immediately prior to the Redemption Date, (B) the Underlying Share Registration Statement has been declared effective and remains effective on the Redemption Date, and (C) no Event of Default shall have occurred, then the Holder shall not be permitted to require the Company to make a Mandatory Redemption in that month.

 

(ii) Company’s Settlement Options. The Company has the option, in its sole discretion, to settle Mandatory Redemptions by (A) paying the Holder cash in an amount equal to the Mandatory Redemption Amount plus the Redemption Premium, or (B) issuing the Holder the number of shares of Common Stock (the “Redemption Shares”) equal to the Mandatory Redemption Amount divided by a price (the “Market Price”) equal to 95% of the lowest daily Volume Weighted Average Price of the Common Stock during the thirty (30) trading days immediately preceding the date the Holder delivers the Redemption Notice as quoted by Bloomberg, LP provided that in order for the Company to choose option B of this Section 3(b)(ii), (x) the Underlying Shares Registration Statement shall have been declared effective and shall remain effective on the date of the Redemption Notice, and (Y) no Event of Default shall have occurred.

 

(iii) Redemption Notice Procedures.

 

(A) On or prior to 5:00 pm New York City time on the Trading Day immediately following the Redemption Date, the Company shall return a copy of the Redemption Notice via facsimile (or other delivery) to the Holder, which Redemption Notice shall note the Company’s choice of settlement options with respect to such Redemption Notice and shall be signed by an officer of the Company.

 

(B) The Company shall settle all Redemption Notices within 5 Trading Days of the Redemption Date.

 

 
 

 

(iv) Settlement of Put Notice in shares of Common Stock. In the event that the Company chooses (if available) to settle a Redemption Notice in shares of Common Stock pursuant to option (B) of Section 3(b)(ii), upon notice to the Holder of such selection, the Redemption Notice shall effectively be treated the same as a Conversion Notice submitted by the Holder and processed in accordance with the provisions for Conversion Notices set forth in Section 4. The limitations on Conversions set forth in Section 4(b) hereof shall apply to any shares of Common Stock issued pursuant to this Section 3. In the event that the Company fails to notify the Holder of its election of settlement options in accordance with Section 3(b )(iii) hereof, then if applicable, the Company hereby designates all such Redemption Notices to automatically be settled in shares of Common Stock.

 

Section 4. Conversion.

 

(a) Conversion at Option of Holder.

 

(i) This Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as defined in Section 6) (subject to the limitations on conversion set forth in Section 4(b) hereof). The number of shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing (x) the outstanding amount of this Debenture to be converted by (y) the Conversion Price (as defined in Section 4(c)(i)). The Company shall deliver Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a Conversion Date.

 

(ii) Notwithstanding anything to the contrary contained herein, if on any Conversion Date: (1) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder in shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on a Primary Market; or (3) the Company has failed to timely satisfy a conversion; then, at the option of the Holder, the Company, in lieu of delivering shares of Common Stock pursuant to Section 4( a)(i), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an amount in cash equal to the product of the outstanding principal amount to be converted divided by the applicable Conversion Price, and multiplied by the highest Closing Bid Price of the stock from date of the conversion notice till the date that such cash payment is made.

 

Further, if the Company shall not have delivered any cash due in respect of conversion of this Debenture by the fifth (5th) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue shares of Common Stock pursuant to Section 4( c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such shares will be subject to the provisions of this Section.

 

(iii) The Holder shall effect conversions by delivering to the Company a completed notice in the form attached hereto as Exhibit B (a “Conversion Notice”). The date on which a Conversion Notice is delivered is the “Conversion Date.” Unless the Holder is converting the entire principal amount outstanding under this Debenture, the Holder is not required to physically surrender this Debenture to the Company in order to effect conversions. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

 

 
 

 

(b) Certain Conversion Restrictions.

 

(i) A Holder may not convert this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent such conversion or receipt of such interest payment would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of, and payment of interest on, this Debenture held by such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with the periods described in Section 4( a)(i) and, at the option of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future conversions or return such excess principal amount to the Holder. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.

 

(c) Conversion Price and Adjustments to Conversion Price.

 

(i) The conversion price in effect on any Conversion Date shall be equal to the lower of $0.02 per share or eighty-five percent (85%) of the lowest Volume Weighted Average Price in the thirty (30) Trading Days prior to the Conversion Date (the “Conversion Price”). The Conversion Price may be adjusted pursuant to the terms of this Debenture.

 

(ii) If the Company, at any time while this Debenture is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

 
 

 

(iii) If the Company, at any time while this Debenture is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants (plus the number of additional shares of Common Stock offered for subscription or purchase), and of which the numerator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants, plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Conversion Price. Such adjustment shall be made whenever such rights or wairants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. However, upon the expiration of any such right, option or warrant to purchase shares of the Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section, if any such right, option or warrant shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of the Common Stock actually purchased upon the exercise of such rights, options or warrants actually exercised.

 

(iv) If the Company or any subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall issue shares of Common Stock or rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at a price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than one (1) business day following the issuance of any Common Stock or Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms. No adjustment under this Section 4(c)(iv) shall be made as a result of issuances of Excluded Securities.

 

 
 

 

(v) If the Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which this Debenture shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Bid Price determined as of the record date mentioned above, and of which the numerator shall be such Closing Bid Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

(vi) In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to, at its option, (A) convert the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Common Stock following such reclassification or share exchange, and the Holder of this Debenture shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture could have been converted immediately prior to such reclassification or share exchange would have been entitled, or (B) require the Company to prepay the outstanding principal amount of this Debenture, plus all interest and other amounts due and payable thereon. The entire prepayment price shall be paid in cash. This provision shall similarly apply to successive reclassifications or share exchanges.

 

(vii) Whenever the Conversion Price is adjusted pursuant to Section 4 hereof, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

 
 

 

(viii) If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last address as it shall appear upon the stock books of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day calendar period commencing the date of such notice to the effective date of the event triggering such notice.

 

(ix) In case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b ),(B) convert the aggregate amount of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

 

 
 

 

(d) Other Provisions.

 

(i) Conversion at the Option of the Company. The Company shall have the right to force the Holder to convert this Debenture into shares of Common Stock in accordance with this Section 3 hereof, in amounts not to exceed $200,000 in any thirty (30) day period, after the Original Issue Date, subject to the limitations on conversions set forth in Section 3(b) hereof and provided that the following conditions are satisfied: (a) the Closing Bid Price of the Common Stock is greater than 110% of the Conversion Price on each of the five Trading Days immediately preceding the Conversion Date, (b) the average daily trading volume for the Common Stock on a Primary Market shall have been greater than $200,000 over the five Trading Days prior to the Conversion Date, (c) the Underlying Shares Registration Statement shall be effective and the Holder shall be permitted to resell the shares of Common Stock underlying this Debenture under the Underlying Registration Statement, and (d) no Event of Default has occurred.

 

(ii) The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Debenture; and within three (3) Business Days following the receipt by the Company of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement.

 

(iii) All calculations under this Section 4 shall be rounded up to the nearest $0.0001 or whole share.

 

(iv) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in this Debenture or in the Transaction Documents) be issuable (taking into account the adjustments and restrictions set forth herein) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Underlying Shares Registration Statement has been declared effective under the Securities Act, registered for public sale in accordance with such Underlying Shares Registration Statement.

 

(v) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Closing Bid Price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

(vi) The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

 
 

 

(vii) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company ‘s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(viii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(a)( i) by the fifth (5th) Trading Day after the Conversion Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either reissue a Debenture in the principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements under Section 4(a)(i). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which the market price of the Underlying Shares on the date of conversion was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

Section 5. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Trading 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, to: Coroware, Inc.
  1410 Market Street, Suite 200
  Kirkland, WA 98033
  Attention: Lloyd Spencer
  Telephone: (425) 818-8990
  Facsimile: (800) 641-2676
   
With a copy to: Sichenzia Ross Friedman Ference LLP
  1065 Avenue of the Americas
  New York, NY 10018
  Attention: Gregory Sichenzia
  Telephone: (212) 930-9700
  Facsimile: (212) 930-9725
   
If to the Holder: David Ratzker.
  59 Westminster Ave.,
  Bergenfield, NJ 07620
  (516) 880-8110

 

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) business days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

Section 6. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Approved Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company prior to the date of the Securities Purchase Agreement, pursuant to which the Company’s securities may be issued only to any employee, officer or director for services provided to the Company.

 

“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

 

 
 

 

“Change of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(l) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Company (except that the acquisition of voting securities by the Holder shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c).

 

“Closing Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock is then listed as quoted by Bloomberg, LP.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $.001, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.

 

“Conversion Date” shall mean the date upon which the Holder gives the Company notice of their intention to effectuate a conversion of this Debenture into shares of the Company’s Common Stock as outlined herein.

 

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

 

“Excluded Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right, option, obligation or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the date of the Securities Purchase Agreement, and (c) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of this Debenture.

 

“Original Issue Date” shall mean the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.

 

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

 
 

 

“Trading Day” means a day on which the shares of Common Stock are quoted on the OTC or quoted or traded on such Primary Market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

 

“Transaction Documents” means the Securities Purchase Agreement or any other agreement delivered in connection with the Securities Purchase Agreement, including, without limitation, the Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer Agent Instructions, and the Registration Rights Agreement.

 

“Underlying Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms hereof.

 

“Underlying Shares Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering among other things the resale of the Underlying Shares and naming the Holder as a “selling stockholder” thereunder.

 

Section 7. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

Section 8. This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

Section 9. If this Debenture is mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

Section 10. No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.

 

Section 11. This Debenture shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

 

 
 

 

Section 12. If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

 

Section 13. Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.

 

Section 14. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

Section 15. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 16. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations but with the same terms and conditions, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

 

Section 17. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

Section 18. Amended and Restated Debenture. This Debenture, together with that certain Amended and Restated Secured Convertible Debenture of even date herewith made by the Company payable to the Former Holder in the original principal amount of $395,628, shall amend, restate, and divide that certain Secured Convertible Debenture dated as of July 20, 2006 issued by the Company in favor of the Holder in the original principal amount of $1,250,000 (the “Original Debenture”). This Debenture is not in any way intended to constitute a novation of the obligations and liabilities existing under the Original Debenture or evidence payment of all or any portion of such obligations and liabilities.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 
 

 

IN WITNESS WHEREOF, the Company has caused this Amended and Restated Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.

 

  COMPANY:
  COROWARE, INC.
   
  By:
  Name: Lloyd T. Spencer
  Title: Chief Executive Officer

 

 
 

 

EXHIBIT A

 

REDEMPTION NOTICE

 

Redemption Date:     Mandatory Redemption Amount:  

 

Settlement in Common Stock

 

D AU Conditions to Company’s option to settle in Common Stock (Section 3(b )) are satisfied

 

Mandatory Redemption Amount: $  
     
Redemption Conversion Price: $  
     
Number of shares of Common Stock to be issued:    

 

Please issue the shares of Common Stock in the following name and to the following address:

 

Issue to:   David Ratzker.
    59 Westminster Ave.,
    Bergenfield, NJ 07620
    (516) 880-8110

 

Broker DTC Participant Code:

Account Number:

 

    Settlement in Cash
Mandatory Redemption Amount: $  
Redemption Premium: $  
Total Cash Settlement: $  

 

Notification of Settlement Option

 

D Settlement in Common Stock D Settlement in Cash

 

   
Coroware, Inc.  
By:  
Its:            

 

**THIS REDEMPTION NOTICE MUST BE SIGNED & RETURNED VIA FACSIMILE TO THE HOLDER AT (201) 946-0851 NO LATER THAN 5:00 N.Y.C. TIME ON THE DAY FOLLOWING THE REDEMPTION DATE**

 

 
 

 

EXHIBIT B

 

CONVERSION NOTICE

 

(To be executed by the Holder in order to Convert the Debenture)

 

TO:

 

The undersigned hereby irrevocably elects to convert $ _________________________________________ of the principal amount of the above Debenture into Shares of Common Stock of COROWARE, INC., according to the conditions stated therein, as of the Conversion Date written below.

 

Conversion Date:    
     
Amount to be converted: $  
     
Conversion Price: $  
     
Number of shares of Common to be issued:   
     

Amount of Debenture

Unconverted:

 $  

 

Please issue the shares of Common Stock in the following name and to the following address:

 

Issue to:   David Ratzker.
    59 Westminster Ave.,
    Bergenfield, NJ 07620
    (516) 880-8110

 

Authorized Signature:    
     
Name:    
     
Title:    
     
Broker DTC Participant Code:    
     
Account Number:    

 

 

 

Exhibit 10.72

 

 

CoroWare, Inc.

(A Delaware corporation)

 

10% CONVERTIBLE NOTE

 

THIS NOTE AND ANY SHARES OF THE COMMON STOCK OF COROWARE, INC. ACQUIRED UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

$25,000.00 Date: April 2, 2014 Note #1-A

 

FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Burrington Capital with principal address at 607 Lawrence Ave., Westfield, NJ 07090 (“Holder”) or its assignee, in lawful money of and within the United States of America and in immediately available funds, the principal sum of Twenty Five Thousand US Dollars ($25,000.00) (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein. Borrower further agrees to pay interest on the Principal Amount at the compounded rate per annum of 10% (ten per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on October 1, 2014 (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2. Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below..

 

2.1 Conversion into the Borrower’s Common Stock

 

(a) The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default, as the case may be, into fully paid and non-assessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”).

 

Page 1 of 10

 

 

Upon delivery to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request for conversion (the date of giving such notice of conversion being a “Conversion Date”), the Borrower shall issue and deliver to the Holder within five (5) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing.

 

(b) The Conversion Price shall be the lesser of $0.01 or 60% of the lowest closing price for the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the Common Stock is listed or traded, for the twenty (20) trading days prior to but not including the Conversion Date. If the Conversion Shares are not deliverable by DWAC (Deposit/Withdrawal at Custodian) an additional 10% discount will apply. If the shares are ineligible for deposit into the DTCC (Depository Trust & Clearing Corporation), an additional 5% discount shall apply. The Conversion Price may be adjusted pursuant to the terms of this Debenture.

 

(c) The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.

 

B. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

 

C. Stock Splits, Combinations and Dividends. If the shares of the Borrower’s Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

 

Page 2 of 10

 

 

D. Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.

 

2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

 

2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.

 

3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4. Default. The following events shall each be an “Event of Default” under this Note:

 

A. Bankruptcy or insolvency of Borrower;

 

B. Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C. Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.

 

Page 3 of 10

 

 

5. Covenants.

 

A. Use of Proceeds. The Borrower will not receive any proceeds from this Note since this Note is being issued solely in payment of certain accrued and unpaid amounts due the Lender for legal services received by the Borrower from the Lender.

 

B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E. Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

6. Representations and Warranties of the Lender. The Lender hereby warrants and represents to the Borrower that:

 

A. Understanding RE: This Note as a Restricted Security. The Lender understands that this Note and any shares of the Borrower’s Common Stock acquired upon conversion of this Note (the “Subject Shares”), have not been registered under the Securities Act of 1933, as amended (the “1933 Act”) and that the Lender will be required to bear the economic and financial risk of holding this Note and all said Subject Shares for an indeterminate period of time.

 

Page 4 of 10

 

 

B. Status of Lender. The Lender is an “accredited investor” as that term is defined in Rule 501 of Regulation D of the 1933 Act and is also sophisticated and experienced in acquiring the securities of small public companies with an ability to fully evaluate the risks and uncertainties associated with such investments.

 

C. Matter of Trading Markets. The Lender understands that there is no trading market for this Note and there is no likelihood that any trading market will ever develop. Further, the Lender understands that there is only a limited and sporadic trading market for the Borrower’s Common Stock and there can be no assurance that any continuous and liquid trading market for the Borrower’s Common Stock will ever develop or, if it does develop, that it will be sustained.

 

D. Subordinate to Existing and Future Debt. The Note issued to the Lender is subordinate to the Borrower’s existing and future debt. The Subject Shares acquired upon conversion of the Note will also be subordinate to existing and future debt.

 

E. Limited Financial and Managerial Resources. The Borrower has limited financial and managerial resources and the Borrower’s ability to respond to financial and managerial challenges in the marketplace are limited. In the event that the Borrower encounters competitive and technological challenges from others, there can be no guarantee that the Borrower will have the ability to obtain sufficient financial and managerial resources to meet any one or more of these challenges successfully.

 

F. Receipt of Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Prior to acquiring the Note, the Lender reviewed each of the Borrower’s Annual Report on Form 10-K for the fiscal years ending 2011 and 2012 together with each of the Quarterly Reports for the fiscal 2013 fiscal year through the present, all as filed with the Securities and Exchange Commission with the result that the Lender understands that the Lender’s acquisition of the Note must be considered a “HIGH RISK” investment with the likelihood that the Lender may lose all or substantially all of their investment. A copy of the Borrower’s Annual Report on Form 10-K for the fiscal year ending December 31, 2012 and the Quarterly Reports on Form 10-Q for 2013 are each attached to Exhibit A hereto and is incorporated by reference herein.

 

G. Losses, Negative Cash Flow, Limited Equity, and Need for Additional Capital. The Borrower has had a history of losses and negative cash flow and there can be no assurance that the Borrower will achieve profitability or positive cash flow or if it does, that it can be sustained. The Borrower also has limited equity and a need to raise additional capital but without any assurance that it can raise any additional capital. For these and other reasons, the Lender understands that it should be prepared to lose their entire investment.

 

H. Risk Factors in Annual Report on Form 10-K. Prior to acquiring the Note, the Lender reviewed and understands the Risk Factors set forth in the Borrower’s Annual Report on For5m 10-K and has had sufficient opportunity to ask questions of the Borrower’s officers and directors regarding the Borrower and its affairs and prospects and to receive answers thereto.

 

Page 5 of 10

 

 

I. No Collateral and No Guarantor. The Note is unsecured and no collateral has or will be given to secure the Borrower’s obligations to the Lender. Further, no guarantor has or will be giving any guaranty to the Lender. In the event that the Borrower defaults on its obligations to the Lender, the Lender should be prepared to suffer the total loss of their investment.

 

J. Survival. All of the representations made herein by the Lender shall survive the issuance of this Note and continue thereafter until the sixth anniversary of this Note as measured from the date first stated above.

 

7. Waiver. TO THE FULLEST EXTENT PERMITIED BY LAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.

 

8. Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

9. Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

CoroWare, Inc. 

Attention: Chief Executive Officer 601 108th Avenue NE

Suite 1900 

Bellevue, WA 98004

 

Page 6 of 10

 

 

If to the Lender, at:

 

Burrington Capital, LLC

607 Lawrence Ave.,

Westfield, NJ 07090

Attn: Jason McLane

jason@mclaneny.com

 

or at any address specified by Borrower or Lender in writing.

 

10. Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

11. No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

12. Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

13. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

14. Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

15. Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

Page 7 of 10

 

 

16. Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

17. Arbitration. Any dispute or claim arising to or in any way related to this Agreement shall be settled by binding arbitration in Redmond, Washington but any dispute or controversy arising out of or interpreting this Agreement shall be settled in accordance with the laws of the State of Washington as if this Agreement were executed and all actions were performed hereunder within the State of Washington. All arbitration shall be confidential and shall be conducted in accordance with the rules and regulations of the American Arbitration Association (“AAA”). AAA shall designate an arbitrator from an approved list of arbitrators following both parties’ review and deletion of those arbitrators on the approved list having a conflict of interest with either party. Each party shall pay its own expenses associated with such arbitration. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter has arisen and in no event shall such demand be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statutes of limitations. The decision of the arbitrators shall be rendered within 60 days of submission of any claim or dispute, shall be in writing and mailed to all the parties included in the arbitration. The decision of the arbitrator shall be binding upon the parties and judgment in accordance with that decision may be entered in any court having jurisdiction thereof.

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

FOR COROWARE, INC.:  
   
By:  
Name:  Lloyd T. Spencer  
Title: President and CEO  
     
Date: April 24, 2014  
   
AGREEMENT & ACKNOWLEDGED BY HOLDER:  
   
By:      
Name: Jason McLane  
Title:      
     
Date: April 24, 2014  

 

Page 8 of 10

 

 

EXHIBIT A

 

ATTACHMENT TO 10% CONVERTIBLE NOTE OF APRIL 17, 2014

 

1. Copy of 2012 Annual Report on Form 10-K as filed with the Securities and Exchange Commission; and

 

2. Copy of 2013 Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission.

 

(Each, as attached.)

 

[The remainder of this page has been left intentionally blank.]

 

Page 9 of 10

 

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

The undersigned hereby elects to convert $________ of the principal and $ ______ of the interest due on the Convetible Note issued by COROWARE, INC. on April 17, 2014 into shares of common stock of COROWARE, INC. (the “Company”) according to the conditions set forth in such Note, as of the date written below.

 

Date of Conversion: ___________________________________________________________________

 

Conversion Price:_____________________________________________________________________

 

Address and contact details of person to whom the shares should be delivered:

 

____________________________________________________________________________________

 

____________________________________________________________________________________

 

Signature: ____________________________________________________________________________

 

Print Name: ___________________________________________________________________________

 

Title: ________________________________________________________________________________

 

Address: ____________________________________________________________________________

 

___________________________________________________________________________________

 

Page 10 of 10

 

 

Exhibit 10.73

 

Issuance Date: July 20, 2006

 

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.

 

No.IVHG-2-1 PF $50,000

 

COROWARE INC.

 

Amended and Restated Secured Convertible Debenture

 

Due: December 31, 2014

 

This Amended and Restated Secured Convertible Debenture (including all secured convertible debentures issued in exchange, transfer or replacement hereof, this “Debenture”) was originally issued pursuant to that certain Securities Purchase Agreement (the “Securities Purchase Agreement”) dated July 20, 2006 in the original principal amount of $1,250,000 by COROWARE, INC. (f/k/a INNOVA ROBOTICS & AUTOMATION, INC., f/k/a INNOVA HOLDINGS, INC.), a Delaware corporation (the “Company”), to YA GLOBAL INVESTMENTS, LTD. (f/k/a CORNELL CAPITAL PARTNERS, LP) (the “Former Holder”). As of April 3, 2014 the Former Holder sold, transferred, and assigned to PATRICK FERRO (the “Holder”) a portion of the Original Debenture (as defined herein) representing the outstanding principal balance at such time of $50,000. This Debenture (No. IVHG-2-1 PT) does not effect a refinancing of all or any portion of the obligations under the Original Debenture, it being the intention of the Company and the Holder to avoid effectuating a novation of any such obligations. All amounts due under the Original Debenture being assigned to this Debenture, including the principal amount of $50,000.00 as set fotih above (the “Assigned Principal Amount”) shall henceforth be evidenced by and paid, redeemed, and/or converted in accordance with the terms and conditions of this Debenture.

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order of the Holder, or its registered assigns, the amount set out above as the Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof). Certain capitalized terms used herein are defined in Section 6.

 

 
 

 

Section I.  General Terms

 

(a) Obligations Due and Payable. Notwithstanding anything contained herein to the contrary, the Company acknowledges that the obligations evidenced by this Debenture matured as of December 31, 2014 (the “Maturity Date”) and are currently due and payable in full.

 

(b) Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to fourteen percent (14%) per annum. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures in cash or in Common Stock (valued at the Closing Bid Price on the Trading Day immediately prior to the date paid) at the option of the Company.

 

(c) Security. The Debenture is secured by all collateral granted by the Company and its affiliates to the Former Holder, in accordance with the terms and conditions of the Assignment Agreement.

 

Section 2. Events of Default.

 

(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i) Any default in the payment of the principal of, interest on or other charges in respect of this Debenture, free of any claim of subordination, as and when the same shall become due and payable whether upon a Mandatory Redemption (as defined in Section 3(b)), an Optional Redemption (as defined in Section 3(a)), or the Maturity Date or by acceleration or otherwise;

 

(ii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

 

 
 

 

(iii) The Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

(iv) The Common Stock shall cease to be quoted for trading or listing for trading on any of (a) the NYSE Amex, (b) New York Stock Exchange, (c) the Nasdaq Stock Market, or (d) the OTC Bulletin Board (“OTC”) (each, a “Primary Market”) and shall not again be quoted or listed for trading on any Primary Market within five (5) Trading Days of such delisting; Primary Market

 

(v) The Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6);

 

(vi) The Company shall fail for any reason to deliver Common Stock certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion Date or after a Redemption Date if the Company chose to settle a Mandatory Redemption in shares of Common Stock, or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions, or settlements of Mandatory Redemptions in shares of Common Stock, in accordance with the terms hereof;

 

(vii) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) days after notice is claimed delivered hereunder;

 

(viii) The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(ix) hereof) or any Transaction Document (as defined in Section 6) which is not cured within a period of ten (I 0) days after notice of such breach has been sent by the Holder to the Company;

 

 
 

 

(b) During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Company. If an Event of Default shall occur the Conversion Price shall be reduced to $0.02 (the “Default Conversion Price”). Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Debenture or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Debenture or the sale of the Underlying Shares.

 

Section 3. Redemptions.

 

(a) Company’s Optional Cash Redemption. The Company at its option shall have the right to redeem (“Optional Redemption”) a portion or all amounts outstanding under this Debenture prior to the Maturity Date provided that as of the date of the Holder’s receipt of a Redemption Notice (as defined herein) (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price, and (ii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption Premium”) equal to ten percent (10%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the “Redemption Amount”). In order to make a redemption, the Company shall first provide written notice to the Holder of its intention to make a redemption (the “Redemption Notice”) setting forth the amount of principal it desires to redeem. After receipt of the Redemption Notice the Holder shall have three (3) business days to elect to convert all or any portion of this Debenture, subject to the limitations set forth in Section 4(b). On the fourth (4th) business day after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the principal amount redeemed after giving effect to conversions effected during the three (3) business day period.

 

(b) Mandatory Redemptions.

 

(i) Holder’s Right. Beginning on January 1, 2007, and continuing on the first Trading Day of each calendar month thereafter (each, a “Redemption Date”), the Holder shall have the right to force the Company to redeem (“Mandatory Redemptions”) up to $500,000 of the remaining principal amount of the Debenture (the “Maximum Redemption Amount”) per calendar month by transmitting a copy of a Redemption Notice in the form attached hereto as Exhibit A (the “Redemption Notice”) requiring the Company to redeem (as set forth below in Section 3(b)(ii) hereof) the principal amount set forth in the Redemption Notice (the “Mandatory Redemption Amount”). The Company, in its sole discretion, may increase the Maximum Redemption Amount and, upon an Event of Default the Maximum Redemption Amount shall be automatically increased to an amount up to the remaining principal amount of the Debenture.

 

 
 

 

Notwithstanding the foregoing, if (A) the Closing Bid Price of the Common Stock exceeds the Conversion Price for each of the five consecutive Trading Days immediately prior to the Redemption Date, and (B) no Event of Default shall have occurred, then the Holder shall not be permitted to require the Company to make a Mandatory Redemption in that month.

 

(ii) Company’s Settlement Options. The Company has the option, in its sole discretion, to settle Mandatory Redemptions by (A) paying the Holder cash in an amount equal to the Mandatory Redemption Amount plus the Redemption Premium.

 

(iii) Redemption Notice Procedures.

 

(A) On or prior to 5:00 pm New York City time on the Trading Day immediately following the Redemption Date, the Company shall return a copy of the Redemption Notice via facsimile (or other delivery) to the Holder, which Redemption Notice shall note the Company’s choice of settlement options with respect to such Redemption Notice and shall be signed by an officer of the Company.

 

(B) The Company shall settle all Redemption Notices within 5 Trading Days of the Redemption Date.

 

(iv) Settlement of Put Notice in shares of Common Stock. In the event that the Company chooses (if available) to settle a Redemption Notice in shares of Common Stock pursuant to option (B) of Section 3(b)(ii), upon notice to the Holder of such selection, the Redemption Notice shall effectively be treated the same as a Conversion Notice submitted by the Holder and processed in accordance with the provisions for Conversion Notices set forth in Section 4. The limitations on Conversions set forth in Section 4(b) hereof shall apply to any shares of Common Stock issued pursuant to this Section 3. In the event that the Company fails to notify the Holder of its election of settlement options in accordance with Section 3(b)(iii) hereof, then if applicable, the Company hereby designates all such Redemption Notices to automatically be settled in shares of Common Stock.

 

Section 4. Conversion.

 

(a) Conversion at Option of Holder.

 

(i) This Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as defined in Section 6) (subject to the limitations on conversion set forth in Section 4(b) hereof). The number of shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing (x) the outstanding amount of this Debenture to be converted by (y) the Conversion Price (as defined in Section 4(c)(i)). The Company shall deliver Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a Conversion Date.

 

 
 

 

(ii) Notwithstanding anything to the contrary contained herein, if on any Conversion Date: (1) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder in shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on a Primary Market; or (3) the Company has failed to timely satisfy a conversion; then, at the option of the Holder, the Company, in lieu of delivering shares of Common Stock pursuant to Section 4(a)(i), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an amount in cash equal to the product of the outstanding principal amount to be converted divided by the applicable Conversion Price, and multiplied by the highest Closing Bid Price of the stock from date of the conversion notice till the date that such cash payment is made.

 

Further, if the Company shall not have delivered any cash due in respect of conversion of this Debenture by the fifth (5th) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue shares of Common Stock pursuant to Section 4(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such shares will be subject to the provisions of this Section.

 

(iii) The Holder shall effect conversions by delivering to the Company a completed notice in the form attached hereto as Exhibit B (a “Conversion Notice”). The date on which a Conversion Notice is delivered is the “Conversion Date.” Unless the Holder is converting the entire principal amount outstanding under this Debenture, the Holder is not required to physically surrender this Debenture to the Company in order to effect conversions. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

 

(b) Certain Conversion Restrictions.

 

(i) A Holder may not convert this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent such conversion or receipt of such interest payment would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of, and payment of interest on, this Debenture held by such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with the periods described in Section 4(a)(i) and, at the option of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future conversions or return such excess principal amount to the Holder. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.

 

 
 

 

(c) Conversion Price and Adjustments to Conversion Price.

 

(i) The conversion price in effect on any Conversion Date shall be equal to the lower of $0.02 per share or fifty percent (50%) of the average three (3) lowest Volume Weighted Average Pricses in the thirty (30) Trading Days prior to the Conversion Date (the “Conversion Price”). The Conversion Price may be adjusted pursuant to the terms of this Debenture.

 

(ii) If the Company, at any time while this Debenture is outstanding, shall( a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

(iii) If the Company, at any time while this Debenture is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants (plus the number of additional shares of Common Stock offered for subscription or purchase), and of which the numerator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants, plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Conversion Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. However, upon the expiration of any such right, option or warrant to purchase shares of the Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section, if any such right, option or warrant shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of the Common Stock actually purchased upon the exercise of such rights, options or warrants actually exercised.

 

 
 

 

(iv) If the Company or any subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall issue shares of Common Stock or rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at a price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than one (1) business day following the issuance of any Common Stock or Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms. No adjustment under this Section 4(c)(iv) shall be made as a result of issuances of Excluded Securities.

 

(v) If the Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which this Debenture shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Bid Price determined as of the record date mentioned above, and of which the numerator shall be such Closing Bid Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

 
 

 

(vi) In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to, at its option, (A) convert the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Common Stock following such reclassification or share exchange, and the Holder of this Debenture shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture could have been converted immediately prior to such reclassification or share exchange would have been entitled, or (B) require the Company to prepay the outstanding principal amount of this Debenture, plus all interest and other amounts due and payable thereon. The entire prepayment price shall be paid in cash. This provision shall similarly apply to successive reclassifications or share exchanges.

 

(vii) Whenever the Conversion Price is adjusted pursuant to Section 4 hereof, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(viii) If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last address as it shall appear upon the stock books of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day calendar period commencing the date of such notice to the effective date of the event triggering such notice.

 

 
 

 

(ix) In case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series ofrelated transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

 

(d) Other Provisions.

 

(i) Conversion at the Option of the Company. The Company shall have the right to force the Holder to convert this Debenture into shares of Common Stock in accordance with this Section 3 hereof, in amounts not to exceed $200,000 in any thirty (30) day period, after the Original Issue Date, subject to the limitations on conversions set forth in Section 3(b) hereof and provided that the following conditions are satisfied: (a) the Closing Bid Price of the Common Stock is greater than 110% of the Conversion Price on each of the five Trading Days immediately preceding the Conversion Date, (b) the average daily trading volume for the Common Stock on a Primary Market shall have been greater than $200,000 over the five Trading Days prior to the Conversion Date, and (c) no Event of Default has occurred.

 

(ii) The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Debenture; and within three (3) Business Days following the receipt by the Company of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement.

 

(iii) All calculations under this Section 4 shall be rounded up to the nearest$ 0.0001 or whole share.

 

 
 

 

(iv) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in this Debenture or in the Transaction Documents) be issuable (taking into account the adjustments and restrictions set forth herein) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.

 

(v) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Closing Bid Price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

(vi) The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(vii) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company ‘s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(viii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(a)(i) by the fifth (5th) Trading Day after the Conversion Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either reissue a Debenture in the principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements under Section 4(a)(i). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which the market price of the Underlying Shares on the date of conversion was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

 
 

 

Section 5. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Trading 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, to: Coroware, Inc.
  1410 Market Street, Suite 200
  Kirkland, WA 98033
  Attention: Lloyd Spencer
  Telephone: (425) 818-8990
  Facsimile: (800) 641-2676
     
With a copy to: Sichenzia Ross Friedman Ference LLP
  1065 Avenue of the Americas
  New York, NY 10018
  Attention: Gregory Sichenzia
  Telephone: (212) 930-9700
  Facsimile: (212) 930-9725
     
If to the Holder: Patrick Ferro  
  1037 Central Ave.
  Westfield, NJ 07090
  Email: ferropj@me.com
  (T): 908.413.6410

 

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) business days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

 
 

 

Section 6. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Approved Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company prior to the date of the Securities Purchase Agreement, pursuant to which the Company’s securities may be issued only to any employee, officer or director for services provided to the Company.

 

“Assignment Agreement” means that certain Nonrecourse Assignment Agreement dated as of April 3, 2014 by and between the Former Holder and the Holder.

 

“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

 

“Change of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(l) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) ofin excess of fifty percent (50%) of the voting securities of the Company (except that the acquisition of voting securities by the Holder shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c).

 

“Closing Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock is then listed as quoted by Bloomberg, LP.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $.001, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.

 

“Conversion Date” shall mean the date upon which the Holder gives the Company notice of their intention to effectuate a conversion of this Debenture into shares of the Company’s Common Stock as outlined herein.

 

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

 

 
 

 

“Excluded Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right, option, obligation or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the date of the Securities Purchase Agreement, and (c) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of this Debenture.

 

“Original Issue Date” shall mean the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.

 

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading Day” means a day on which the shares of Common Stock are quoted on the OTC or quoted or traded on such Primary Market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

 

“Transaction Documents” means the Securities Purchase Agreement or any other agreement delivered in connection with the Securities Purchase Agreement, including, without limitation, the Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer Agent Instructions.

 

“Underlying Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms hereof.

 

Section 7. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

Section 8. This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

 
 

 

Section 9. If this Debenture is mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

Section 10. No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.

 

Section 11. This Debenture shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

 

Section 12. If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

 

Section 13. Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.

 

Section 14. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of ever such as though no such law has been enacted.

 

 
 

 

Section 15. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 16. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations but with the same terms and conditions, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

 

Section 17. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 
 

 

IN WITNESS WHEREOF, the Company has caused this Amended and Restated Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.

 

  COMPANY:
  COROWARE, INC
   
  By: /s/ Lloyd T. Spencer 
  Name: Lloyd T. Spencer
  Title: Chief Executive Officer

 

 
 

 

EXHIBIT A

 

REDEMPTION NOTICE

 

Redemption Date:     Mandatory Redemption Amount:

 

Settlement in Common Stock

 

D All Conditions to Company’s option to settle in Common Stock (Section 3(b)) are satisfied

 

Mandatory Redemption Amount: $
Redemption Conversion Price: $

Number of shares of Common Stock to be issued:
   

 

Please issue the shares of Common Stock in the following name and to the following address:
Issue to: Patrick Ferro
1037 Central Ave.
  Westfield, NJ 07090
  Email: ferropj@me.com
  (T): 908.413.6410
Broker DTC Participant Code:    
Account Number:    

 

Settlement in Cash

 

Mandatory Redemption Amount: $ $
Redemption Premium: $
Total Cash Settlement: $

 

Notification of Settlement Option

 

D Settlement in Common Stock   D Settlement in Cash
     
     

 

Coroware, Inc.
By:    
Its:    

 

 
 

 

EXHIBIT B

 

CONVERSION NOTICE

 

(To be executed by the Holder in order to Convert the Debenture)

 

TO:

 

The undersigned hereby irrevocably elects to convert $___________________________________ of the principal amount of the above Debenture into Shares of Common Stock of COROWARE, INC., according to the conditions stated therein, as of the Conversion Date written below.

 

Conversion Date:
Amount to be converted: $
Conversion Price: $
Number of shares of Common Stock to be issued:
Amount of Debenture  Unconverted: $

 

Please issue the shares of Common Stock in the following name and to the following address:

 

Issue to: Patrick Ferro
  1037 Central Ave.
  Authorized Signature:
  Westfield, NJ 07090
  Email: ferropj@me.com
  (T): 908.413.6410

 

Authorized Signature:  
Name:  
Title:  
Broker OTC Participant Code:  
Account Number:  

 

 

 

 

Exhibit 10.74

 

Issuance Date: August 22, 2006

 

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.

 

No. IVHG-2-1 BL $100,000

 

COROWARE INC.

 

Amended and Restated Secured Convertible Debenture

 

Due: December 31, 2014

 

This Amended and Restated Secured Convertible Debenture (including all secured convertible debentures issued in exchange, transfer or replacement hereof, this “Debenture”) was originally issued pursuant to that certain Securities Purchase Agreement (the “Securities Purchase Agreement”) dated July 20, 2006 in the original principal amount of $1,250,000 by COROWARE, INC. (f/k/a INNOVA ROBOTICS & AUTOMATION, INC., f/k/a INNOVA HOLDINGS, INC.), a Delaware corporation (the “Company”), to YA GLOBAL INVESTMENTS, LTD. (f/k/a CORNELL CAPITAL PARTNERS, LP) (the “Former Holder”). As of April 14, 2014 the Former Holder sold, transferred, and assigned to Barry Liben (the “Holder”) a portion of the Original Debenture (as defined herein) representing the $100,000.00 of the outstanding accrued and unpaid interest balance of the Debenture. This Debenture (No. IVHG-2-1 BL) does not effect a refinancing of all or any portion of the obligations under the Original Debenture, it being the intention of the Company and the Holder to avoid effectuating a novation of any such obligations. All amounts due under the Original Debenture being assigned to this Debenture, including the accrued and unpaid interest principal amount of $100,000.00 as set forth above (the “Assigned Interest Amount”) shall henceforth be evidenced by and paid, redeemed, and/or converted in accordance with the terms and conditions of this Debenture.

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order of the Holder, or its registered assigns, the amount set out above as the Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof). Certain capitalized terms used herein are defined in Section 6.

 

 

 

 

Section 1. General Terms

 

(a) Obligations Due and Payable. Notwithstanding anything contained herein to the contrary, the Company acknowledges that the obligations evidenced by this Debenture matured as of December 31, 2014 (the “Maturity Date”) and are currently due and payable in full.

 

(b) Interest. This Debenture shall accrue no Interest

 

(c) Security. The Debenture is secured by all collateral granted by the Company and its affiliates to the Former Holder, in accordance with the terms and conditions of the Assignment Agreement.

 

Section 2. Events of Default.

 

(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i) Any default in the payment of the principal of, interest on or other charges in respect of this Debenture, free of any claim of subordination, as and when the same shall become due and payable whether upon a Mandatory Redemption (as defined in Section 3(b)), an Optional Redemption (as defined in Section 3(a)), or the Maturity Date or by acceleration or otherwise;

 

(ii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

 

 

 

 

(iii) The Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

(iv) The Common Stock shall cease to be quoted for trading or listing for trading on any of (a) the NYSE Amex, (b) New York Stock Exchange, (c) the Nasdaq Stock Market, or (d) the OTC Bulletin Board (“OTC”) (each, a “Primary Market”) and shall not again be quoted or listed for trading on any Primary Market within five (5) Trading Days of such delisting; Primary Market

 

(v) The Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6);

 

(vi) The Company shall fail for any reason to deliver Common Stock certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion Date or after a Redemption Date if the Company chose to settle a Mandatory Redemption in shares of Common Stock, or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions, or settlements of Mandatory Redemptions in shares of Common Stock, in accordance with the terms hereof;

 

(vii) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) days after notice is claimed delivered hereunder;

 

(viii) The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(ix) hereof) or any Transaction Document (as defined in Section 6) which is not cured within a period of ten (10) days after notice of such breach has been sent by the Holder to the Company;

 

(b) During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Company. If an Event of Default shall occur the Conversion Price shall be reduced to $0.02 (the “Default Conversion Price”). Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Debenture or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Debenture or the sale of the Underlying Shares.

 

 

 

 

Section 3. Redemptions.

 

(a) Company’s Optional Cash Redemption. The Company at its option shall have the right to redeem (“Optional Redemption”) a portion or all amounts outstanding under this Debenture prior to the Maturity Date provided that as of the date of the Holder’s receipt of a Redemption Notice (as defined herein) (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price, and (ii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption Premium”) equal to ten percent (10%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the “Redemption Amount”). In order to make a redemption, the Company shall first provide written notice to the Holder of its intention to make a redemption (the “Redemption Notice”) setting forth the amount of principal it desires to redeem. After receipt of the Redemption Notice the Holder shall have three (3) business days to elect to convert all or any portion of this Debenture, subject to the limitations set forth in Section 4(b). On the fourth (4th) business day after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the principal amount redeemed after giving effect to conversions effected during the three (3) business day period.

 

(b) Mandatory Redemptions.

 

(i) Holder’s Right. Beginning on January 1, 2007, and continuing on the first Trading Day of each calendar month thereafter (each, a “Redemption Date”), the Holder shall have the right to force the Company to redeem (“Mandatory Redemptions”) up to $500,000 of the remaining principal amount of the Debenture (the “Maximum Redemption Amount”) per calendar month by transmitting a copy of a Redemption Notice in the form attached hereto as Exhibit A (the “Redemption Notice”) requiring the Company to redeem (as set forth below in Section 3(b)(ii) hereof) the principal amount set forth in the Redemption Notice (the “Mandatory Redemption Amount”). The Company, in its sole discretion, may increase the Maximum Redemption Amount and, upon an Event of Default the Maximum Redemption Amount shall be automatically increased to an amount up to the remaining principal amount of the Debenture.

 

Notwithstanding the foregoing, if (A) the Closing Bid Price of the Common Stock exceeds the Conversion Price for each of the five consecutive Trading Days immediately prior to the Redemption Date, and (B) no Event of Default shall have occurred, then the Holder shall not be permitted to require the Company to make a Mandatory Redemption in that month.

 

 

 

 

(ii) Company’s Settlement Options. The Company has the option, in its sole discretion, to settle Mandatory Redemptions by (A) paying the Holder cash in an amount equal to the Mandatory Redemption Amount plus the Redemption Premium.

 

(iii) Redemption Notice Procedures.

 

(A) On or prior to 5:00 pm New York City time on the Trading Day immediately following the Redemption Date, the Company shall return a copy of the Redemption Notice via facsimile (or other delivery) to the Holder, which Redemption Notice shall note the Company’s choice of settlement options with respect to such Redemption Notice and shall be signed by an officer of the Company.

 

(B) The Company shall settle all Redemption Notices within 5 Trading Days of the Redemption Date.

 

(iv) Settlement of Put Notice in shares of Common Stock. In the event that the Company chooses (if available) to settle a Redemption Notice in shares of Common Stock pursuant to option (B) of Section 3(b)(ii), upon notice to the Holder of such selection, the Redemption Notice shall effectively be treated the same as a Conversion Notice submitted by the Holder and processed in accordance with the provisions for Conversion Notices set forth in Section 4. The limitations on Conversions set forth in Section 4(b) hereof shall apply to any shares of Common Stock issued pursuant to this Section 3. In the event that the Company fails to notify the Holder of its election of settlement options in accordance with Section 3(b)(iii) hereof, then if applicable, the Company hereby designates all such Redemption Notices to automatically be settled in shares of Common Stock.

 

Section 4. Conversion.

 

(a) Conversion at Option of Holder.

 

(i) This Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as defined in Section 6) (subject to the limitations on conversion set forth in Section 4(b) hereof). The number of shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing (x) the outstanding amount of this Debenture to be converted by (y) the Conversion Price (as defined in Section 4(c)(i)). The Company shall deliver Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a Conversion Date.

 

(ii) Notwithstanding anything to the contrary contained herein, if on any Conversion Date: (1) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder in shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on a Primary Market; or (3) the Company has failed to timely satisfy a conversion; then, at the option of the Holder, the Company, in lieu of delivering shares of Common Stock pursuant to Section 4(a)(i), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an amount in cash equal to the product of the outstanding principal amount to be converted divided by the applicable Conversion Price, and multiplied by the highest Closing Bid Price of the stock from date of the conversion notice till the date that such cash payment is made.

 

 

 

 

Further, if the Company shall not have delivered any cash due in respect of conversion of this Debenture by the fifth (5th) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue shares of Common Stock pursuant to Section 4(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such shares will be subject to the provisions of this Section.

 

(iii) The Holder shall effect conversions by delivering to the Company a completed notice in the form attached hereto as Exhibit B (a “Conversion Notice”). The date on which a Conversion Notice is delivered is the “Conversion Date.” Unless the Holder is converting the entire principal amount outstanding under this Debenture, the Holder is not required to physically surrender this Debenture to the Company in order to effect conversions. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

 

(b) Certain Conversion Restrictions.

 

(i) A Holder may not convert this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent such conversion or receipt of such interest payment would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of, and payment of interest on, this Debenture held by such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with the periods described in Section 4(a)(i) and, at the option of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future conversions or return such excess principal amount to the Holder. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.

 

 

 

 

(c) Conversion Price and Adjustments to Conversion Price.

 

(i) The conversion price in effect on any Conversion Date shall be equal to the lower of $0.02 per share or fifty percent (50%) of the average three (3) lowest Volume Weighted Average Price in the thirty (30) Trading Days prior to the Conversion Date (the “Conversion Price”). The Conversion Price may be adjusted pursuant to the terms of this Debenture.

 

(ii) If the Company, at any time while this Debenture is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

(iii) If the Company, at any time while this Debenture is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants (plus the number of additional shares of Common Stock offered for subscription or purchase), and of which the numerator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants, plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Conversion Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. However, upon the expiration of any such right, option or warrant to purchase shares of the Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section, if any such right, option or warrant shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of the Common Stock actually purchased upon the exercise of such rights, options or warrants actually exercised.

 

 

 

 

(iv) If the Company or any subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall issue shares of Common Stock or rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at a price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than one (1) business day following the issuance of any Common Stock or Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms. No adjustment under this Section 4(c)(iv) shall be made as a result of issuances of Excluded Securities.

 

(v) If the Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which this Debenture shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Bid Price determined as of the record date mentioned above, and of which the numerator shall be such Closing Bid Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

(vi) In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to, at its option, (A) convert the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Common Stock following such reclassification or share exchange, and the Holder of this Debenture shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture could have been converted immediately prior to such reclassification or share exchange would have been entitled, or (B) require the Company to prepay the outstanding principal amount of this Debenture, plus all interest and other amounts due and payable thereon. The entire prepayment price shall be paid in cash. This provision shall similarly apply to successive reclassifications or share exchanges.

 

 

 

 

(vii) Whenever the Conversion Price is adjusted pursuant to Section 4 hereof, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(viii) If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last address as it shall appear upon the stock books of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day calendar period commencing the date of such notice to the effective date of the event triggering such notice.

 

 

 

 

(ix) In case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

 

(d) Other Provisions.

 

(i) Conversion at the Option of the Company. The Company shall have the right to force the Holder to convert this Debenture into shares of Common Stock in accordance with this Section 3 hereof, in amounts not to exceed $200,000 in any thirty (30) day period, after the Original Issue Date, subject to the limitations on conversions set forth in Section 3(b) hereof and provided that the following conditions are satisfied: (a) the Closing Bid Price of the Common Stock is greater than 110% of the Conversion Price on each of the five Trading Days immediately preceding the Conversion Date, (b) the average daily trading volume for the Common Stock on a Primary Market shall have been greater than $200,000 over the five Trading Days prior to the Conversion Date, and (c) no Event of Default has occurred.

 

(ii) The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Debenture; and within three (3) Business Days following the receipt by the Company of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement.

 

(iii) All calculations under this Section 4 shall be rounded up to the nearest $0.0001 or whole share.

 

(iv) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in this Debenture or in the Transaction Documents) be issuable (taking into account the adjustments and restrictions set forth herein) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.

 

 

 

 

(v) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Closing Bid Price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

(vi) The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(vii) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company ‘s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(viii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(a)(i) by the fifth (5th) Trading Day after the Conversion Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either reissue a Debenture in the principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements under Section 4(a)(i). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which the market price of the Underlying Shares on the date of conversion was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

 

 

 

Section 5. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Trading 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, to: Coroware, Inc.
  1410 Market Street, Suite 200
  Kirkland, WA 98033
  Attention: Lloyd Spencer
  Telephone: (425) 818-8990
  Facsimile: (800) 641-2676
   
With a copy to: Sichenzia Ross Friedman Ference LLP
  1065 Avenue of the Americas
  New York, NY 10018
  Attention: Gregory Sichenzia
  Telephone: (212) 930-9700
  Facsimile: (212) 930-9725

 

If to the Holder:

Barry Liben

235 West 71st. St., 5th. Fl.,

New York, NY 10023

Email: BLiben@Tzell.com

(T) 212.944.2121

 

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) business days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

Section 6. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Approved Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company prior to the date of the Securities Purchase Agreement, pursuant to which the Company’s securities may be issued only to any employee, officer or director for services provided to the Company.

 

 

 

 

“Assignment Agreement” means that certain Nonrecourse Assignment Agreement dated as of April 14, 2014 by and between the Former Holder and the Holder.

 

“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

 

“Change of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Company (except that the acquisition of voting securities by the Holder shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c).

 

“Closing Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock is then listed as quoted by Bloomberg, LP.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $.001, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.

 

“Conversion Date” shall mean the date upon which the Holder gives the Company notice of their intention to effectuate a conversion of this Debenture into shares of the Company’s Common Stock as outlined herein.

 

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

 

“Excluded Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right, option, obligation or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the date of the Securities Purchase Agreement, and (c) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of this Debenture.

 

 

 

 

“Original Issue Date” shall mean the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.

 

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading Day” means a day on which the shares of Common Stock are quoted on the OTC or quoted or traded on such Primary Market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

 

“Transaction Documents” means the Securities Purchase Agreement or any other agreement delivered in connection with the Securities Purchase Agreement, including, without limitation, the Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer Agent Instructions.

 

“Underlying Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms hereof.

 

Section 7. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

Section 8. This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

Section 9. If this Debenture is mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

 

 

 

Section 10. No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.

 

Section 11. This Debenture shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

 

Section 12. If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

 

Section 13. Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.

 

Section 14. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

Section 15. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 16. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations but with the same terms and conditions, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

 

Section 17. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Amended and Restated Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.

 

  COMPANY:
  COROWARE, INC.
   
  By: /s/ Lloyd T. Spencer
  Name:  Lloyd T. Spencer
  Title: Chief Executive Officer

 

 

 

 

EXHIBIT A

 

REDEMPTION NOTICE

 

Redemption Date:     Mandatory Redemption Amount:  

 

Settlement in Common Stock

 

☐ All Conditions to Company’s option to settle in Common Stock (Section 3(b)) are satisfied

 

Mandatory Redemption Amount: $  
Redemption Conversion Price: $  
Number of shares of Common Stock to be issued:    

 

Please issue the shares of Common Stock in the following name and to the following address:

 

Issue to:

Barry Liben

235 West 71st. St., 5th. Fl.,

New York, NY 10023

Email: BLiben@Tzell.com

(T) 212.944.2121

Broker DTC Participant Code:  
Account Number:  

 

  Settlement in Cash
Mandatory Redemption Amount: $                
Redemption Premium: $  
Total Cash Settlement: $  

 

Notification of Settlement Option
 
☐ Settlement in Common Stock ☐ Settlement in Cash

 

Coroware, Inc.  
   
By:                        
Its:    

 

 

 

 

EXHIBIT B

 

CONVERSION NOTICE

 

(To be executed by the Holder in order to Convert the Debenture)

 

TO:

 

The undersigned hereby irrevocably elects to convert $                                 of the principal amount of the above Debenture into Shares of Common Stock of COROWARE, INC., according to the conditions stated therein, as of the Conversion Date written below.

 

Conversion Date:    
Amount to be converted: $  
Conversion Price: $  
Number of shares of Common Stock to be issued:    
Amount of Debenture Unconverted: $  

 

Please issue the shares of Common Stock in the following name and to the following address:

 

Issue to:

Barry Liben

235 West 71st. St., 5th. Fl.,

New York, NY 10023

Email: BLiben@Tzell.com

(T) 212.944.2121

Authorized Signature:  
Name:  
Title:  
Broker DTC Participant Code:  
Account Number:  

 

 

 

 

Exhibit 10.75

 

CoroWare, INC.

A Delaware Corporation

 

10% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

$7,000 .00 Date: August 3, 2012

 

FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Raphael Cariou (“Holder”) or his assignee, in lawful money of and within the United States of America and in immediately available funds, the principal sum of $7,000.00 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein.

 

Borrower further agrees to pay interest on the Principal Amount at the compounded rate per annum of 10% (ten per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on February 3, 2013 (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2. Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below..

 

2.1 Conversion into the Borrower’s Common Stock

 

(a) The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default, as the case may be, into fully paid and nonassessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”). Upon delivery to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request for conversion (the date of giving such notice of conversion being a “Conversion Date”), the Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of the Note to be converted and interest, if any, by the Conversion Price, and then multiplied by One Hundred Fifteen Percent (115%).

 

 

 

 

(b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be the average closing bid prices for the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the Common Stock is listed or traded, for the five (5) trading days prior to but not including the Conversion Date.

 

(c) The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.

 

B. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

 

C. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

 

D. Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.

 

2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

 

 

 

 

2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.

 

3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4. Default. The following events shall each be an “Event of Default” under this Note:

 

A. Bankruptcy or insolvency of Borrower;

 

B. Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C. Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.

 

5. Covenants.

 

A. Use of Proceeds. The Borrower has used the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

 

 

 

D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E. Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

6. Waiver. TO THE FULLEST EXTENT PERMITIED BY LAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.

 

7. Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

8. Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

 

 

 

If to the Borrower, at:

 

CoroWare, Inc. 

1410 Market Street 

Suite 200

Kirkland, WA 98033 Attention: President

 

If to the Lender, at:

 

Raphael Cariou

263 Huntington Ave #322,

Boston, MA 02115

 

or at any address specified by Borrower or Lender in writing.

 

9. Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

10. No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

11. Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

12. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

 

 

 

13. Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

14. Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

15. Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

COROWARE, INC.  
   
By:  
Name: Lloyd T. Spencer  
Title: President and CEO  
Date: August 3, 2012  
     
HOLDER  
   
By:  
Name: Raphael Cariou  
Date: August 3, 2012  

 

 

 

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

The undersigned hereby elects to convert $____________ of the principal and $____________ of the interest due on the Note issued by COROWARE, INC. on August 3________________2012 into shares of common stock of COROWARE, INC. (the “Company”) according to the conditions set forth in such Note, as of the date written below.

 

Date of

Conversion:___________________________________________________________________________

 

Conversion

Price:____________________________________________________________________________

 

Shares To Be

Delivered:_________________________________________________________________________

 

Signature:______________________________________________________________________________

 

Print

Name:_________________________________________________________________________________

 

Address:_________________________________________________________________________________

 

____________________________________________________________________________________ 

 

 

 

Exhibit 10.76

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SAID ACT.

 

CONVERTIBLE NOTE

 

Kirkland, WA

Issue date: August 23, 2013 $140,000

Maturity date: January 23, 2014

 

FOR VALUE RECEIVED, COROWARE INC., a Delaware corporation (hereinafter called the “Borrower” or the “Company”), hereby promises to pay to the order of ZOOM MARKETING or registered assigns (the “Holder”) the sum of $140,000, on January 23, 2014 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of five percent (5%) per annum from August 23, 2013 (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of ten percent (10%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the issue date, shall be computed on the basis of a 365-day year and the actual number of days elapsed and shall be payable on the Maturity Date. All payments due hereunder (to the extent not converted into common stock, $.0001 par value per share, of the Borrower (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.

 

The following terms shall apply to this Note:

 

 

 

 

ARTICLE I. CONVERSION RIGHTS

 

1.1 Conversion Right. The Holder shall have the right from time to time, and at any time on or prior to repayment, to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the Conversion Price on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date.

 

Conversion Price. The “Conversion Price” is Applicable Percentage (as defined herein) multiplied by the Market Price (as defined herein). “Market Price” means the average of the lowest three (3) Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower via facsimile (the “Conversion Date”). “Closing Price” means, for any security as of any date, the closing price on the Over-the-Counter Bulletin Board or the OTC Markets (collectively, the “OTCQB”) as reported by a reliable reporting service mutually acceptable to and hereafter designated by Holders of a majority in interest of the Notes and the Borrower or, if the OTCQB is not the principal trading market for such security, the closing price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing price of such security is available in any of the foregoing manners, the average of the closing prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Closing Price cannot be calculated for such security on such date in the manner provided above, the Closing Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Closing Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is traded for any period on the OTCQB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. “Applicable Percentage” shall mean 85.0%. When the Conversion Price is below the par price of $.0001, the Holder may reduce the debt by the amount due under the conversion formula although the value of the conversion for tax purposes shall be that calculated based on issuing the stock at par.

 

2

 

 

1.2 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note.

 

1.3 Method of Conversion.

 

(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

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(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within two (2) business days after such receipt (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof.

 

(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

 

1.4 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined under the Securities Act of 1933). Until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

4

 

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SAID ACT.”

 

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefor free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act and the shares are so sold or transferred, (ii) such Holder provides the Borrower or its transfer agent with reasonable assurances that the Common Stock issuable upon conversion of this Note (to the extent such securities are deemed to have been acquired on the same date) can be sold pursuant to Rule 144 or (iii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.

 

1.5 Effect of Certain Events.

 

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III)

 

(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof.

 

5

 

 

(c) Adjustment Due to Dividend, Distribution or Split. If the Borrower, at any time while the Note is outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Borrower, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

1.6 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 19.99% of the total shares outstanding on the Closing Date, subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, the Borrower will use its best efforts to seek and obtain shareholder approval as soon as practicable.

 

1.7 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note.

 

6

 

 

ARTICLE II. INTENTIONALLY LEFT BLANK

 

ARTICLE III. EVENTS OF DEFAULT

 

If any of the following events of default (each, an “Event of Default”) shall occur:

 

3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note and, if such failure is to pay interest, is not cured within ninety (90) days of such failure;

 

3.2 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed;

 

3.3 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $250,000, and shall remain unvacated, unbonded or unstayed for a period of sixty (60) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld;

 

3.4 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower;

 

3.5 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at the OTCQB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange or the Pinksheets; or

 

then, upon the occurrence and during the continuation of any Event of Default, at the option of the Holder exercisable through the delivery of written notice to the Borrower by Holder (the “Default Notice”), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) (the “Default Amount”) and all other amounts payable hereunder and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

ARTICLE IV. MISCELLANEOUS

 

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

4.2 Notices. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or sent by United States mail and shall be deemed to have been given upon receipt if personally served (which shall include telephone line facsimile transmission) or sent by courier or three (3) days after being deposited in the United States mail, certified, with postage pre-paid and properly addressed, if sent by mail. For the purposes hereof, the address of the Holder shall be as shown on the records of the Borrower; and the address of the Borrower shall be as set forth in its filings with the Securities Exchange Act of 1934, as amended. Both the Holder and the Borrower may change the address for service by service of written notice to the other as herein provided.

 

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4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.

 

4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). The Holder may assign this Note at anytime.

 

4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

 

4.6 Governing Law. THIS NOTE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

 

8

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer the first day set forth above.

 

  COROWARE, INC.
     
  By: /s/ Lloyd Spence
    Lloyd Spence
    Chief Executive Officer

 

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EXHIBIT A

 

NOTICE OF CONVERSION

(To be Executed by the Registered Holder

in order to Convert the Notes)

 

The undersigned hereby irrevocably elects to convert $____________of the Note (defined below) into shares of common stock, par value $.0001 per share (“Common Stock”), of Coroware, Inc., a Delaware corporation (the “Borrower”) according to the conditions of the Convertible Note of the Borrower dated as of August 7, 2014 (the “Notes”), as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates. A copy of each Note is attached hereto (or evidence of loss, theft or destruction thereof).

 

The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

  Name:    

 

  Address to send shares:    

 

   

 

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the Note shall be made pursuant to registration of the securities under the Securities Act of 1933, as amended (the “Act”), or pursuant to an exemption from registration under the Act.

 

Date of Conversion:__________________________________

Applicable Conversion Price:$                      

If allowable conversion below par, actual debt reduction______________

Number of Shares of Common Stock to be Issued Pursuant to

Conversion of the Notes: ____________________

 

Signature:________________________________________

 

Name:___________________________________________

 

10

 

Exhibit 10.77

 

 

 

CoroWare, Inc.

(A Delaware corporation)

 

10% CONVERTIBLE NOTE

 

THIS NOTE AND ANY SHARES OF THE COMMON STOCK OF COROWARE, INC. ACQUIRED UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘ACT’’), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

$20,000.00    Date: December 10, 2014    Note JR-2014-03

 

FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Jared Robert with principal address at 1323 N 100 E, Lehi, UT 84043 (“Holder”) or its assignee, in lawful money of and within the United States of America and in immediately available funds, the principal sum of Twenty Thousand US Dollars ($20,000.00) (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein. Borrower further agrees to pay interest on the Principal Amount at the compounded rate per annum of 10% (ten per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on June 10, 2015 (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2. Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below..

 

2.1 Conversion into the Borrower’s Common Stock

 

(a) The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default, as the case may be, into fully paid and non-assessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”).

 

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Upon delivery to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request for conversion (the date of giving such notice of conversion being a “Conversion Date”), the Borrower shall issue and deliver to the Holder within five (5) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing.

 

(b) The Conversion Price shall be the lesser of $0.01 or 60% of the lowest closing price for the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the Common Stock is listed or traded, for the twenty (20) trading days prior to but not including the Conversion Date. If the Conversion Shares are not deliverable by DWAC (Deposit/Withdrawal at Custodian) an additional 10% discount will apply. If the shares are ineligible for deposit into the DTCC (Depository Trust & Clearing Corporation), an additional 5% discount shall apply. The Conversion Price may be adjusted pursuant to the terms of this Debenture.

 

(c) The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.

 

B. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

 

C. Stock Splits. Combinations and Dividends. If the shares of the Borrower’s Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

 

Page 2 of 9

 

 

D. Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.

 

2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

 

2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.

 

3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4. Default. The following events shall each be an “Event of Default” under this Note:

 

A. Bankruptcy or insolvency of Borrower;

 

B. Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C. Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.

 

Page 3 of 9

 

 

5. Covenants.

 

A. Use of Proceeds. The Borrower will not receive any proceeds from this Note since this Note is being issued solely in payment of certain accrued and unpaid amounts due the Lender for legal services received by the Borrower from the Lender.

 

B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E. Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

6. Representations and Warranties of the Lender. The Lender hereby warrants and represents to the Borrower that:

 

A. Understanding RE: This Note as a Restricted Security. The Lender understands that this Note and any shares of the Borrower’s Common Stock acquired upon conversion of this Note (the “Subject Shares”), have not been registered under the Securities Act of 1933, as amended (the “1933 Act”) and that the Lender will be required to bear the economic and financial risk of holding this Note and all said Subject Shares for an indeterminate period of time.

 

Page 4 of 9

 

 

B. Status of Lender. The Lender is an “accredited investor” as that term is defined in Rule 50 l of Regulation D of the 1933 Act and is also sophisticated and experienced in acquiring the securities of small public companies with an ability to fully evaluate the risks and uncertainties associated with such investments.

 

C. Matter of Trading Markets. The Lender understands that there is no trading market for this Note and there is no likelihood that any trading market will ever develop. Further, the Lender understands that there is only a limited and sporadic trading market for the Borrower’s Common Stock and there can be no assurance that any continuous and liquid trading market for the Borrower’s Common Stock will ever develop or, if it does develop, that it will be sustained.

 

D. Subordinate to Existing and Future Debt. The Note issued to the Lender is subordinate to the Borrower’s existing and future debt. The Subject Shares acquired upon conversion of the Note will also be subordinate to existing and future debt.

 

E. Limited Financial and Managerial Resources. The Borrower has limited financial and managerial resources and the Borrower’s ability to respond to financial and managerial challenges in the marketplace are limited. In the event that the Borrower encounters competitive and technological challenges from others, there can be no guarantee that the Borrower will have the ability to obtain sufficient financial and managerial resources to meet any one or more of these challenges successfully.

 

F. Receipt of Annual Reports on Form 10-K and Quarterly Reports on Form 10-0. Prior to acquiring the Note, the Lender reviewed each of the Borrower’s Annual Report on Form 10-K for the fiscal years ending 2011 and 2012 together with each of the Quarterly Reports for the fiscal 2013 fiscal year through the present, all as filed with the Securities and Exchange Commission with the result that the Lender understands that the Lender’s acquisition of the Note must be considered a “HIGH RISK” investment with the likelihood that the Lender may lose all or substantially all of their investment. A copy of the Borrower’s Annual Report on Form 10-K for the fiscal year ending December 31, 2012 and the Quarterly Reports on Form 10-Q for 2013 are each attached to Exhibit A hereto and is incorporated by reference herein.

 

G. Losses, Negative Cash Flow. Limited Equity, and Need for Additional Capital. The Borrower has had a history of losses and negative cash flow and there can be no assurance that the Borrower will achieve profitability or positive cash flow or if it does, that it can be sustained. The Borrower also has limited equity and a need to raise additional capital but without any assurance that it can raise any additional capital. For these and other reasons, the Lender understands that it should be prepared to lose their entire investment.

 

H. Risk Factors in Annual Report on Form 10-K. Prior to acquiring the Note, the Lender reviewed and understands the Risk Factors set forth in the Borrower’s Annual Report on For5m 10-K and has had sufficient opportunity to ask questions of the Borrower’s officers and directors regarding the Borrower and its affairs and prospects and to receive answers thereto.

 

Page 5 of 9

 

 

I. No Collateral and No Guarantor. The Note is unsecured and no collateral has or will be given to secure the Borrower’s obligations to the Lender. Further, no guarantor has or will be giving any guaranty to the Lender. In the event that the Borrower defaults on its obligations to the Lender, the Lender should be prepared to suffer the total loss of their investment.

 

J. Survival. All of the representations made herein by the Lender shall survive the issuance of this Note and continue thereafter until the sixth anniversary of this Note as measured from the date first stated above.

 

7. Waiver. TO THE FULLEST EXTENT PERMITIED BYLAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A TT.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HEREBY WAIVED TO THE FULLEST EXTENT PERMITTED BYLAW.

 

8. Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

9. Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

If to the Borrower, at:

 

CoroWare, Inc.

Attention: Chief Executive Officer

601 108th Avenue NE

Suite 1900

Bellevue, WA 98004

 

Page 6 of 9

 

 

If to the Lender, at:

 

Jared Robert

1323 N 100 E

Lehi, UT 84043

 

or at any address specified by Borrower or Lender in writing.

 

10. Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

11. No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

12. Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

13. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

14. Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

15. Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

16. Entire Agreement. This Note and the documents and any agreements executed in connecti n here ith constitute the final agreement of the parties hereto and supersede any prior agreement or understand mg, wntten or oral, with respect to the matters contained herein and therein.

 

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17. Arbitration. Any dispute or claim arising to or in any way related to this Agreement shall be settled by binding arbitration in Redmond, Washington but any dispute or controversy arising out of or interpreting this Agreement shall be settled in accordance with the laws of the State of Washington as if this Agreement were executed and all actions were performed hereunder within the State of Washington. All arbitration shall be confidential and shall be conducted in accordance with the rules and regulations of the American Arbitration Association (“AAA”). AAA shall designate an arbitrator from an approved list of arbitrators following both parties’ review and deletion of those arbitrators on the approved list having a conflict of interest with either party. Each party shall pay its own expenses associated with such arbitration. A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter has arisen and in no event shall such demand be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statutes of limitations. The decision of the arbitrators shall be rendered within 60 days of submission of any claim or dispute, shall be in writing and mailed to all the parties included in the arbitration. The decision of the arbitrator shall be binding upon the parties and judgment in accordance with that decision may be entered in any court having jurisdiction thereof.

 

TillS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. TillS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

FOR COROWARE, INC.:  
     
By: /s/ Lloyd T. Spencer  
Name: Lloyd T. Spencer  
Title: President and CEO  
Date: December 10, 2014  

 

Page 8 of 9

 

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

The undersigned hereby elects to convert $___________ of the principal and $_________ of the interest due on the Convetible Note issued by COROWARE, INC. on December 10, 2014 into shares of common stock of COROWARE, INC. (the “Company”) according to the conditions set forth in such Note, as of the date written below.

 

Date of Conversion: ______________________________________________________________________________

 

Conversion Price: _________________________________________________________________________________

 

Address and contact details of person to whom the shares should be delivered:

 

 _____________________________________________________________________________________________

 

 _____________________________________________________________________________________________

 

Signature: _______________________________________________________________________________________

 

Print Name:. ______________________________________________________________________________________

 

Title: ___________________________________________________________________________________________

 

Address: ______________________________________________________________________________________

 

______________________________________________________________________________________________

 

Page 9 of 9

 

Exhibit 10.78

 

Issuance Date: July 20, 2006

 

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.

 

No. COWI-DC $200,000

 

COROWARE INC.

 

Amended and Restated Secured Convertible Debenture

 

Due: December 31, 2014

 

This Amended and Restated Secured Convertible Debenture (including all secured convertible debentures issued in exchange, transfer or replacement hereof, this “Debenture”) was originally issued pursuant to that certain Securities Purchase Agreement (the “Securities Purchase Agreement”) dated July 20, 2006 in the original principal amount of $1,250,000 by COROWARE, INC. (f/k/a INNOVA ROBOTICS & AUTOMATION, INC., f/k/a INNOVA HOLDINGS, INC.), a Delaware corporation (the “Company”), to YA GLOBAL INVESTMENTS, L.P. (f/k/a CORNELL CAPITAL PARTNERS, LP) (the “Former Holder”). As of April 8, 2014 the Former Holder sold, transferred, and assigned to Dakota Capital Pty Limited atf Dakota SP Master Fund. (the “Holder”) a portion of the Original Debenture (as defined herein) representing the outstanding principal balance at such time of $200,000. This Debenture (No. COWJ-DC) does not effect a refinancing of all or any portion of the obligations under the Original Debenture, it being the intention of the Company and the Holder to avoid effectuating a novation of any such obligations. All amounts due under the Original Debenture being assigned to this Debenture, including the principal amount of $200,000.00 as set forth above (the “Assigned Principal Amount”) shall henceforth be evidenced by and paid, redeemed, and/or converted in accordance with the terms and conditions of this Debenture.

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order of the Holder, or its registered assigns, the amount set out above as the Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof). Certain capitalized terms used herein are defined in Section 6.

 

 
 

 

Section 1. General Terms

 

(a) Obligations Due and Payable. Notwithstanding anything contained herein to the contrary, the Company acknowledges that the obligations evidenced by this Debenture matured as of December 31, 2014 (the “Maturity Date”) and are currently due and payable in full.

 

(b) Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to fourteen percent (14%) per annum. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures in cash or in Common Stock (valued at the Closing Bid Price on the Trading Day immediately prior to the date paid) at the option of the Company.

 

(c) Security. The Debenture is secured by all collateral granted by the Company and its affiliates to the Former Holder, in accordance with the terms and conditions of the Assignment Agreement.

 

Section 2. Events of Default.

 

(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i) Any default in the payment of the principal of, interest on or other charges in respect of this Debenture, free of any claim of subordination, as and when the same shall become due and payable whether upon a Mandatory Redemption (as defined in Section 3(b)), an Optional Redemption (as defined in Section 3(a)), or the Maturity Date or by acceleration or otherwise;

 

(ii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

 

 
 

 

(iii) The Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

(iv) The Common Stock shall cease to be quoted for trading or listing for trading on any of (a) the NYSE Amex, (b) New York Stock Exchange, (c) the Nasdaq Stock Market, or (d) the OTC Bulletin Board (“OTC”) (each, a “Primary Market”) and shall not again be quoted or listed for trading on any Primary Market within five (5) Trading Days of such delisting; Primary Market

 

(v) The Company or any subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section 6);

 

(vi) The Company shall fail for any reason to deliver Common Stock certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion Date or after a Redemption Date if the Company chose to settle a Mandatory Redemption in shares of Common Stock, or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions, or settlements of Mandatory Redemptions in shares of Common Stock, in accordance with the terms hereof;

 

(vii) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within three (3) days after notice is claimed delivered hereunder;

 

(viii) The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(ix) hereof) or any Transaction Document (as defined in Section 6) which is not cured within a period of ten (10) days after notice of such breach has been sent by the Holder to the Company;

 

 
 

 

(b) During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Company. If an Event of Default shall occur the Conversion Price shall be reduced to $0.02 (the “Default Conversion Price”). Further more, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Debenture or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Debenture or the sale of the Underlying Shares.

 

Section 3. Redemptions.

 

(a) Company’s Optional Cash Redemption. The Company at its option shall have the right to redeem (“Optional Redemption”) a portion or all amounts outstanding under this Debenture prior to the Maturity Date provided that as of the date of the Holder’s receipt of a Redemption Notice (as defined herein) (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price, and (ii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium (“Redemption Premium”) equal to ten percent (10%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the “Redemption Amount”). In order to make a redemption, the Company shall first provide written notice to the Holder of its intention to make a redemption (the “Redemption Notice”) setting forth the amount of principal it desires to redeem. After receipt of the Redemption Notice the Holder shall have three (3) business days to elect to convert all or any portion of this Debenture, subject to the limitations set forth in Section 4(b). On the fourth (4th) business day after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the principal amount redeemed after giving effect to conversions effected during the three (3) business day period.

 

(b) Mandatory Redemptions.

 

(i) Holder’s Right. Beginning on January 1, 2007, and continuing on the first Trading Day of each calendar month thereafter (each, a “Redemption Date”), the Holder shall have the right to force the Company to redeem (“Mandatory Redemptions”) up to $500,000 of the remaining principal amount of the Debenture (the “Maximum Redemption Amount”) per calendar month by transmitting a copy of a Redemption Notice in the form attached hereto as Exhibit A (the “Redemption Notice”) requiring the Company to redeem (as set forth below in Section 3(b)(ii) hereof) the principal amount set forth in the Redemption Notice (the “Mandatory Redemption Amount”). The Company, in its sole discretion, may increase the Maximum Redemption Amount and, upon an Event of Default the Maximum Redemption Amount shall be automatically increased to an amount up to the remaining principal amount of the Debenture.

 

 
 

 

Notwithstanding the foregoing, if (A) the Closing Bid Price of the Common Stock exceeds the Conversion Price for each of the five consecutive Trading Days immediately prior to the Redemption Date, and (B) no Event of Default shall have occurred, then the Holder shall not be permitted to require the Company to make a Mandatory Redemption in that month.

 

(ii) Company’s Settlement Options. The Company has the option, in its sole discretion, to settle Mandatory Redemptions by (A) paying the Holder cash in an amount equal to the Mandatory Redemption Amount plus the Redemption Premium.

 

(iii) Redemption Notice Procedures.

 

(A) On or prior to 5:00 pm New York City time on the Trading Day immediately following the Redemption Date, the Company shall return a copy of the Redemption Notice via facsimile (or other delivery) to the Holder, which Redemption Notice shall note the Company’s choice of settlement options with respect to such Redemption Notice and shall be signed by an officer of the Company.

 

(B) The Company shall settle all Redemption Notices within 5 Trading Days of the Redemption Date.

 

(iv) Settlement of Put Notice in shares of Common Stock. In the event that the Company chooses (if available) to settle a Redemption Notice in shares of Common Stock pursuant to option (B) of Section 3(b)(ii), upon notice to the Holder of such selection, the Redemption Notice shall effectively be treated the same as a Conversion Notice submitted by the Holder and processed in accordance with the provisions for Conversion Notices set forth in Section 4. The limitations on Conversions set forth in Section 4(b) hereof shall apply to any shares of Common Stock issued pursuant to this Section 3. In the event that the Company fails to notify the Holder of its election of settlement options in accordance with Section 3(b)(iii) hereof, then if applicable, the Company hereby designates all such Redemption Notices to automatically be settled in shares of Common Stock.

 

Section 4. Conversion.

 

(a) Conversion at Option of Holder.

 

(i) This Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as defined in Section 6) (subject to the limitations on conversion set forth in Section 4(b) hereof). The number of shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing (x) the outstanding amount of this Debenture to be converted by (y) the Conversion Price (as defined in Section 4 c)(i)). The Company shall deliver Common Stock certificates to the Holder prior to the Fifth (5) Trading Day after a Conversion Date.

 

 
 

 

(ii) Notwithstanding anything to the contrary contained herein, if on any Conversion Date: (1) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder in shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on a Primary Market; or (3) the Company has failed to timely satisfy a conversion; then, at the option of the Holder, the Company, in lieu of delivering shares of Common Stock pursuant to Section 4(a)(i), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an amount in cash equal to the product of the outstanding principal amount to be converted divided by the applicable Conversion Price, and multiplied by the highest Closing Bid Price of the stock from date of the conversion notice till the date that such cash payment is made.

 

Further, if the Company shall not have delivered any cash due in respect of conversion of this Debenture by the fifth (5th) Trading Day after the Conversion Date, the Holder may, by notice to the Company, require the Company to issue shares of Common Stock pursuant to Section 4(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand. Any such shares will be subject to the provisions of this Section.

 

(iii) The Holder shall effect conversions by delivering to the Company a completed notice in the form attached hereto as Exhibit B (a “Conversion Notice”). The date on which a Conversion Notice is delivered is the “Conversion Date.” Unless the Holder is converting the entire principal amount outstanding under this Debenture, the Holder is not required to physically surrender this Debenture to the Company in order to effect conversions. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error,

 

(b) Certain Conversion Restrictions.

 

(i) A Holder may not convert this Debenture or receive shares of Common Stock as payment of interest hereunder to the extent such conversion or receipt of such interest payment would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of, and payment of interest on, this Debenture held by such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof. the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with the periods described in Section 4(a)(i) and, at the option of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future conversions or return such excess principal amount to the Holder. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.

 

 
 

 

(c) Conversion Price and Adjustments to Conversion Price.

 

(i) The conversion price in effect on any Conversion Date shall be equal to the lower of $0.02 per share or fifty percent (50%) of the lowest Volume Weighted Average Prices in the thirty (30) Trading Days prior to the Conversion Date (the “Conversion Price”). The Conversion Price may be adjusted pursuant to the terms of this Debenture.

 

(ii) If the Company, at any time while this Debenture is outstanding, shall( a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

(iii) If the Company, at any time while this Debenture is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants (plus the number of additional shares of Common Stock offered for subscription or purchase), and of which the numerator shall be the number of shares of the Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants, plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the Conversion Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. However, upon the expiration of any such right, option or warrant to purchase shares of the Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section, if any such right, option or warrant shall expire and shall not have been exercised, the Conversion Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights, options or warrants been made on the basis of offering for subscription or purchase only that number of shares of the Common Stock actually purchased upon the exercise of such rights, options or warrants actually exercised.

 

 
 

 

(iv) If the Company or any subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall issue shares of Common Stock or rights, warrants, options or other securities or debt that are convertible into or exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time. whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at a price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price), then, at the sole option of the Holder. the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than one (1) business day following the issuance of any Common Stock or Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange price. conversion price and other pricing terms. No adjustment under this Section 4(c)(iv) shall be made as a result of issuances of Excluded Securities.

 

(v) If the Company. at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price at which this Debenture shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Bid Price determined as of the record date mentioned above, and of which the numerator shall be such Closing Bid Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

 
 

 

(vi) In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to, at its option, (A) convert the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Common Stock following such reclassification or share exchange, and the Holder of this Debenture shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture could have been converted immediately prior to such reclassification or share exchange would have been entitled, or (B) require the Company to prepay the outstanding principal amount of this Debenture, plus all interest and other amounts due and payable thereon. The entire prepayment price shall be paid in cash. This provision shall similarly apply to successive reclassifications or share exchanges.

 

(vii) Whenever the Conversion Price is adjusted pursuant to Section 4 hereof, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(viii) If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last address as it shall appear upon the stock books of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day calendar period commencing the date of such notice to the effective date of the event triggering such notice.

 

 
 

 

(ix) In case of any (1) merger or consolidation of the Company or any subsidiary of the Company with or into another Person, or (2) sale by the Company or any subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with a principal amount equal to the aggregate principal amount of this Debenture then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued. In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

 

(d) Other Provisions.

 

(i) Conversion at the Option of the Company. The Company shall have the right to force the Holder to convert this Debenture into shares of Common Stock in accordance with this Section 3 hereof, in amounts not to exceed $200,000 in any thirty (30) day period, after the Original Issue Date, subject to the limitations on conversions set forth in Section 3(b) hereof and provided that the following conditions are satisfied: (a) the Closing Bid Price of the Common Stock is greater than 110% of the Conversion Price on each of the five Trading Days immediately preceding the Conversion Date, (b) the average daily trading volume for the Common Stock on a Primary Market shall have been greater than $200,000 over the five Trading Days prior to the Conversion Date, and (c) no Event of Default has occurred.

 

(ii) The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Debenture; and within three (3) Business Days following the receipt by the Company of a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement.

 

(iii) All calculations under this Section 4 shall be rounded up to the nearest$ 0.0001 or whole share.

 

 
 

 

(iv) The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in this Debenture or in the Transaction Documents) be issuable (taking into account the adjustments and restrictions set forth herein) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.

 

(v) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Closing Bid Price at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

(vi) The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(vii) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(viii) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to Section 4(a)(i) by the fifth (5th) Trading Day after the Conversion Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either reissue a Debenture in the principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements under Section 4(a)(i). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which the market price of the Underlying Shares on the date of conversion was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

 
 

 

Section 5. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Trading 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, to: Coroware, Inc.
  1410 Market Street, Suite 200
  Kirkland, WA 98033
  Attention: Lloyd Spencer
  Telephone: (425) 818-8990
  Facsimile: (800) 641-2676
     
With a copy to: Sichenzia Ross Friedman Ference LLP
  1065 Avenue of the Americas
  New York, NY 10018
  Attention: Gregory Sichenzia
  Telephone: (212) 930-9700
  Facsimile: (212) 930-9725
     
If to the Holder:

Dakota Capital Pty Limited

  Level 18
 

126 Phillip Street

  Sydney NSW 2000
  Australia
  Phone Number: +61282777000
  Attn: Jonathan Cook

 

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) business days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

 
 

 

Section 6. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Approved Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company prior to the date of the Securities Purchase Agreement, pursuant to which the Company’s securities may be issued only to any employee, officer or director for services provided to the Company.

 

“Assignment Agreement” means that certain Nonrecourse Assignment Agreement dated as of May 1, 2014 by and between the Former Holder and the Holder.

 

“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

 

“Change of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(l) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Company (except that the acquisition of voting securities by the Holder shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the Company which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any subsidiary of the Company in one or a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c).

 

“Closing Bid Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock is then listed as quoted by Bloomberg, LP.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $.001, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.

 

“Conversion Date” shall mean the date upon which the Holder gives the Company notice of their intention to effectuate a conversion of this Debenture into shares of the Company’s Common Stock as outlined herein.

 

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

 

 
 

 

“Excluded Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any right, option, obligation or security outstanding on the date prior to date of the Securities Purchase Agreement, provided that the terms of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Securities Purchase Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the date of the Securities Purchase Agreement, and (c) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of this Debenture.

 

“Original Issue Date” shall mean the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.

 

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Trading Day” means a day on which the shares of Common Stock are quoted on the OTC or quoted or traded on such Primary Market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

 

“Transaction Documents” means the Securities Purchase Agreement or any other agreement delivered in connection with the Securities Purchase Agreement, including, without limitation, the Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer Agent Instructions.

 

“Underlying Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms hereof.

 

Section 7. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

Section 8. This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company. unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

 
 

 

Section 9. If this Debenture is mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

Section 10. No indebtedness of the Company is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.

 

Section 11. This Debenture shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the Superior Courts of the State of New Jersey sitting in Hudson County, New Jersey and the U.S. District Court for the District of New Jersey sitting in Newark, New Jersey in connection with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

 

Section 12. If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation. those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

 

Section 13. Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.

 

Section 14. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of. any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder. but will suffer and permit the execution of ever such as though no such law has been enacted.

 

 
 

 

Section 15. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 16. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations but with the same terms and conditions, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

 

Section 17. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 
 

 

IN WITNESS WHEREOF, the Company has caused this Amended and Restated Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.

 

  COMPANY:
  COROWARE, INC
   
  By: /s/Lloyd T. Spencer 
  Name: Lloyd T. Spencer
  Title: Chief Executive Officer

 

 
 

 

EXHIBIT A

 

REDEMPTION NOTICE

 

Redemption Date:     Mandatory Redemption Amount:

 

Settlement in Common Stock

 

D All Conditions to Company’s option to settle in Common Stock (Section 3(b)) are satisfied

 

Mandatory Redemption Amount: $
Redemption Conversion Price: $
Number of shares of Common Stock to be issued:  

 

Please issue the shares of Common Stock in the following name and to the following address:
 
Issue to: Dakota Capital Pty Limited
Level 18
  126 Phillip Street
  Sydney NSW 2000
  Australia
  Phone Number: +6128777000
  Attn: Jonathan Cook
Broker DTC Participant Code:    
Account Number:    

 

Settlement in Cash

 

Mandatory Redemption Amount: $ $
Redemption Premium: $
Total Cash Settlement: $

 

Notification of Settlement Option

 

D Settlement in Common Stock   D Settlement in Cash
     
     

 

Coroware, Inc.
By:    
Its:    

 

 
 

 

EXHIBIT B

 

CONVERSION NOTICE

 

(To be executed by the Holder in order to Convert the Debenture)

 

TO:

 

The undersigned hereby irrevocably elects to convert $___________________________________ of the principal amount of the above Debenture into Shares of Common Stock of COROWARE, INC., according to the conditions stated therein, as of the Conversion Date written below.

 

Conversion Date:
Amount to be converted: $
Conversion Price: $
Number of shares of Common Stock to be issued:
Amount of Debenture  Unconverted: $

 

Please issue the shares of Common Stock in the following name and to the following address:

 

Issue to: Dakota Capital Pty Limited
  Level 18
  126 Phillip Street
  Sydney NSW 2000
  Australia
  Phone Number: +6128777000
  Attn: Jonathan Cook

 

Authorized Signature:  
Name:  
Title:  
Broker DTC Participant Code:  
Account Number:  

 

 

 

 

Exhibit 10.79

 

CoroWare, INC.

A Delaware Corporation

 

10% CONVERTIBLE NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.

 

67.042.46 Date: April 2, 2011   Note#l

 

 

FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of Martin Harvey (“Holder”) or his assignee, in lawful money of and within the United States of America and in immediately available funds, the principal sum of$67,042.46 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein. Borrower further agrees to pay interest on the Principal Amount at the compounded rate per annum of 10% (ten per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.

 

1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on May 2, 2011 (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.

 

2. Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below.

 

2.1 Conversion into the Borrower’s Common Stock

 

(a) The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default, as the case may be, into fully paid and nonassessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, at the conversion price as defined in Section 2.l(b) hereof (the “Conversion Price”). Upon delivery to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request for conversion (the date of giving such notice of conversion being a “Conversion Date’’), the Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note con erted in accordance with the foregoing. The number of shares of Common Stock to be issued upon e conversion of this Note shall be determined by dividing that portion of the principal of the Note to be converted and interest, if any, by the Conversion Price, and then multiplied by One Hundred Fifteen Percent (115%}.

 

 

 

 

(b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be the average closing bid prices for the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the Common Stock is listed or traded, for the five (5) trading days prior to but not including the Conversion Date.

 

(c) The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.

 

B. Reclassjfication, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

 

C. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

 

D. Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.

 

2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.l(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

 

 

 

 

2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Common Stock which would be in excess the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.

 

3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.

 

4. Default. The following events shall each be an “Event of Default” under this Note:

 

A. Bankruptcy or insolvency of Borrower;

 

B. Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and

 

C. Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.

 

Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.

 

5. Covenants.

 

A. Use of Proceeds. The Borrower has used the net cash proceeds loaned to Borrower pursuant to this Note for working capital.

 

B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.

 

C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of au governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.

 

 

 

 

D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.

 

E. Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.

 

F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.

 

6. Waiver. TO THE FULLEST EXTENT PERMITIED BY LAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUlT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (11) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (ID) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMTTATTONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.

 

7. Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney’s fees relating thereto.

 

8. Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:

 

 

 

 

If to the Borrower, at:

 

CoroWare, (nc.

1410 Market Street

Suite 200

Kirkland, WA 98033

Attention: President

 

If to the Lender, at:

 

Martin Harvey

PO Pox 1374

2 Weatherstone Court

Niagara-on-the-Lake, ON LOS I JO

 

or at any address specified by Borrower or Lender in writing.

 

9. Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection wjtJ1 the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.

 

10. No Waivers of Lender’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.

 

11. Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.

 

 

 

 

12. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.

 

13. Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.

 

14. Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.

 

15. Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.

 

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WJTH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

 

COROWARE, INC.

 

By: /s/ Lloyd T. Spencer  
     
Name: Lloyd T. Spencer  
     
Title: President and CEO  
     
Date: April 2. 2011  

 

HOLDER

 

By: Martin Harvey  
     
Name: Martin Harvey  
     
Date: April 2, 2011  

 

 

 

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

The undersigned hereby elects to convert $________________ of the principal and $_______ of the interest due on the Note issued by COROWARE, INC. on _____________2011 into shares of common stock of COROWARE, INC. (the “Company”) according to the conditions set forth in such Note, as of the date written below.

 

Date of  
Conversion:        
   
Conversion  
Price:  
   
Shares To Be  
Delivered:  
   
Signature  
   
Print  
Name:  
   
Address:,

 

 

 

 

 

 

Exhibit 10.80

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

Principal Amount: $15,000 Issue Date: September 12, 2022
Actual Amount of Purchase Price: $15,000.00  

 

PROMISSORY NOTE

 

FOR VALUE RECEIVED, CARBONMETA TECHNOLOGIES, INC., a Delaware corporation (hereinafter called the “Borrower” or the “Company”) (Trading Symbol: COWI), hereby promises to pay to the order of RPG Capital Partners Inc., or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $15,000.00 (the “Principal Amount”), which amount is the $15,000.00 actual amount of the purchase price (the “Consideration” and the “Principal Amount”) and to pay interest on the unpaid Principal Amount hereof at the rate of twelve percent (12%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein. The maturity date shall be twelve (12) months from the Issue Date (the “Maturity Date”), and is the date upon which the Principal Amount as well as any accrued and unpaid interest and other fees, shall be due and payable.

 

This Note may not be prepaid or repaid in whole or in part except as otherwise explicitly set forth herein.

 

Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) sixteen percent (16%) per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid (“Default Interest”). Default Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed.

 

All payments due hereunder (to the extent not converted into shares of common stock, $0.0001 par value per share, of the Borrower (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day.

 

Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement, dated as of the Issue Date, pursuant to which this Note was originally issued (the “Purchase Agreement”). As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.

 

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

1

 

 

The following terms shall also apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1 Conversion Right. The Holder shall have the right, on any calendar day, at any time on or following the Issue Date, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any Default Interest) into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified, at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that notwithstanding anything to the contrary contained herein, the a Holder shall not have the right to convert any portion of this Note, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after conversion as set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons (as defined below) acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1.1, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1.1, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof. The limitations contained in this paragraph shall apply to a successor holder of this Note. The number of Conversion Shares to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower or Borrower’s transfer agent by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).

 

2

 

 

1.2 Conversion Price.

 

(a) Calculation of Conversion Price. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall equal $0.0002, subject to adjustment as provided in this Note. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, rights offerings, reclassification or similar transaction that proportionately decreases or increases the Common Stock. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to the immediately preceding sentence shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. “Common Stock Equivalents” means any securities of the Company or the Company’s subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

1.3 Authorized and Reserved Shares. The Borrower covenants that at all times until the Note is satisfied in full, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of a number of Conversion Shares equal to the greater of: (a) 75,000,000 shares of Common Stock or (b) the sum of (i) the number of Conversion Shares issuable upon the full conversion of this Note (assuming no payment of Principal Amount or interest) at the time of such calculation (taking into consideration any adjustments to the Conversion Price as provided in this Note) multiplied by (ii) one and a half (1.5) (the “Reserved Amount”). The Borrower represents that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Conversion Shares or instructions to have the Conversion Shares issued as contemplated by Section 1.4(f) hereof, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates or cause the Company to electronically issue shares of Common Stock to execute and issue the necessary certificates for the Conversion Shares or cause the Conversion Shares to be issued as contemplated by Section 1.4(f) hereof in accordance with the terms and conditions of this Note.

 

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default (as defined in this Note) under this Note.

 

1.4 Method of Conversion.

 

(a) Mechanics of Conversion. This Note may be converted by the Holder in whole or in part, on any calendar day, at any time on or following the Issue Date, by submitting to the Borrower or Borrower’s transfer agent a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 11:59 p.m., New York, New York time). Any Notice of Conversion submitted after 11:59 p.m., New York, New York time, shall be deemed to have been delivered and received on the next Trading Day.

 

(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid Principal Amount is so converted. The Holder and the Borrower shall maintain records showing the Principal Amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid Principal Amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

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(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower or Borrower’s transfer agent from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(f) hereof) within three (3) Trading Days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid Principal Amount and interest (including any Default Interest) under this Note, surrender of this Note). If the Company shall fail for any reason or for no reason to issue to the Holder on or prior to the Deadline a certificate for the number of Conversion Shares or to which the Holder is entitled hereunder and register such Conversion Shares on the Company’s share register or to credit the Holder’s balance account with DTC (as defined below) for such number of Conversion Shares to which the Holder is entitled upon the Holder’s conversion of this Note (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, (i) the Company shall pay in cash to the Holder on each day after the Deadline and during such Conversion Failure an amount equal to 2.0% of the product of (A) the sum of the number of Conversion Shares not issued to the Holder on or prior to the Deadline and to which the Holder is entitled and (B) the closing sale price of the Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such Conversion Shares to the Holder without violating this Section 1.4(d); and (ii) the Holder, upon written notice to the Company, may void all or any portion of such Notice of Conversion; provided that the voiding of all or any portion of a Notice of Conversion shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice. In addition to the foregoing, if on or prior to the Deadline the Company shall fail to issue and deliver a certificate to the Holder and register such Conversion Shares on the Company’s share register or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company, then the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable and customary out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Conversion Shares) or credit such Holder’s balance account with DTC for such Conversion Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Conversion Shares or credit such Holder’s balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the closing sales price of the Common Stock on the date of exercise. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing the Conversion Shares (or to electronically deliver such Conversion Shares) upon the conversion of this Note as required pursuant to the terms hereof.

 

(e) Obligation of Borrower to Deliver Common Stock. At the time that the Holder submits the Notice of Conversion to the Borrower or Borrower’s transfer agent, the Holder shall be deemed to be the holder of record of the Conversion Shares issuable upon such conversion, the outstanding Principal Amount and the amount of accrued and unpaid interest (including any Default Interest) under this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(f) hereof) shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is sent to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time, on such date.

 

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(f) Delivery of Conversion Shares by Electronic Transfer. In lieu of delivering physical certificates representing the Conversion Shares issuable upon conversion hereof, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Conversion Shares issuable upon conversion hereof to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.

 

1.5 Concerning the Shares. The Conversion Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be the Legal Counsel Opinion (as defined in the Purchase Agreement)) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption, or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the Conversion Shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for the Conversion Shares that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S UNDER SAID ACT, OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue to the Holder a certificate for the applicable Conversion Shares without such legend upon which it is stamped or (as requested by the Holder) issue the applicable Conversion Shares by electronic delivery by crediting the account of such holder’s broker with DTC, if, unless otherwise required by applicable state securities laws: (a) such Conversion Shares are registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) the Company or the Holder provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 4(m) of the Purchase Agreement) to the effect that a public sale or transfer of such Conversion Shares may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Holder agrees to sell all Conversion Shares, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Conversion Shares pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation S, or other applicable exemption, at the Deadline, notwithstanding that the conditions of Rule 144, Rule 144A, Regulation S, or other applicable exemption, as applicable, have been met, it will be considered an Event of Default under this Note.

 

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1.6 Effect of Certain Events.

 

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (defined in Section 3.19) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

 

(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of this Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not effectuate any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, at least thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

 

(d) Purchase Rights. If, at any time when all or any portion of this Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

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(e) Dilutive Issuance. If the Borrower, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or other securities are issued. By way of example, and for the avoidance of doubt, if the Company issues a convertible promissory note (including but not limited to a Variable Rate Transaction), and the holder of such convertible promissory note has the right to convert it into Common Stock at an effective price per share that is lower than the then Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations for the Common Stock), then the Holder has the right to reduce the Conversion Price to such Base Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations for the Common Stock) in perpetuity regardless of whether the holder of such convertible promissory note ever effectuated a conversion at the Base Conversion Price. Notwithstanding the foregoing, no adjustment will be made under this Section 1.6(e) in respect of an Exempt Issuance. In the event of an issuance of securities involving multiple tranches or closings, any adjustment pursuant to this Section 1.6(e) shall be calculated as if all such securities were issued at the initial closing.

 

An “Exempt Issuance” shall mean the issuance of (a) shares of Common Stock or other securities to officers or directors of the Company pursuant to any stock or option or similar equity incentive plan duly adopted for such purpose, by a majority of the non-employee members of the Company’s Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose in a manner which is consistent with the Company’s prior business practices; (b) securities issued pursuant to a merger, consolidation, acquisition or similar business combination approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities; (c) securities issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similar financial institution approved by a majority of the disinterested directors of the Company; or (d) securities issued with respect to which the Holder waives its rights in writing under this Section 1.6(e).

 

(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6 of this Note, the Borrower shall, at its expense and within one (1) calendar day after the occurrence of each respective adjustment or readjustment of the Conversion Price, compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. In addition, the Borrower shall, within one (1) calendar day after each written request from the Holder, furnish to such Holder a like certificate setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. For the avoidance of doubt, each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6 of this Note shall occur without any action by the Holder and regardless of whether the Borrower complied with the notification provisions in Section 1.6 of this Note.

 

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1.7 [Intentionally Omitted].

 

1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the Conversion Shares covered thereby (other than the Conversion Shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure to convert this Note.

 

1.9 Prepayment. At any time prior to the date that an Event of Default occurs under this Note (the “Prepayment Period”), the Borrower shall have the right, exercisable on three (3) Trading Days prior written notice to the Holder of the Note, to prepay the outstanding Principal Amount and interest then due under this Note in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be three (3) Trading Days from the date of the Optional Prepayment Notice (the “Optional Prepayment Date”). The Holder shall have the right, at all times prior to the actual receipt of the full prepayment amount on the Optional Prepayment Date, to instead convert all or any portion of the Note pursuant to the terms of this Note, including the amount of this Note to be prepaid by the Borrower in accordance with this Section 1.9. On the Optional Prepayment Date, the Borrower shall make payment of the amounts designated below to or upon the order of the Holder as specified by the Holder in writing to the Borrower. If the Borrower exercises its right to prepay the Note in accordance with this Section 1.9, the Borrower shall make payment to the Holder of an amount in cash equal to the sum of: (w) 100% multiplied by the Principal Amount then outstanding plus (x) accrued and unpaid interest on the Principal Amount to the Optional Prepayment Date plus (y) $750.00 to reimburse Holder for administrative fees.

 

If the Borrower delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note as provided in this Section 1.9, then the Borrower shall forever forfeit its right to prepay any part of the Note pursuant to this Section 1.9.

 

1.10 Repayment from Proceeds. If, at any time prior to the full repayment or full conversion of all amounts owed under this Note, the Company receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the Holder of or publicly disclose such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply up to all of such proceeds to repay all or any portion of the outstanding Principal Amount and interest (including any Default Interest) then due under this Note. Failure of the Borrower to comply with this provision shall constitute an Event of Default.

 

ARTICLE II. RANKING AND CERTAIN COVENANTS

 

2.1 Ranking and Security. This Note shall have priority over all unsecured indebtedness of the Borrower.

 

2.2 Other Indebtedness. So long as the Borrower shall have any obligation under this Note, the Borrower shall not (directly or indirectly through any Subsidiary or affiliate) incur or suffer to exist or guarantee any unsecured indebtedness that is senior to or pari passu with (in priority of payment and performance) the Borrower’s obligations hereunder.

 

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2.3 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

 

2.4 Restriction on Stock Repurchases and Debt Repayments. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares, or repay any pari passu or subordinated indebtedness of Borrower.

 

2.5 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent by the Holder to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

2.6 Advances and Loans; Affiliate Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit, make advances to or enter into any transaction with any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business or (c) in regard to transactions with unaffiliated third parties, not in excess of $100,000. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with any indebtedness or accrued amounts owed to any such party.

 

2.7 Preservation of Business and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) change the nature of its business; (b) sell, divest, change the structure of any material assets other than in the ordinary course of business; (c) enter into a Variable Rate Transaction; or (d) enter into any merchant cash advance transactions. In addition, so long as the Borrower shall have any obligation under this Note, the Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

 

2.8 Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.

 

2.9 Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note.

 

ARTICLE III. EVENTS OF DEFAULT

 

It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur:

 

3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the Principal Amount hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise, or fails to fully comply with Section 1.10 of this Note.

 

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3.2 Conversion and the Shares. The Borrower (i) fails to issue Conversion Shares to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) fails to reserve the Reserved Amount at all times, (iv) the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) Trading Days after the Holder shall have delivered a Notice of Conversion, and/or (v) fails to remain current in its obligations to its transfer agent (including but not limited to payment obligations to its transfer agent). It shall be an Event of Default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be added to the principal balance of the Note.

 

3.3 Breach of Agreements and Covenants. The Borrower breaches any covenant, agreement, or other term or condition contained in the Purchase Agreement, this Note, Irrevocable Transfer Agent Instructions, Warrant (as defined in the Purchase Agreement) (the “Warrant”), or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.

 

3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made in the Purchase Agreement, this Note, Irrevocable Transfer Agent Instructions, Warrant, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

 

3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

 

3.8 Failure to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.

 

3.9 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.10 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

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3.11 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

 

3.12 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding.

 

3.13 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

3.14 Cross-Default. The declaration of an event of default by any lender or other extender of credit to the Company under any notes, loans, agreements or other instruments of the Company evidencing any indebtedness of the Company (including those filed as exhibits to or described in the Company’s filings with the SEC), after the passage of all applicable notice and cure or grace periods.

 

3.15 Variable Rate Transactions. The Borrower consummates a Variable Rate Transaction at any time on or after the Issue Date.

 

3.16 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.

 

3.17 Unavailability of Rule 144. If, at any time on or after the date that is six (6) calendar months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and/or (ii) thereupon deposit such shares into the Holder’s brokerage account.

 

3.18 Delisting, Suspension, or Quotation of Trading of Common Stock. If, at any time on or after the Issue Date, the Borrower’s Common Stock (i) is suspended from trading, (ii) halted from trading, and/or (iii) fails to be quoted or listed (as applicable) on a Principal Market.

 

3.19 Rights and Remedies Upon an Event of Default. Upon the occurrence of any Event of Default specified in this Article III, this Note shall become immediately due and payable, and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by 125% (collectively the “Default Amount”), as well as all costs, including, without limitation, legal fees and expenses, of collection, all without demand, presentment or notice, all of which hereby are expressly waived by the Borrower. Holder may, in its sole discretion, determine to accept payment part in Common Stock and part in cash. For purposes of payments in Common Stock, the conversion formula set forth in Section 1.2 shall apply as well as all other provisions of this Note. The Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

ARTICLE IV. MISCELLANEOUS

 

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

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4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Borrower, to:

 

CARBONMETA TECHNOLOGIES, INC.

13110 NE 177th Place, Suite 145

Woodinville, WA 98072

Attention: Lloyd Spencer

e-mail: investors@carbonmetatech.com

 

If to the Holder:

 

RPG Capital Partners Inc.

c/o Robert Papiri

304 S Jones Avenue, #1856

Las Vegas, NV 89107

E-mail: robertpapiri@gmail.com

 

4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. The Borrower shall not assign this Note or any rights or obligations hereunder without the prior written consent of the Holder. The Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

 

4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware. The Borrower hereby irrevocably waives 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 BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. 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 Note or any other agreement, certificate, instrument or document contemplated hereby or thereby 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 Note 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. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

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4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

4.8 Purchase Agreement. The Company and the Holder shall be bound by the applicable terms of the Purchase Agreement and the documents entered into in connection herewith and therewith.

 

4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any change in control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

 

4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

4.11 Construction; Headings. This Note shall be deemed to be jointly drafted by the Company and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

 

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4.12 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Company under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Company may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Holder’s election.

 

4.13 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), 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 this Note.

 

4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security, or amendment to a security that was originally issued before the Issue Date, with any term that the Holder reasonably believes is more favorable to the holder of such security or with a term in favor of the holder of such security that the Holder reasonably believes was not similarly provided to the Holder in this Note, then (i) the Borrower shall notify the Holder of such additional or more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Holder’s option, shall become a part of the transaction documents with the Holder (regardless of whether the Borrower complied with the notification provision of this Section 4.14). The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts.

 

4.15 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Issue, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within one (1) Trading Day after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within one (1) Trading Day of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within one (1) Trading Day, submit (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than one (1) Trading Day from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.

 

4.16 Right of First Refusal. If at any time while this Note is outstanding, the Borrower has a bona fide offer of capital or financing from any 3rd party, that the Borrower intends to act upon, then the Borrower must first offer such opportunity to the Holder to provide such capital or financing to the Borrower on the same terms as each respective 3rd party’s terms. Should the Holder be unwilling or unable to provide such capital or financing to the Borrower within five (5) Trading Days from Holder’s receipt of written notice of the offer (the “Offer Notice”) from the Borrower, then the Borrower may obtain such capital or financing from that respective 3rd party upon the exact same terms and conditions offered by the Borrower to the Holder, which transaction must be completed within 30 days after the date of the Offer Notice. If the Borrower does not receive the capital or financing from the respective 3rd party within 30 days after the date of the respective Offer Notice, then the Borrower must again offer the capital or financing opportunity to the Holder as described above, and the process detailed above shall be repeated. The Offer Notice must be sent via electronic mail to robertpapiri@gmail.com

 

[signature page follows]

 

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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on September 12, 2022.

 

CARBONMETA TECHNOLOGIES, INC.

 

By:    
Name:  Lloyd Spencer  
Title: Chief Executive Officer  

 

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EXHIBIT A — NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of CARBONMETA TECHNOLOGIES, INC., a Delaware corporation (the “Borrower”), according to the conditions of the promissory note of the Borrower dated as of September 12, 2022 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

  ☐ The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).
     
    Name of DTC Prime Broker:
    Account Number:

 

  ☐

The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

  Date of Conversion:      
  Applicable Conversion Price:   $  
  Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Note:      
  Amount of Principal Balance Due remaining Under the Note after this conversion:      

 

By:    
Name:     
Title:    
Date:    

 

 

 

Exhibit 10.81

 

REGISTRATION RIGHTS AGREEMENT

 

Registration Rights Agreement (the “Agreement”), dated as of September 12, 2022 by and between CarbonMeta Technologies, Inc., a corporation organized under the laws of Delaware (the “Company”), and RPG Capital Partners Inc., a Florida Corporation (the “Investor”).

 

Whereas, in connection with the Convertible Promissory Note by and between the Company and the Investor of this date (the “Convertible Promissory Note”), the Company has agreed to issue and sell to the Investor a $15,000.00 Convertible Promissory note, convertible into shares of the Company’s Common Stock, $0.0001 Par value per share (the “Common Stock”); and

 

Whereas, to induce the Investor to execute and deliver the Convertible Promissory Note, 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 Convertible Promissory Note.

 

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 1. DEFINITIONS.

 

As used in this Agreement, the following terms shall have the following meanings:

 

“Execution Date” means the date of this Agreement set forth above.

 

“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.

 

“Principal Market” shall mean Nasdaq Capital Market, the NYSE Amex, the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTC Markets, whichever is the principal market on which the Common Stock of the Company is listed.

 

“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”).

 

“Registrable Securities” means (i) the underlying shares of the Convertible Promissory Note in the amount of $15,000.00, (ii) Commitment Shares, (iii) Warrant Shares and (iv) 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 or statements of the Company filed under the 1933 Act covering the Registrable Securities.

 

 

 

 

All capitalized terms used in this Agreement and not otherwise defined herein shall have the same meaning ascribed to them as in the Convertible Promissory Note.

 

Section 2. REGISTRATION.

 

(a) Subject to Section 3(g), the Company shall, within thirty (30) days after the date of this Agreement, file with the SEC the 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 212,500,000 shares of Common Stock, except to the extent that the SEC requires the share amount to be reduced as a condition of effectiveness. In the event that the Investor requires more than 212,500,000 shares to fully convert the Convertible Promissory Note, the Company shall file a subsequent Registration Statement to register for resale the number of shares required for the Investor to fully convert the Convertible Promissory Note.

 

(b) The Company agrees not to include any other securities in the Registration Statement covering the Registrable Securities without the Investor’s prior written consent which the Investor may withhold in its sole discretion. Furthermore, the Company agrees that it will not file any other Registration Statement for other securities, until thirty calendar days after the Registration Statement for the Registrable Securities is declared effective by the SEC.

 

Section 3. RELATED OBLIGATIONS.

 

At such time as the Company is obligated to prepare and file the Registration Statement with the SEC pursuant to Section 2(a), the Company shall have the following obligations with respect to the Registration Statement:

 

(a) The Company shall use all commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective within ninety (90) days after the date that the Registration Statement is filed 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 Company has no right to sell any additional shares of Common Stock under the Convertible Promissory Note (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 five (5) business days after notice from the SEC that the Registration Statement may be declared effective. The Investor agrees to provide all information which it 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.

 

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(b) 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 fifty (50) 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 fifty (50) 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.

 

(c) The Company shall make available to the Investor whose Registrable Securities are included in any Registration Statement and its legal counsel without charge (i) if requested by the Investor, 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; and (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.

 

(d) 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(d), 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.

 

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(e) As promptly as practicable after becoming aware of such event, the Company shall notify the 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; (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. If a Registration Default occurs during the period commencing on the Put Notice Date and ending on the Closing Date, the Company acknowledges that its failure to cure such a Registration Default within ten (10) business days will cause the Investor to suffer damages in an amount that will be difficult to ascertain.

 

(f) 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.

 

(g) 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.

 

(h) 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, (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, (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement, or (v) the Investor has consented to such disclosure. 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.

 

(i) 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. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Agreement.

 

(j) 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.

 

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(k) 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.

 

(l) 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.

 

(m) 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.

 

(n) Within one (1) 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, a written notification that such Registration Statement has been declared effective by the SEC.

 

Section 4. OBLIGATIONS OF THE INVESTOR.

 

(a) 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 the resale 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.

 

(b) 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.

 

Section 5. EXPENSES OF REGISTRATION.

 

All reasonable expenses, other than underwriting discounts and commissions and other than as set forth in the Convertible Promissory Note, incurred in connection with registrations including comments, filings or qualifications pursuant to Section 2 and Section 3, including, without limitation, all registration, listing and qualifications fees, printing and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company.

 

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Section 6. INDEMNIFICATION.

 

In the event any Registrable Securities are included in the Registration Statement under this Agreement:

 

(a) To the fullest extent permitted by law, the Company, under this Agreement, will, and hereby does, indemnify, hold harmless and defend the Investor, the directors, officers, partners, employees, counsel, agents, representatives of, and each Person, if any, who controls, the 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 for the offer of the Registrable Securities (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(b) the Company shall reimburse each Indemnified 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(a): (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; (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; (C) 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; (D) 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 (E) 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; and (iii) shall not be available to the extent the Claim arises out of the gross negligence or willful misconduct of the Indemnified Person.

 

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(b) 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, as the case may be, 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 Indemnified Party. 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.

 

(c) 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 7. 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.

 

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Section 8. REPORTS UNDER THE 1934 ACT.

 

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 which are eligible for resale under Rule 144 and such information is necessary in order for the Investor to sell such Securities pursuant to Rule 144, the Company agrees to:

 

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

 

(b) file with the SEC 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 the Convertible Promissory Note) 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 applicable to the Company, (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.

 

Section 9. NO ASSIGNMENT OF REGISTRATION RIGHTS.

 

This Agreement and the rights, agreements or obligations hereunder may not be assigned, by operation of law, merger or otherwise, and without the prior written consent of the other party hereto, and any purported assignment by a party without prior written consent of the other party will be null and void and not binding on such other party. Subject to the preceding sentence, all of the terms, agreements, covenants, representations, warranties and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the parties and their respective successors and assigns.

 

Section 10. AMENDMENT OF REGISTRATION RIGHTS.

 

The provisions of this Agreement may be amended only with the written consent of the Company and the Investor.

 

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Section 11. MISCELLANEOUS.

 

(a) 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 facsimile or email with the signed document attached in PDF format (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:

 

CarbonMeta Technologies, Inc.

13110 NE 177th Place, #145

Woodinville, WA 98072

ceo@carbonmetatech.com 

 

If to the Investor:

 

RPG Capital Partners Inc.

c/o Robert Papiri

304 S Jones Avenue, #1856

Las Vegas, NV 89107

E-mail: robertpapiri@gmail.com

 

Each party shall provide five (5) business days prior notice to the other party of any change in address, phone number, facsimile number ore-mail address.

 

(b) 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.

 

(c) This Agreement and the Convertible Promissory Note 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.

 

(d) This Agreement and the Convertible Promissory Note supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

 

(e) 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.

 

(f) This Agreement may be executed in two or more identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission or by e-mail delivery of a PDF format of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

(g) 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.

 

(h) 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.

 

Section 12. CHOICE OF LAW.

 

All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the state of Delaware, without regard to principles of conflict of laws.

 

*.*.*

 

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SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT

 

Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Convertible Promissory Note and 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.

 

  RPG Capital Partners, Inc
   
  By:  
  Name:  
  Title:      

 

  CarbonMeta Technologies, Inc.
   
  By:  
  Name:  
  Title:              

 

Signature Page to Registration Rights Agreement

 

 

 

Exhibit 10.82

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of September 12, 2022, by and between CARBONMETA TECHNOLOGIES, INC., a Delaware corporation, with headquarters located at 13110 NE 177th Place, # 145, Woodinville, WA 98072 (the “Company”), and RPG Capital Partners Inc., a Nevada Corporation, located at 304 S Jones Avenue, #1856, Las Vegas, NV 89107 (the “Buyer”).

 

WHEREAS:

 

A. The Company and the Buyer are executing and delivering this Agreement 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”) and Rule 506(b) promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act; and

 

B. Buyer desires to purchase from the Company, and the Company desires to issue and sell to the Buyer, upon the terms and conditions set forth in this Agreement, a promissory note of the Company, in the aggregate principal amount of $15,000.00 (as the principal amount thereof may be increased pursuant to the terms thereof, and together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, in the form attached hereto as Exhibit A, the “Note”), convertible into shares of common stock, $0.0001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note; and

 

C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of the Note as is set forth immediately below its name on the signature pages hereto; and

 

D. The Company wishes to issue a common stock purchase warrant to purchase 37,500,000 shares of Common Stock (the “Warrant”) and 15,000,000 shares of Common Stock (the “Commitment Shares”) to the Buyer as additional consideration for the purchase of the Note, which shall be earned in full as of the Closing Date, as further provided herein.

 

NOW THEREFORE, in consideration of the foregoing and of the agreements and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Buyer hereby agree as follows:

 

1. Purchase and Sale of Note.

 

a. Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from the Company, the Note, as further provided herein. As used in this Agreement, the term “business day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.

 

b. Form of Payment. On the Closing Date: (i) the Buyer shall pay the purchase price of $15,000.00 (the “Purchase Price”) for the Note, to be issued and sold to it at the Closing (as defined below), by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note, and (ii) the Company shall deliver such duly executed Note and Warrant on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

 

c. Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be on the date that the Purchase Price for the Note is paid by Buyer pursuant to terms of this Agreement.

 

d. Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties (including via exchange of electronic signatures).

 

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1A. Warrant. On or before the Closing Date, the Company shall issue the Warrant and Commitment Shares to the Buyer pursuant to the terms of contained therein.

 

2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company as of the Closing Date that:

 

a. Investment Purpose. As of the Closing Date, the Buyer is purchasing the Note and Warrant (the Note, Warrant, shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (the “Conversion Shares”), shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrant (the “Exercise Shares”), and Commitment Shares shall collectively be referred to herein as the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

 

b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

 

c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

 

d. Information. The Buyer and its advisors, if any, have been, and for so long as the Note remains outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remains outstanding will continue to be, afforded the opportunity to ask questions of the Company regarding its business and affairs. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information regarding the Company or otherwise and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below.

 

e. Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

f. Transfer or Re-sale. The Buyer understands that (i) the sale or resale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel (which may be the Legal Counsel Opinion (as defined below)) that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144 or other applicable exemption, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged in connection with a bona fide margin account or other lending arrangement secured by the Securities, and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and the Buyer in effecting such pledge of Securities shall be not required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or otherwise.

 

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g. Legends. The Buyer understands that until such time as the Note, Warrant, Conversion Shares, and/or Exercise Shares, have been registered under the 1933 Act or may be sold pursuant to Rule 144, Rule 144A under the 1933 Act, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Securities may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE/EXERCISABLE] HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S, OR OTHER APPLICABLE EXEMPTION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue a certificate or book entry statement for the applicable shares of Common Stock without such legend to the holder of any Security upon which it is stamped or (as requested by such holder) issue the applicable shares of Common Stock to such holder by electronic delivery by crediting the account of such holder’s broker with The Depository Trust Company (“DTC”), if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) the Company or the Buyer provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 4(m) hereof) to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation S, or other applicable exemption at the Deadline (as defined in the Note), it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

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h. Authorization; Enforcement. This Agreement has been duly and validly authorized by the Buyer and has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and except as may be limited by the exercise of judicial discretion in applying principles of equity.

 

3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer as of the Closing Date that:

 

a. Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a), if attached hereto, sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

 

b. Authorization; Enforcement. The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note, and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Warrant, the Note, Conversion Shares, and the Exercise Shares by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note, Warrant, as well as the issuance and reservation for issuance of the Conversion Shares and Exercise Shares issuable upon conversion of the Note and/or exercise of the Warrant) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, its shareholders, or its debt holders is required, (iii) this Agreement and the Note (together with any other instruments executed in connection herewith or therewith) have been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement, the Note and the other instruments documents executed in connection herewith or therewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms.

 

c. Capitalization; Governing Documents. As of September 12, 2022, the authorized capital stock of the Company consists of: 35,000,000,000 authorized shares of Common Stock, of which 18,843,858,479 shares were issued and outstanding, and total authorized and preferred shares of the Company are the same as disclosed in the Company’s annual report filed with OTC Markets on April 21, 2022. All of such outstanding shares of capital stock of the Company and the Conversion Shares, are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of this Agreement, other than as publicly announced prior to such date and reflected in the SEC Documents of the Company (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, 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, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of any of the Securities. The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto.

 

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d. Issuance of Conversion Shares and Exercise Shares. The Conversion Shares and Exercise Shares are duly authorized and reserved for issuance and, upon conversion of the Note and/or exercise of the Warrant in accordance with its terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

e. Issuance of Warrant and Commitment Shares. The issuance of the Warrant and Commitment Shares are duly authorized and will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

f. Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect of the Conversion Shares and Exercise Shares to the Common Stock upon the conversion of the Note and/or exercise of the Warrant. The Company further acknowledges that its obligation to issue, upon conversion of the Note and/or exercise of the Warrant, the Conversion Shares and/or Exercise Shares, are absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

g. No Conflicts. The execution, delivery and performance of this Agreement and the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares and Exercise Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, note, evidence of indebtedness, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities is subject) 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 (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect), or (iv) trigger any anti-dilution and/or ratchet provision contained in any other contract in which the Company is a party thereto or any security issued by the Company. Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement and the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and, upon conversion of the Note and/or exercise of the Warrant, issue Conversion Shares and/or Exercise Shares as applicable. All consents, authorizations, 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. The Company is not in violation of the listing requirements of the Principal Market (as defined herein) and does not reasonably anticipate that the Common Stock will be delisted by the Principal Market in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The “Principal Market” shall mean the principal securities exchange or trading market where such Common Stock is listed or traded, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.

 

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h. Absence of Certain Changes. Since September 30, 2021, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

 

i. Absence of Litigation. There is no action, suit, claim, 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 Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The SEC Documents contain a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

j. Intellectual Property. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

 

k. 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.

 

l. Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign 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 provisions 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. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

 

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m. Transactions with Affiliates. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options described in the SEC Documents, 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.

 

n. Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

 

o. Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’s purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

 

p. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

 

q. No Brokers; No Solicitation. Except with respect to J. H. Darbie & Co., a registered broker-dealer (CRD#: 43520), the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. The Company acknowledges and agrees that neither the Buyer nor its employee(s), member(s), beneficial owner(s), or partner(s) in such capacity with respect to the Buyer solicited the Company to enter into this Agreement and consummate the transactions described in this Agreement.

 

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r. Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since September 30, 2021, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

 

s. Environmental Matters.

 

(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

 

(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

 

t. Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and 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 Schedule 3(u), if attached hereto, or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

 

u. Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, 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 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.

 

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v. Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

w. Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company’s financial statements for its most recent fiscal year end and interim financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

x. No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

 

aa. No Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

 

bb. No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.

 

cc. Manipulation of Price. The Company has not, and to its knowledge no one acting on its behalf has: (i) taken, directly or indirectly, any action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

 

dd. Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

ee. Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any of the officers, directors, employees, agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.

 

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ff. Breach of Representations and Warranties by the Company. The Company agrees that if the Company breaches any of the representations or warranties set forth in this Section 3 and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.4 of the Note.

 

4. ADDITIONAL COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS.

 

a. Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

 

b. Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities if required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.

 

c. Use of Proceeds. The Company shall use the proceeds for business development, and not for (i) the repayment of any indebtedness owed to officers, directors or employees of the Company or their affiliates, (iii) any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with the Company’s currently existing operations), (iv) any loan, credit, or advance to any officers, directors, employees, or affiliates of the Company, or (v) in violation or contravention of any applicable law, rule or regulation.

 

d. Right of Participation and First Refusal.

 

(i) Other than arrangements that are in place or disclosed in SEC Documents prior to the date of this Agreement, from the date of this Agreement until the Note is extinguished in its entirety, the Company will not, (i) directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or its Subsidiaries’ debt, equity, or equity equivalent securities, including without limitation any debt, preferred shares or other instrument or security that is, at any time during its life and/or under any circumstances, convertible into, exchangeable, or exercisable for Common Stock (any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”) or (ii) enter into any definitive agreement with regard to the foregoing, in each case unless the Company shall have first complied with this Section 4(d).

 

(ii) The Company shall deliver to the Buyer an irrevocable written notice (the “Offer Notice”) of any proposed or intended Subsequent Placement, which shall (w) identify and describe the Subsequent Placement, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the securities in the Subsequent Placement to be issued, sold, or exchanged and (y) offer to issue and sell to or exchange with the Buyer at least one hundred percent (100%) of the securities in the Subsequent Placement (in each case, an “Offer”).

 

(iii) To accept an Offer, in whole or in part, the Buyer must deliver a written notice (the “Notice of Acceptance”) to the Company prior to the end of the fifth (5th) Trading Day (as defined in the Note) after the Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the amount that the Buyer elects to purchase (the “Subscription Amount”). The Company shall complete the Subsequent Placement and issue and sell the Subscription Amount to the Buyer upon terms and conditions (including, without limitation, unit prices and interest rates) set forth in the Offer Notice, unless a change to such terms and conditions is agreed to in writing between the Company and Buyer.

 

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(iv) Notwithstanding anything to the contrary contained herein, if the Company desires to modify or amend the terms or conditions of a Subsequent Placement at any time after the Offer Notice is given to Buyer (provided, however, that such modification or amendment to the terms or conditions cannot occur during any Offer Period), the Company shall deliver to the Buyer a new Offer Notice and the Offer Period of such new Offer shall expire at the end of the fifth (5th) Trading Day after the Buyer’s receipt of such new Offer Notice.

 

e. Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Buyer in order to enforce any right or remedy under this Agreement, the Note and any document, agreement or instrument contemplated thereby. Notwithstanding any provision to the contrary contained in this Agreement, the Note and any document, agreement or instrument contemplated thereby, it is expressly agreed and provided that the total liability of the Company under this Agreement, the Note or any document, agreement or instrument contemplated thereby for payments which under applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under applicable law in the nature of interest that the Company may be obligated to pay under this Agreement, the Note and any document, agreement or instrument contemplated thereby exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law applicable to this Agreement, the Note and any document, agreement or instrument contemplated thereby is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Agreement, the Note and any document, agreement or instrument contemplated thereby from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Buyer with respect to indebtedness evidenced by this Agreement, the Note and any document, agreement or instrument contemplated thereby, such excess shall be applied by the Buyer to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Buyer’s election.

 

f. Restriction on Activities. Commencing as of the date first above written, and until the earlier of payment of the Note in full or full conversion of the Note, the Company shall not, directly or indirectly, without the Buyer’s prior written consent, which consent shall not be unreasonably withheld: (a) change the nature of its business; or (b) sell, divest, acquire, change the structure of any material assets other than in the ordinary course of business.

 

g. Listing. The Company will, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the Principal Market or any equivalent replacement exchange or electronic quotation system (including but not limited to the Pink Sheets electronic quotation system) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the Principal Market and any other exchanges or electronic quotation systems on which the Common Stock is then traded regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

 

h. Corporate Existence. The Company will, so long as the Buyer beneficially owns any of the Securities, maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading or quotation on the Principal Market, any tier of the NASDAQ Stock Market, the New York Stock Exchange or the NYSE MKT.

 

i. No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

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j. Breach of Covenants. The Company acknowledges and agrees that if the Company breaches any of the covenants set forth in this Section 4, in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.3 of the Note.

 

k. Compliance with 1934 Act; Public Information Failures. For so long as the Buyer beneficially owns the Note, Warrant, Conversion Shares, or any Exercise Shares, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act. During the period that the Buyer beneficially owns the Note, if the Company shall (i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirements under Rule 144(c) or (ii) if the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (each, a “Public Information Failure”) then, as partial relief for the damages to the Buyer by reason of any such delay in or reduction of its ability to sell the Securities (which remedy shall not be exclusive of any other remedies available pursuant to this Agreement, the Note, or at law or in equity), the Company shall pay to the Buyer an amount in cash equal to three percent (3%) of the Purchase Price on each of the day of a Public Information Failure and on every thirtieth day (pro rated for periods totaling less than thirty days) thereafter until the date such Public Information Failure is cured. The payments to which a holder shall be entitled pursuant to this Section 4(k) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (iii) the third business day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 5% per month (prorated for partial months) until paid in full.

 

l. Acknowledgement Regarding Buyer’s Trading Activity. Until the Note is fully repaid or fully converted, the Buyer shall not effect any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Common Stock which establishes a net short position with respect to the Common Stock.

 

m. Disclosure of Transactions and Other Material Information. By 9:00 a.m., New York time, following the date this Agreement has been fully executed, the Company shall file a Current Report on Form 8-K (if required) describing the terms of the transactions contemplated by this Agreement in the form required by the 1934 Act and attaching this Agreement, the form of Note (the “8-K Filing”). From and after the filing of the 8-K Filing with the SEC, the Buyer shall not be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents that is not disclosed in the 8-K Filing. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and the Buyer or any of its affiliates, on the other hand, shall terminate.

 

n. Legal Counsel Opinions. Upon the request of the Buyer from to time to time, the Company shall be responsible (at its cost) for promptly supplying to the Company’s transfer agent and the Buyer a customary legal opinion letter of its counsel (the “Legal Counsel Opinion”) to the effect that the resale of the Conversion Shares and/or Exercise Shares by the Buyer or its affiliates, successors and assigns is exempt from the registration requirements of the 1933 Act pursuant to Rule 144 (provided the requirements of Rule 144 are satisfied and provided the Conversion Shares and/or Exercise Shares are not then registered under the 1933 Act for resale pursuant to an effective registration statement) or other applicable exemption (provided the requirements of such other applicable exemption are satisfied). In addition, the Buyer may (at the Company’s cost) at any time secure its own legal counsel to issue the Legal Counsel Opinion, and the Company will instruct its transfer agent to accept such opinion. The Company hereby agrees that it may never take the position that it is a “shell company” in connection with its obligations under this Agreement or otherwise.

 

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o. Piggyback Registration Rights. The Company hereby grants to the Buyer the registration rights set forth on Exhibit B hereto.

 

p. Most Favored Nation. While the Note or any principal amount, interest or fees or expenses due thereunder remain outstanding and unpaid, the Company shall not enter into any public or private offering of its securities (including securities convertible into shares of Common Stock) with any individual or entity (an “Other Investor”) that has the effect of establishing rights or otherwise benefiting such Other Investor in a manner more favorable in any material respect to such Other Investor than the rights and benefits established in favor of the Buyer by this Agreement or the Note unless, in any such case, the Buyer has been provided with such rights and benefits pursuant to a definitive written agreement or agreements between the Company and the Buyer.

 

q. Subsequent Variable Rate Transactions. From the date hereof until such time as the Note is fully converted or fully repaid, the Company shall be prohibited from effecting or entering into an agreement involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price. The Buyer shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

 

r. [Intentionally Omitted].

 

s. Non-Public Information. The Company covenants and agrees that neither it, nor any other person acting on its behalf will provide the Buyer or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto the Buyer shall have consented to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and confirms that the Buyer shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company delivers any material, non-public information to the Buyer without such Buyer’s consent, the Company hereby covenants and agrees that such Buyer shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or affiliates, not to trade on the basis of, such material, non- public information, provided that the Buyer shall remain subject to applicable law. To the extent that any notice provided, information provided, or any other communications made by the Company, to the Buyer, constitutes or contains material non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice or other material information with the SEC pursuant to a Current Report on Form 8-K. In addition to any other remedies provided by this Agreement or the related transaction documents, if the Company provides any material non-public information to the Buyer without their prior written consent, and it fails to immediately (no later than that business day) file a Form 8-K disclosing this material non-public information, it shall pay the Buyer as partial liquidated damages and not as a penalty a sum equal to $3,000 per day beginning with the day the information is disclosed to the Buyer and ending and including the day the Form 8-K disclosing this information is filed.

 

t. D&O Insurance. Within 300 calendar days of the Closing, the Company shall purchase director and officer insurance on behalf of the Company’s (including its subsidiary) officers and directors for a period of 18 months after the Closing with respect to any losses, claims, damages, liabilities, costs and expense in connection with any actual or threatened claim or proceeding that is based on, or arises out of their status as a director or officer of the Company. The insurance policy shall provide for two years of tail coverage.

 

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5. Transfer Agent Instructions. The Company shall issue irrevocable instructions to the Company’s transfer agent to issue certificates and/or issue shares electronically at the Buyer’s option, registered in the name of the Buyer or its nominee, upon conversion of the Note and/or exercise of the Warrant, the Conversion Shares and Exercise Shares, in such amounts as specified from time to time by the Buyer to the Company in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably reserved shares of Common Stock in the Reserved Amount (as defined in the Note)) signed by the successor transfer agent to the Company and the Company. Prior to registration of the Conversion Shares and/or Exercise Shares under the 1933 Act or the date on which the Conversion Shares and/or Exercise Shares may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates or book entry shares shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5 will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Securities to be issued to the Buyer upon conversion of or otherwise pursuant to the Note and/or upon exercise of or otherwise pursuant to the Warrant as and when required by the Note and this Agreement; (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Securities issued to the Buyer upon conversion of or otherwise pursuant to the Note and/or upon exercise of or otherwise pursuant to the Warrant as and when required by the Note, Warrant, and/or this Agreement and (iv) it will provide any required corporate resolutions and issuance approvals to its transfer agent within 6 hours of each conversion of the Note and/or exercise of the Warrant. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Company, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to 144, Rule 144A, Regulation S, or other applicable exemption, the Company shall permit the transfer, and, in the case of the Securities, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

6. Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

    a. The Buyer shall have executed this Agreement and delivered the same to the Company.
       
    b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
       
    c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

 

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    d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

7. Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note, on the Closing Date, is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

    a. The Company shall have executed this Agreement and delivered the same to the Buyer.
       
    b. The Company shall have delivered to the Buyer the duly executed Note in such denominations as the Buyer shall request and in accordance with Section 1(b) above.
       
    c. The Company shall have delivered to the Buyer the Warrant and Commitment Shares.
       
    d. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.
       
    e. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of Closing Date, as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
       
    f. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
       
    g. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.
       
    h. Trading in the Common Stock on the Principal Market shall not have been suspended by the SEC, FINRA or the Principal Market.
       
    i. The Company shall have delivered to the Buyer (i) a certificate evidencing the formation and good standing of the Company and each of its Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction, as of a date within ten (10) days of the Closing Date and (ii) resolutions adopted by the Company’s Board of Directors at a duly called meeting or by unanimous written consent authorizing this Agreement and all other documents, instruments and transactions contemplated hereby.

 

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8. Governing Law; Miscellaneous.

 

a. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware. 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, 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 TRANSACTIONS CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. 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, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby 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.

 

b. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. A facsimile or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or .pdf signature. Delivery of a counterpart signature hereto by facsimile or email/.pdf transmission shall be deemed validly delivery thereof.

 

c. Construction; Headings. This Agreement shall be deemed to be jointly drafted by the Company and the Buyer and shall not be construed against any person as the drafter hereof. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

d. Severability. In the event that any provision of this Agreement, the Note, or any other agreement or instrument 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 this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby.

 

e. Entire Agreement; Amendments. This Agreement, the Note, and the instruments referenced herein 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 the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement or any agreement or instrument contemplated hereby may be waived or amended other than by an instrument in writing signed by the Buyer.

 

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f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Company, to:

 

CARBONMETA TECHNOLOGIES, INC.

13110 NE 177th Place, Suite 145

Woodinville, WA 98072

Attention: Lloyd Spencer

e-mail: investors@carbonmetatech.com

 

If to the Buyer:

 

RPG Capital Partners Inc.

c/o Robert Papiri

304 S Jones Avenue, #1856

Las Vegas, NV 89107

E-mail: robertpapiri@gmail.com

 

g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer. The Buyer may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

 

h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i. Survival. The representations and warranties of the 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 the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the 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.

 

j. Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, Principal Market or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, Principal Market (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).

 

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k. 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.

 

l. 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.

 

m. Indemnification. In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement or the Note, the Company shall defend, protect, indemnify and hold harmless the Buyer and its stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing persons’ 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 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 (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of the Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.

 

n. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement, the Note, the Warrant, or any other agreement, certificate, instrument or document contemplated hereby or thereby will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, the Note, the Warrant, or any other agreement, certificate, instrument or document contemplated hereby or thereby, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement, the Note, the Warrant, or any other agreement, certificate, instrument or document contemplated hereby or thereby, and to enforce specifically the terms and provisions hereof and thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

o. Payment Set Aside. To the extent that the (i) Company makes a payment or payments to the Buyer hereunder, pursuant to the Note, pursuant to the Warrant, or pursuant to any other agreement, certificate, instrument or document contemplated hereby or thereby, or (ii) the Buyer enforces or exercises its rights hereunder, pursuant to the Note, pursuant to the Warrant, or pursuant to any other agreement, certificate, instrument or document contemplated hereby or thereby, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof (including but not limited to the sale of the Securities) are for any reason (i) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Buyer, or (ii) are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then (i) 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 and (ii) the Company shall immediately pay to the Buyer a dollar amount equal to the amount that was for any reason (i) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Buyer, or (ii) required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action).

 

p. Failure or Indulgence Not Waiver. No failure or delay on the part of the Buyer in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Buyer existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

[Signature Page Follows]

 

18

 

 

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

 

CARBONMETA TECHNOLOGIES, INC.

 

By:  
Name: LLOYD SPENCER  
Title: CHIEF EXECUTIVE OFFICER  

 

RPG Capital Partners Inc.

 

By:  
Name: Robert Papiri  
Title: President  

 

SUBSCRIPTION AMOUNT:

 

Principal Amount of Note: $15,000.00

 

Actual Amount of Purchase Price: $15,000.00

 

19

 

 

EXHIBIT A

 

FORM OF NOTE

 

[attached hereto]

 

20

 

 

EXHIBIT B

 

REGISTRATION RIGHTS

 

All of the Conversion Shares, Exercise Shares, and Commitment Shares shall be deemed “Registrable Securities” subject to the provisions of this Exhibit B. All capitalized terms used but not defined in this Exhibit B shall have the meanings ascribed to such terms in the Securities Purchase Agreement to which this Exhibit is attached.

 

1. Piggy-Back Registration.

 

1.1 Piggy-Back Rights. If at any time on or after the date of the Closing the Company proposes to file any Registration Statement under the 1933 Act (a “Registration Statement”) with respect to any offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan on Form S-8, (ii) for a dividend reinvestment plan or (iii) in connection with a merger or acquisition, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities appearing on the books and records of the Company as such a holder as soon as practicable but in no event less than ten (10) days before the anticipated filing date of the Registration Statement, which notice shall describe the amount and type of securities to be included in such Registration Statement, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such holders may request in writing within three (3) days following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Registrable Securities to be included in such registration and shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof (with the understanding that the Company shall file the initial prospectus covering the Buyer’s sale of the Registrable Securities at prevailing market prices on the same date that the Registration Statement is declared effective by the SEC).

 

1.2 Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 1.5 below.

 

1.3 The Company shall notify the holders of Registrable Securities at any time when a prospectus relating to such holder’s Registrable Securities is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. At the request of such holder, the Company shall also prepare, file and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall not include an 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 not misleading in light of the circumstances then existing. The holders of Registrable Securities shall not to offer or sell any Registrable Securities covered by the Registration Statement after receipt of such notification until the receipt of such supplement or amendment.

 

21

 

 

1.4 The Company may request a holder of Registrable Securities to furnish the Company such information with respect to such holder and such holder’s proposed distribution of the Registrable Securities pursuant to the Registration Statement as the Company may from time to time reasonably request in writing or as shall be required by law or by the SEC in connection therewith, and such holders shall furnish the Company with such information.

 

1.5 All fees and expenses incident to the performance of or compliance with this Exhibit B by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation,(i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the SEC, (B) with respect to filings required to be made with any trading market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) with respect to any filing that may be required to be made by any broker through which a holder of Registrable Securities intends to make sales of Registrable Securities with the FINRA, (ii) printing expenses, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) 1933 Act liability insurance, if the Company so desires such insurance, (vi) fees and expenses of all other persons or entities retained by the Company in connection with the consummation of the transactions contemplated by this Exhibit B and (vii) reasonable fees and disbursements of a single special counsel for the holders of Registrable Securities (selected by holders of the majority of the Registrable Securities requesting such registration). In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any holder of Registrable Securities.

 

1.6 The Company and its successors and assigns shall indemnify and hold harmless the Buyer, each holder of Registrable Securities, the officers, directors, members, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each individual or entity who controls the Buyer or any such holder of Registrable Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling individual or entity (each, an “Indemnified Party”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any related prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any such prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Exhibit B, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based upon information regarding the Buyer or such holder of Registrable Securities furnished to the Company by such party for use therein. The Company shall notify the Buyer and each holder of Registrable Securities promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Exhibit B of which the Company is aware.

 

If the indemnification under Section 1.6 is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then the Company shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Company and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of the Company and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, the Company or the Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in Section 1.6 was available to such party in accordance with its terms. It is agreed that it would not be just and equitable if contribution pursuant to this Section 1.7 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding sentence. Notwithstanding the provisions of this Section 1.7, neither the Buyer nor any holder of Registrable Securities shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such party from the sale of all of their Registrable Securities pursuant to such Registration Statement or related prospectus exceeds the amount of any damages that such party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

[End of Exhibit B]

 

22

 

 

 

Exhibit 10.83

 

NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

CARBONMETA TECHNOLOGIES, INC.

 

Warrant Shares: 37,500,000

Date of Issuance: September 12, 2022 (“Issuance Date”)

 

This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the promissory note in the principal amount of $25,000 to the Holder (as defined below) of even date (the “Note”), RPG Capital Partners Inc. (including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from CARBONMETA TECHNOLOGIES, INC., a Delaware corporation (the “Company”), 37,500,000 shares of Common Stock (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated September 12, 2022, by and among the Company and the Holder (the “Purchase Agreement”).

 

Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $0.0004, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the five-year anniversary thereof.

 

1. EXERCISE OF WARRANT.

 

(a) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise (or deliver such shares of Common Stock in electronic format if requested by the Holder). Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.

 

1

 

 

If the Company fails to cause its transfer agent to issue to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under this Warrant, or otherwise, and such failure shall also be deemed an event of default under the Note, a material breach under this Warrant, and a material breach under the Purchase Agreement.

 

If the Market Price of one share of Common Stock is greater than the Exercise Price, then the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and an Exercise Notice, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:

 

  X = Y (A-B)  
    A  

 

  Where X = the number of 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 Market Price (at the date of such calculation).
         
    B = Exercise Price (as adjusted to the date of such calculation).

 

(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.

 

2

 

 

(c) Holder’s Exercise Limitations. Notwithstanding anything to the contrary contained herein, the Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

(d) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder, within one (1) business day of Holder’s request, the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder within one (1) business day of Holder’s request the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases, or effectuates a cashless exercise hereunder for, Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

3

 

 

2. ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:

 

(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and

 

(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).

 

(b) Anti-Dilution Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon conversion, exercise or otherwise) (including but not limited to the price at which Common Stock is issuable under the Note), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued, regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price by the holder thereof (for the avoidance of doubt, the Holder may utilize the Base Share Price even if the Company did not actually issue shares of its common stock at the Base Share Price under the respective Common stock Equivalents). The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, regardless of whether (i) the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b) upon the occurrence of any Dilutive Issuance or (ii) the Holder accurately refers to the Base Share Price in the Exercise Notice, the Holder is entitled to utilize the Base Share Price at all times on and after the date of such Dilutive Issuance.

 

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(c) Subdivision or Combination of Common Stock. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective. Each such adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively whenever any event covered by this Section 2(c) shall occur.

 

3. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.

 

4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, one and a half (1.5) times the number of shares of Common Stock into which the Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).

 

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5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

6. REISSUANCE.

 

(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.

 

(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.

 

7. TRANSFER. This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of the Holder, which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void if the Company does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without the need to obtain the Company’s consent thereto.

 

8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 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 shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

 

9. AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.

 

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10. GOVERNING LAW AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware. The parties to this Warrant 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. 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 UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT, OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. 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 Warrant 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 Warrant or any other transaction document entered into in connection with this Warrant 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 the Purchase 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. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

12. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:

 

(a) “Nasdaq” means www.Nasdaq.com.

 

(b) “Closing Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market, as reported by Nasdaq, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., New York time, as reported by Nasdaq, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Nasdaq, or (iii) if no last trade price is reported for such security by Nasdaq, the average of the bid and ask prices of any market makers for such security as reported by the OTC Markets. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

 

(c) “Common Stock” means the Company’s common stock, par value $0.0001, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

(d) “Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

(e) [Intentionally Omitted].

 

(f) “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.

 

(g) “Principal Market” means the principal securities exchange or trading market where such Common Stock is listed or quoted, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.

 

(h) “Market Price” means the highest traded price of the Common Stock during the one hundred and fifty Trading Days prior to the date of the respective Exercise Notice.

 

(i) “Trading Day” means any day on which the Common Stock is listed or quoted on its Principal Market, provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.

 

* * * * * * *

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.

 

  CARBONMETA TECHNOLOGIES, INC.
     
 
  Name: Lloyd Spencer
  Title: Chief Executive Officer

 

 
 

 

EXHIBIT A

 

EXERCISE NOTICE

 

(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)

 

THE UNDERSIGNED holder hereby exercises the right to purchase ________________ of the shares of Common Stock (“Warrant Shares”) of CARBONMETA TECHNOLOGIES, INC., a Delaware corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one):

 

☐a cash exercise with respect to _________________Warrant Shares; or
☐by cashless exercise pursuant to the Warrant.

 

2. Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $_________________ to the Company in accordance with the terms of the Warrant.
   
3. Delivery of Warrant Shares. The Company shall deliver to the holder ___________________ Warrant Shares in accordance with the terms of the Warrant.

 

Date:        
         
       
      (Print Name of Registered Holder)
         
      By:        
      Name:  
      Title:  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT OF WARRANT

 

(To be signed only upon authorized transfer of the Warrant)

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto __________________ the right to purchase ________________ shares of common stock of CARBONMETA TECHNOLOGIES, INC., to which the within Common Stock Purchase Warrant relates and appoints ____, as attorney-in-fact, to transfer said right on the books of CARBONMETA TECHNOLOGIES, INC. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.

 

Dated:      
       
       
      (Signature) *
       
       
      (Name)
       
       
      (Address)
       
       
      (Social Security or Tax Identification No.)

 

* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity.

 

 

 

Exhibit 10.84

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT (“Agreement”) is made and entered into this 15th day of May 2006 by and between Lloyd Spencer, a resident of Redmond, Washington (the “Executive”) and Innova Holdings, Inc. (the “Corporation”), a Delaware corporation with its principal place of business in Fort Myers, Florida. The Corporation has three wholly owned subsidiaries (each a “Subsidiary” and together the “Subsidiaries”), namely, Robotic Workspace Technologies, Inc., CoroWare Technologies, Inc. and Innova Robotics, Inc. Collectively, the Corporation and the Executive are referred to herein as the “Parties” and sometimes individually as a “Party.”

 

R E C I T A L S:

 

  A. Executive has substantial experience which the Corporation believes valuable in its business and that of certain of its subsidiaries; and
     
  B. Corporation desires to employ the Executive as an executive of the Corporation and such of its Subsidiaries as the Chief Executive Officer deems appropriate and the Executive desires to accept such employment; and
     
  C. Corporation desires to appoint Executive to serve as a Director on its Subsidiaries’ Boards, and Executive desires to so serve.

 

NOW THEREFORE, in consideration of the promises, mutual covenants and agreements contained herein, the Corporation and the Executive do hereby agree as follows:

 

1. Employment and Duties. On the terms and subject to the job conditions set forth in this Agreement, the Corporation shall employ the Executive as an executive officer of the corporation and such of its Subsidiaries as it believes appropriate and to perform such duties as are consistent with such position as may be assigned, from time to time, by the Chief Executive Officer of the Corporation and to render such additional services and discharge such other responsibilities as the Corporation or designated Subsidiary may, from time to time, stipulate, including without limitation serving as president of such designated Subsidiary. The costs of salary, expenses, options, benefits and bonus related to all work performed for a Subsidiary shall be allocated to that Subsidiary.

 

2. Performance. The Executive accepts the employment described in Paragraph 1 of this Agreement and agrees to devote all of his business time and efforts to the faithful and diligent performance of the services described therein, including the performance of such other services and responsibilities as the Corporation may, from time to time, stipulate.

 

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3. Term. The term (“Term”) of employment under this Agreement shall commence on May 15, 2006 (the “Commencement Date”) and shall continue until the fifth anniversary date following the Commencement Date and shall be automatically renewable for successive one year periods, unless terminated as provided herein. The Term of employment shall terminate:

 

a. after three years from the Commencement Date, if either Party gives more than sixty days prior written notice to the other Party that it wishes to terminate this Agreement; and

 

b. immediately upon receipt of written notice for Just Cause or Good Reason.

 

For purposes of this Agreement, the term “Just Cause” shall mean the occurrence of any one or more of the following events: (i) the breach by the Executive of his covenants under this Agreement; (ii) the Executive’s refusal to perform, or his substantial neglect of, the duties assigned to the Executive pursuant to Paragraph 1 hereof; (iii) the commission by the Executive of theft or embezzlement of Corporation property or other acts of dishonesty; (iv) the commission by the Executive of a crime resulting in injury to the business, property or reputation of the Corporation or any affiliate of the Corporation or commission of other significant activities harmful to the business or reputation of the Corporation or any affiliate of the Corporation; (v) any significant violation of any statutory or common law duty of loyalty to the Corporation; (vi) Executive’s neglect of his duties hereunder or his failure to devote the time and attention to the Corporation’s business required herein; or (vii) Executive’s intentional violation of Corporation’s rules, regulations, procedures or other policies.

 

For purposes of this Agreement, the term “Good Reason” shall mean the occurrence of any one or more of the following events: (i) the Corporation’s material breach of this Agreement; or (ii) a material change in Executive’s compensation and/or responsibilities unless such change is agreed to in advance by Executive.

 

On the effective date of termination of this Agreement for any reason, including, without limitation, the expiration of the Term, and regardless of which Party effects the termination, the Executive shall return to the Corporation all Proprietary Information (as defined hereinafter), and any other property belonging to the Corporation.

 

If the Corporation terminates Executive’s employment without Just Cause or Executive terminates employment with Good Reason, Executive shall be entitled to accrued but unpaid salary and benefits through the date of termination and shall receive a severance payment equal to one-month’s current salary for each full year of employment, with a minimum severance payment of three (3) months and a maximum of six (6) months’ pay; provided however, that Executive’s receipt of any severance payment shall be contingent on Executive signing a separate agreement releasing all claims against the Corporation arising out of Executive’s employment. If Executive is terminated for Just Cause or resigns without Good Reason, Executive shall be entitled only to salary and benefits accrued but unpaid through the date of termination and shall receive no amount for severance.

 

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If Executive fails to give 90 days notice of termination without Good Reason, he shall forfeit 5,000 stock options for each day that he fails to give notice, up to 450,000 options.

 

4. Compensation.

 

a. Salary. During the Term, the Corporation shall pay the Executive a salary in the amount of Twelve Thousand Five Hundred Dollars ($12,500) per month.

 

b. Bonus. The Corporation’s Board of Directors retains the discretion to award to the Executive an annual bonus. The amount of such bonus will be decided by the Board of Directors in its sole discretion..

 

c. Stock Options. The Corporation. shall grant 5,000,000 stock options to Executive pursuant to the Corporation’s Stock Option Plan at an exercise of $0.018 / share. All options shall vest annually from the grant date over a three year period and shall terminate on the tenth anniversary of the date of grant, except that all unvested stock options shall vest immediately if the Corporation terminates Executive’s employment without Just Cause, or Executive resigns for Good Reason

 

d. Expenses. The Corporation shall pay Executive’s out of pocket expenses provided such expenses are within the Corporation’s guidelines. The Executive shall provide the Corporation with an expense report and such substantiating documents as the Corporation requests from time to time.

 

5. Benefits. In addition to the reimbursement of the ordinary out of pocket business expenses described in 4.d, above, the Executive shall be eligible for such other benefits as are offered to other executives in similar positions on such terms as the Corporation shall determine in its sole discretion which as of the current date includes an executive medical program which includes dental and vision coverage.

 

6. Location. The Executive shall perform the duties required of him at the office of CoroWare Technologies, Inc. in the state of Washington and such other locations as the Corporation may specify from time to time.

 

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7. Confidentiality of Information; Duty of Non-Disclosure.

 

c. The Executive acknowledges and agrees that his employment by the Corporation under this Agreement necessarily involves his understanding of and access to certain trade secrets and confidential information pertaining to the business of the Corporation. Accordingly, the Executive agrees that at all times after the date of this Agreement he will not, directly or indirectly, without the express permission of the Corporation, disclose to or use for the benefit of any person, corporation or other entity, or for himself any and all files, trade secrets or other confidential information concerning the internal affairs of the Corporation, including, but not limited to, information pertaining to its clients, services, products, earnings, finances, manufacturing, operations, suppliers, including without limitation its overseas network of suppliers and other relations, methods, distribution system or other activities (“Proprietary Information”); provided, however, that the foregoing shall not apply to information which is of public record or is generally known, disclosed or available to the general public or the industry generally. Further, the Executive agrees that he shall not, directly or indirectly, remove or retain, without the express prior written consent of the Corporation, and upon termination of this Agreement for any reason shall return to the Corporation, any figures, calculations, letters, papers, records, computer disks, computer print-outs, lists, documents, instruments, drawings, designs, programs, brochures, sales literature, or any copies thereof, or any information or instruments derived therefrom, or any other similar information of any type or description, however such information might be obtained or recorded, arising out of or in any way relating to the business of the Corporation or obtained as a result of his employment by the Corporation. The Executive acknowledges that all of the foregoing are proprietary information, and are the exclusive property of the Corporation. The covenants contained in this Paragraph 7 shall survive the termination of Executive’s employment or this Agreement.

 

8. Covenant Not to Compete.

 

a. During Employment Period. During the Term, the Executive shall not, without the prior written consent of the Corporation, engage in any other business activity for gain, profit, or other pecuniary advantage (excepting the investment of funds in such form or manner as will not require any services on the part of the Executive in the operation of the affairs of the companies in which such investments are made) or engage in or in any manner be connected or concerned, directly or indirectly, whether as an officer, director, stockholder, partner, owner, Executive, creditor, or otherwise, with the operation, management, or conduct of any business that competes with or is of a nature similar to that of the Corporation.

 

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b. Following End of Term.

 

  (i) For the purposes of this sub-section, the term “Involved Subsidiary” shall include: (1) any subsidiary of the Corporation with which Executive was actually employed; (2) any subsidiary of the Corporation for which Executive served on the Board of Directors; and (3) any subsidiary of the Corporation that possesses confidential information or has customers to which Executive had direct access during his employment.
  (ii) Within the twelve (12) month period immediately following the termination of the Executive’s employment with the Corporation, regardless of the reason therefore, the Executive shall not, without the prior written consent of the Corporation, interfere with, or divert any customer served by any Involved Subsidiary, or any prospective customer identified by or on behalf of any Involved Subsidiary, or any supplier to any Involved Subsidiary who was a supplier or prospective supplier during the Executive’s employment with the Corporation, wherever located.
  (iii) In addition, during the twelve (12) month period immediately following the termination of the Executive’s employment with the Corporation, regardless of the reason therefore, the Executive shall not engage in or in any manner be connected or concerned, directly or indirectly, whether as an officer, director, stockholder, partner, owner, executive, creditor, or otherwise, with the operation, management, or conduct of any business that competes with or is of a nature similar to that of any Involved Subsidiary’s robotic activities and software systems integration activities without the prior written approval of the Corporation.
  (iv) In addition, during the twenty four (24) month period immediately following the termination of the Executive’s employment with the Corporation, regardless of the reason therefore, the Executive shall not engage in or in any manner be connected or concerned with any business activity, either as an employee, owner, consultant or any other activity involving a product or technology that Executive had initiated, or actively participated in while employed by the Corporation.
  (v) Executive has the right to seek employment with Microsoft at any time, but shall provide the Company with a minimum two (2) week notice of intent to leave.

 

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  (v) Executive has the right to seek an alternative employer if the Company reduces Executives compensation as it is detailed in this Agreement.
  (vi) The term of this agreement will be modified if Executive terminates his employment to a ratio of total stock value of INRA compared to the annual salary; said ratio shall be used to adjust the total months of this non-compete, but the number of months cannot exceed the months identified herein above (ie., if the ratio is greater than 1 it shall not cause the term to exceed the 12 or 24 months specified herein).

 

The covenants contained in this Paragraph 8 shall survive the termination of Executive’s employment under this Agreement.

 

9. Severability. The Executive agrees and acknowledges that the Corporation does not have any adequate remedy at law for the breach or threatened breach by the Executive of the covenants contained in Paragraphs 7 and 8 of this Agreement, and agrees that the Corporation shall be entitled to injunctive relief to bar the Executive from such breach or threatened breach in addition to any other remedies which may be available to the Corporation at law or in equity. The covenants of the Executive contained in Paragraphs 7 and 8 of this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Executive against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of such covenants. If any part of any covenant or other term of this Agreement is determined by a court of law to be overly broad thereby making the covenant unenforceable, the parties hereto agree, and it is their desire, that the court shall substitute a judicially enforceable limitation in its place, and that as so modified the covenant shall be binding upon the parties as if originally set forth herein.

 

10. Inventions, Designs, and Secrecy. Except as otherwise provided in this Section 10 , the Executive: (a) shall hold in a fiduciary capacity for the benefit of the Corporation all secret or confidential information, knowledge, or data of the Corporation or its business or production operations obtained by the Executive during his employment by the Corporation, which shall not be generally known to the public or recognized as standard practice (whether or not developed by the Executive) and shall not, during his employment by the Corporation and after the termination of such employment for any reason, communicate or divulge any such information, knowledge or data to any person, firm or corporation other than the Corporation or persons, firms or corporations designated by the Corporation; (b) shall promptly disclose to the Corporation all designs, inventions, software programs, ideas, devices, and processes made or conceived by him alone or jointly with others, from the time of entering the Corporation’s employ until such employment is terminated, relevant or pertinent in any way, whether directly or indirectly, to the Corporation’s business or production operations or resulting from or suggested by any work which he may have done for the Corporation or at its request; (c) shall, at all times during employment with the Corporation, assist the Corporation in every proper way (entirely at the Corporation’s expense) to obtain and develop for the Corporation’s benefit patents or copyrights on such designs, software programs, inventions, ideas, devices and processes including without limitation software code or software for use in the robotics industry, whether or not patented, trademarked, or copyrighted; and (d) shall do all such acts and execute, acknowledge and deliver all such instruments as may be necessary or desirable in the opinion of the Corporation to vest in the Corporation the entire interest in such designs, inventions, ideas, devices, and processes referred to above. The foregoing to the contrary notwithstanding, the Executive shall not be required to assign or offer to assign to the Corporation any of Executive’s rights in any design or invention for which no equipment, supplies, facility, or trade secret information of the Corporation was used and which was developed entirely on the Executive’s own time, unless (a) the design or invention related to (i) the business of the Corporation or (ii) the Corporation’s actual or demonstrably anticipated research or development, or (b) the design, software or invention results from any work performed by the Executive for the Corporation. The Executive acknowledges his prior receipt of written notification of the limitation set forth in the preceding sentence on the Executive’s obligation to assign or offer to assign to the Corporation the Executive’s rights in designs and inventions.

 

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11. Notice. All notices, demands, instructions and other communications required or permitted to be given to or made upon either Party hereto or any other person shall be in writing and shall be personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested (with a copy by facsimile, if such Party has provided a facsimile number), or by a reputable courier delivery service, or by telegram (with messenger delivery), or by facsimile (confirmed by mail), and shall be deemed to be given for purposes of this Agreement on the day that such writing is delivered or sent to the intended recipient thereof in accordance with the provisions of this Paragraph. Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this Paragraph, notices, demands, instructions and other communications in writing shall be given to or made upon the respective Parties hereto at the following address:

 

To the Corporation:

 

Innova Holdings, Inc.

1708 San Carlos Blvd., A6-151

Ft. Myers, Florida 3

Attention: Walter Weisel

Facsimile No: (312) 427-6511

 

With a copy to:

 

Linda R. Robison

2659 West Gulf Drive, Unit B102

Sanibel, FL 33957

Facsimile Number: (888) 403-2412

 

To the Executive:

 

Lloyd Spencer

18529 NE 184th Street, Woodinville, WA 98077

 

Any such notice shall be deemed effective on the fifth (5th) business day after its mailing.

 

12. Transfer.

 

a. The Corporation shall have the right in its discretion to freely assign or transfer its interests under this Agreement provided such assignment or transfer is in connection with a sale of all or substantially all of its assets, if such assignee assumes all obligations of the Corporation to the Executive arising under the provisions of this Agreement.

 

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b. This Agreement is personal to the Executive, and neither all nor any part of this Agreement directly or indirectly may be assigned or transferred by the Executive without the Corporation’s prior written approval.

 

13. Miscellaneous.

 

a. Controlling Law. This Agreement shall be governed by and interpreted, construed and enforced in accordance with the laws of the United States of America and the State of Florida. The Parties acknowledge and agree that any dispute resolution regarding the Executive’s employment shall be adjudicated in any Federal court located in Fort Myers, Florida USA, unless otherwise mutually agreed by the parties.

 

b. Entire Agreement. This instrument contains the entire agreement of the Parties with respect to its subject matter and may not be changed orally but only by an Agreement in writing signed by the Parties hereto.

 

c. Failure to Enforce. The failure of either Party to enforce any of the provisions of this Agreement shall not be construed as a waiver of such provisions. Further, any express waiver of a breach of any provision hereunder by any Party shall not constitute a waiver of any prior or subsequent breach or of such Party’s right to fully enforce thereafter each and every provision of this Agreement.

 

d. Headings. All numbers and heading of paragraphs and subparagraphs in this Agreement are for convenience of reference only and are not intended to qualify, limit or otherwise affect the meaning or interpretation of this Agreement.

 

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WHEREFORE, the Parties have executed this Agreement as of the date and year first above written.

 

EXECUTIVE:   CORPORATION:
     
    Innova Holdings, Inc.
       
  By:                         
David Hyams   Its:

 

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Exhibit 23.2

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Amendment No. 2 to the Form S-1 Registration Statement of CarbonMeta Technologies, Inc. (the “Company”) of our report dated July 29, 2022 relating to the audit of the consolidated financial statements of the Company for the years ended December 31, 2022 and 2021 included in this Amendment.

 

We also consent to the reference to the Firm under the heading “Experts” in such Amendment.

 

/s/ Michael T. Studer CPA P.C.  
Michael T. Studer CPA P.C.  
Freeport, New York  
October 11, 2022  

 

 

 

 

 

Exhibit 107

 

Calculation of Filing Fee Tables

 

Form S-1

(Form Type)

 

CarbonMeta Technologies, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Table 1: Newly Registered and Carry Forward Securities

 

    Security Type   Security Class Title   Fee Calculation or Carry Forward Rule     Amount Registered     Proposed Maximum Offering Price Per Unit     Maximum Aggregate Offering Price     Fee Rate     Amount of Registration Fee     Carry Forward Form Type     Carry Forward File Number     Carry Forward Initial Effective Date     Filing Fee Previously Paid In Connection with Unsold Securities to be Carried Forward  
    Newly Registered Securities
Fees to Be Paid   Equity   Shares of common stock $0.001 par value per share     457 (a)1     2,781,937,537     $ 0.0005     $ 1,390,969     $ 0.0000927     $ 129                                  
Fees Previously Paid   N/A   N/A     N/A       N/A       N/A       N/A               N/A                                  
    Carry Forward Securities  
Carry Forward Securities   N/A   N/A     N/A       N/A               N/A                       N/A       N/A       N/A       N/A  
    Total Offering Amounts     $ 1,390,969             $ 129                                  
    Total Fees Previously Paid                     $ 129                                  
    Total Fee Offsets                     $ 0.0                                  
    Net Fee Due                     $ 0.0                                  

 

1The shares of Common Stock of CarbonMeta Technologies, Inc. (the “Registrant”) are being registered on this Registration Statement are issuable upon conversion of outstanding convertible notes (1,361,130,000 of the shares of Common Stock being registered) at a conversion price of $0.0005 per share of Common Stock, upon exercise of outstanding warrants (526,875,000 of the shares of Common Stock being registered) at an exercise price of $0.0005 per share of Common Stock and 893,932,537 shares of Common stock previously issued to selling shareholders.