NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Note
1 — Business Organization and Nature of Operations
Corporate
Overview
Forever
8 Fund, LLC (“F8F” or “the Company”) was formed on August 5, 2020 as a Delaware limited liability company.
The Company has established 100% owned operating subsidiaries in the EU and United Kingdom to enter into agreements with customers and
conduct sales in those geographies. The Company has owned 100% of F8 Fund EU Holdings BV, a Dutch company as of April 1, 2021. The Company
has owned 100% of Forever 8 UK Ltd., a United Kingdom company as of March 1, 2021.
Business
Description
F8F,
based in Pennsylvania, was formed in 2020 for the purpose of developing a unique way of funding inventory for e-commerce businesses (its
“Customers”). The growth of e-commerce globally has resulted in a revolution in the way people shop – shopping on platforms
such as Amazon and buying based on reviews and ratings, not necessarily brand recognition. This has resulted in the establishment of
a large number of small and medium sized enterprises (“SME’s) whose primary route to market is via online platforms. One
of the major challenges for these businesses is finding the capital required to invest in inventory in order to fuel growth whilst also
spending on tools to drive sales.
More
traditional sources of debt capital are slow to complete due-diligence and are typically unavailable to this segment of the market. Further,
most of these businesses are either too small for venture capital or the Customer does not want to bring on equity partners. The only
really viable alternative source of capital for them is merchant cash advance (“MCA”) providers, which typically advance
a fixed amount of cash and get re-paid by taking a percentage share of revenue each month. MCA financing can be expensive and cost-prohibitive
in certain circumstances.
F8F
has approached the market differently by developing a technology-driven solution focused on taking product risk directly. The Company
determines which products qualify for inventory funding within a customer’s product portfolio. The Company then buys the existing
inventory of the Customer, immediately freeing up capital for the Customer to focus on driving sales. Going forward, the Company funds
all future inventory purchases directly from the supplier that the Customer requires in order to satisfy its growth. The Company makes
money by simply marking up the inventory it has acquired and charges the Customer for that inventory after the Customer has sold the
product to the end consumer.
Note
2 — Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the
United States of America (“U.S. GAAP”) and are presented in US dollars.
Principles
of Consolidation
The
consolidated financial statements include the accounts of F8F and its wholly-owned subsidiaries. All intercompany transactions and balances
have been eliminated in consolidation.
FOREVER
8 FUND, LLC
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Note
2 — Summary of Significant Accounting Policies — (Continued)
Use
of Estimates
Preparation
of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial
statements.
The
Company’s significant estimates used in these financial statements include, but are not limited to, accounts receivable reserves,
the valuation allowance related to the Company’s deferred tax assets and the recoverability and useful lives of long-lived assets.
Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general
economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and
could cause actual results to differ from those estimates. Management believes all necessary estimates have been made for fair presentation
of the financial statements.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents
in the consolidated financial statements.
As
of December 31, 2021 and 2020, the Company had cash of $829,790 and $91,987, respectively. The Company has cash on deposits in several
financial institutions which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions.
The Company reduces its credit risk by placing its cash and cash equivalents with major financial institutions. As of December 31, 2021
and 2020, the Company had cash of $517,716 and $22,137, respectively, that was held by banking institutions located outside the United
States of America.
Accounts
Receivable
Accounts
receivable are recorded at the invoiced amount, net of an allowance for credit losses. The allowance for credit losses is based on historical
loss experience, the number of days that receivables are past due, and an evaluation of the potential risk of loss associated with delinquent
accounts. Accounts receivable considered uncollectible are charged against the allowance for credit losses when identified. The Company
does not have any off-balance sheet credit exposure related to its customers. At December 31, 2021 and 2020, the Company’s allowance
for credit losses was not material.
Inventory
Inventory
is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method.
FOREVER
8 FUND, LLC
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Note
2 — Summary of Significant Accounting Policies — (Continued)
Segment
Reporting
The
Company uses “the management approach” in determining reportable operating segments. The management approach considers the
internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing
performance as the source for F8F determining its reportable segments. The Company’s chief operating decision maker is the Chief
Executive Officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources and
assessing performance for the entire Company. Accordingly, the Company’s operations are measured on a consolidated basis since
all Company operations and processes are under the same management team. Accordingly, the company’s operations are measured on
a consolidated basis since all company operations and processes are considered one business segment.
Fair
Value of Financial Instruments
The
Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and
Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level
1 — quoted prices in active markets for identical assets or liabilities
Level
2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
The
carrying amounts of the Company’s financial instruments, such as cash, accounts receivable, accounts payable, accrued expenses
and other current liabilities approximate fair values due to the short-term nature of these instruments. The carrying amount of the Company’s
notes payable approximates fair value because the effective yields on these obligations, which include contractual interest rates, taken
together with other features such as concurrent issuance of warrants, are comparable to rates of returns for instruments of similar credit
risk.
Foreign
Currency Translation
The
Company uses the United States dollar as its functional and reporting currency since a substantial portion of the Company’s revenues,
expenses, assets and liabilities are located in the United States. Assets and liabilities in foreign currencies are translated using
the exchange rate at the balance sheet date, while revenue and expense accounts are translated at the average exchange rates prevailing
during the year. Equity accounts are translated at historical exchange rates. Gains and losses from foreign currency transactions and
translation for the year ended December 31, 2021 and 2020 were ($157,687) and $0, respectively.
FOREVER
8 FUND, LLC
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Note
2 — Summary of Significant Accounting Policies — (Continued)
Revenue
Recognition
The
Company has adopted and accounts for revenue under the guidance provided by ASC 606, Revenue from Contracts with Customers, and all related
amendments (“new revenue standard”). The Company has applied the new revenue standard to all contracts from the date of initial
application.
The
Company recognizes revenue at the time the delivery receipt is received, as it is obligated to provide no additional services subsequent
to the delivery and the collectability of the fee for service is reasonably assured.
The
Company recognizes revenue ratably over the term of the agreement. Revenue on each agreement is the total due under the agreement. In
those instances where the clients’ obligations are not fully paid at the termination date of the agreement, additional fees charged
are calculated on the unpaid balance and recorded monthly. The accounts are charged mark-up rates ranging from 1% to 30% of supplier
costs, depending on the timing of the sale and terms of the agreement.
The
table below allocates net revenue recorded for the year ended December 31, 2021 and 2020:
| | |
For the Year Ended | | |
For the Year Ended | |
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Sales | |
$ | 12,001,636 | | |
$ | 103,182 | |
| Fee Income | |
| 589,757 | | |
| 18,443 | |
| Revenue | |
$ | 12,591,393 | | |
$ | 121,625 | |
Concentrations
For
the year ended December 31, 2021, total consolidated revenues in the United States, the United Kingdom and European Union were $2,174,398,
$394,374, and $10,022,621, respectively. No other geographical area accounted for more than 10% of total sales during the year ended
December 31, 2021. Two of the Company’s customers account for over 85% of total consolidated revenues for the year ended
December 31, 2021. For the year ended December 31, 2020, all total consolidated revenues were generated from the United States. One of
the Company’s customers accounted for 100% of total consolidated revenues for the year ended December 31, 2020.
Income
Taxes
Since
the Company is treated as a partnership for tax purposes it pays no federal income tax and, thus, the company is not subject to account
for income taxes under the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic 740 “Income Taxes”
(“ASC Topic 740”).
As
a result of being a partnership for tax purposes, all tax attributes “flow-through” to the owners of the company and they
account for those tax attributes accordingly, on their respective tax returns.
FOREVER
8 FUND, LLC
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Note
2 — Summary of Significant Accounting Policies — (Continued)
Management
has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial
statements as of December 31, 2021 and 2020. The Company does not expect any significant changes in its unrecognized tax benefits within
twelve months of the reporting date.
The
Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and
administrative expenses in the statements of operations.
Recently
Issued Accounting Pronouncements
In
June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the current accounting guidance
and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable
forecasts. This guidance amends the accounting for credit losses for available-for-sale investment securities and purchased financial
assets with credit deterioration. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of this guidance did not have a material
impact on the Company’s financial condition, results of operations, cash flows or disclosures.
In
August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU
2018-15”), a series of amendments which align the requirements for capitalizing implementation costs incurred in a hosting arrangement
that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software
(and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement
that is a service contract is not affected by these amendments. The Company adopted ASU 2018-15 on January 1, 2020. The adoption of this
guidance did not have a material impact on the Company’s financial condition, results of operations, cash flows or disclosures.
Recent
Accounting Pronouncements Not Yet Adopted
In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU
2019-12”). This amendment was issued to simplify the accounting for income taxes by removing certain exceptions for recognizing
deferred taxes, performing intraperiod allocation, and calculating income taxes in interim periods. Further, ASU 2019-12 adds guidance
to reduce complexity in certain areas, including recognizing deferred taxes for tax basis goodwill and allocating taxes to members of
a consolidated group. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective
income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition
of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities.
Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period
that includes the effective date of the tax law. This guidance is effective for interim and annual periods beginning December 15, 2022
for private companies. The Company does not expect the adoption of this guidance to have a material impact on its financial condition,
results of operations, cash flows or disclosures.
FOREVER
8 FUND, LLC
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Note
3 — Inventory
As
of December 31, 2021 and 2020, inventory consisted of the following:
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Finished Goods | |
$ | 5,092,518 | | |
$ | 256,210 | |
| Total Inventory | |
$ | 5,092,518 | | |
$ | 256,210 | |
Note
4 — Intangible Assets
Internal
and external costs incurred during the preliminary project stage are being expensed as incurred. Internal and external costs
incurred to develop internal-use computer software and costs to develop or obtain software that allows for access to, or the
conversion of old data by new systems during the application development stage are being capitalized. Training costs and data
conversion costs, which may include purging or cleansing of existing data, reconciliation or balancing of the old data and the data
in the new system, creation of new or additional data, and conversion of old data to the new system, are being expensed as incurred.
Internal and external training costs and maintenance costs during the post-implementation operation stage are being expensed
as incurred. Upgrades and enhancements are defined as modifications to existing internal-use software that result in additional
functionality – that is, modifications to enable the software to perform tasks that it was previously incapable of performing.
Upgrades and enhancements normally require new software specifications and may also require a change to all or part of the existing
software specifications. In order for costs of specified upgrades and enhancements to internal-use computer software to be
capitalized, it must be probable that those expenditures will result in additional functionality.
Capitalization
of costs begin when both of the following occur: (a) preliminary project stage is completed, and (b) management, with the relevant authority,
implicitly or explicitly authorizes and commits to funding a computer software project and it is probable that the project will be completed,
and the software will be used to perform the function intended. When it is no longer probable that the computer software project will
be completed and placed in service, no further costs shall be capitalized, and guidance on impairment shall be applied to existing balances.
Capitalization ceased no later than the point at which a computer software project is substantially complete and ready for its intended
use, that is, after all substantial testing is completed.
Intangible
assets include internally developed software and patents. Costs to acquire these intangible assets are capitalized and amortized over
their expected economic useful lives, which is currently 10 years for internally developed software and 20 years for patents. Where the
future benefits of the rights are unknown, these costs are expensed as incurred. For the years ended December 31, 2021 and 2020, the
Company recorded no impairment.
FOREVER
8 FUND, LLC
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Note
4 — Intangible Assets – (Continued)
Amortization
expense on intangible assets were $0 for both years as the capitalized software developments costs had not been put into commercial use
as of December 31, 2021 and 2020:
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Capitalized software development cost, gross | |
$ | 167,629 | | |
$ | 2,438 | |
| Less: accumulated amortization | |
| - | | |
| - | |
| Capitalized software development cost, net | |
$ | 167,629 | | |
$ | 2,438 | |
Note
5 — Accrued Expenses and Other Current Liabilities
As
of December 31, 2021 and 2020, accrued expenses and other current liabilities consisted of the following:
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Accrued other taxes | |
$ | 17,140 | | |
$ | - | |
| Accrued payroll and benefits | |
| 16,217 | | |
| - | |
| Accrued professional fees | |
| 15,000 | | |
| - | |
| Accrued other | |
| 2,466 | | |
| - | |
| Total accrued expenses and other current liabilities | |
$ | 50,823 | | |
$ | - | |
Note
6 — Notes Payable
As
of December 31, 2021, the Company closed on a Series A Term Loan in the amount of $6,032,949 (the “Series A Term Loan”).
The Series A Term Loan accrues interest at a rate of 15% per annum and matures on June 30, 2022. The Company had the right to extend
the maturity date to August 15, 2022 by providing written notice to the lenders on or before May 31, 2022. On May 31, 2022, the Company
provided written notice to the lenders to extend the maturity date. The Series A Term Loan has a first security interest on all of the
Company’s inventory and accounts receivable. The Series A Term Loan does not include a personal guarantee. Each Noteholder has
the right to participate in future F8F equity offerings for four (4) years from the effective date of their loan agreement (“Future
F8F Offerings”) at a 10% discount from the valuation of, and on the terms and conditions to be set forth in the Future F8F Offerings.
Noteholders shall have the right to invest up to four (4) times the aggregate amount of the term loans.
It
should be noted that approximately $350,000 of contributed capital from two of F8’s founders were converted to Series A Term Loan
in 2021.
FOREVER
8 FUND, LLC
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Note
7 — Income Taxes
Since
the Company is treated as a partnership for tax purposes it pays no federal income tax and, thus, the company is not subject to account
for income taxes under the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic 740 “Income Taxes”
(“ASC Topic 740”).
As
a result of being a partnership for tax purposes, all tax attributes “flow-through” to the owners of the company and they
account for those tax attributes accordingly, on their respective tax returns.
Note
8 — Related Party Transactions
Approximately
$1,855,000 of the $6,032,949 Series A Term Loan is held by founders and senior management team members of the Company as of December
31, 2021. There are no other related party transactions.
Note
9 — Commitments and Contingencies
Operating
Lease
The
Company leases office space under short-term lease agreements. On April 1, 2022, the Company entered into a 3-month
lease for office space in Bethlehem, Pennsylvania. Monthly lease payments are approximately $1,500. On November 11, 2021, the Company
entered into a 6-month lease for office space in New York, New York. Monthly lease payments are approximately $500.
Total
rent expense, for the years ended December 31, 2021 and 2020, was $26,380 and $5,057, respectively, and is included in
general and administrative expense on the consolidated statements of operations.
Note
10 — Subsequent Events
In
accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial
statements were available to be issued on November 14, 2022, and has determined that it does not have any material subsequent events to disclose
in these financial statements other than the following:
From
April through July 18, 2022, the Company raised $425,000 through the issuance of membership units in Forever 8 Fund, LLC (the “Units”
or “Securities”), at a price of $2.26 per Unit (the “Offering”).
On
August 22, 2022, the Company issued 390,200 Units to employees and consultants in lieu of cash compensation.
On
September 14, 2022, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) by and among
the Company, Cryptyde, Inc. (“Cryptyde”), a Delaware corporation, the members of the Company set forth on the signature pages
thereto (the “Sellers”) and Paul Vassilakos, solely in his capacity as representative of the Sellers (the “Sellers’
Representative”), pursuant to which, and in accordance with the terms and conditions set forth therein, Crpytyde was to acquire
100% of the issued and outstanding membership interests of Forever 8 (including all rights and benefits associated with such membership
interests, the “Membership Interests”) from the Sellers (the “Acquisition”). On October 1, 2022, the closing
of the acquisition occurred (the “Closing”).
Pursuant
to the Purchase Agreement, the Sellers received consideration consisting of (i) an aggregate of 7,000,000 non-voting preferred membership
units of Forever 8 (the “Initial Base Preferred Units”), subject to adjustments discussed below, (ii) convertible promissory
notes in an aggregate principal amount of $27.5 million (the “Promissory Notes”), and (iii) the right to receive potential
earnout amounts. In addition, $4.6 million in cash was transferred to the Company in consideration for the Company’s payment of
certain of its obligations.
In
the event that the volume weighted average price (“VWAP”) of the Cryptyde Shares the later of (i) the 15 trading days immediately
prior to the date the put right pursuant to Section 7(b) of the Amended Operating Agreement (as defined below) is exercisable and (ii)
the 15 trading days following the Company’s filing of its Annual Report on Form 10-K for the fiscal year ending December 31, 2022
is less than $3.07, then Sellers shall be entitled to receive an additional number of Preferred Units (“Additional Base Preferred
Units” and together with the Initial Base Preferred Units, the “Total Base Preferred Unit Consideration”) such that
the Total Base Preferred Unit Consideration multiplied by the Additional Base Preferred Unit VWAP equals $21.5 million; provided that
in no event shall more than 3,750,000 Additional Base Preferred Units be issued.
As
indicated below, the Purchase Agreement provides that the Sellers are entitled to receive three potential earnout payments (the “Earnout
Consideration). The Earnout Consideration is payable to the Sellers in cash or, at Cryptyde’s election, in up to 7,000,000 additional
Preferred Units, upon the achievement of certain performance thresholds relating to cumulative collected revenues (each, an “Earn-Out
Target”).
If
Cryptyde elects to issue additional Preferred Units upon the achievement of any Earn-Out Target and the VWAP of Cryptyde’s common
stock for the 15 trading days preceding the date that any Earn-Out Target is achieved (the “Earn-Out VWAP”) is (A) with respect
to the first Earn-Out Target, less than $5.00, (B) with respect to the second Earn-Out Target, less than $6.00 or (C) with respect to
the third Earn-Out Target, less than $5.00, then Sellers shall be entitled to receive an additional number of additional Preferred Units
(the “True-up Units” and together with the additional Preferred Units, the “Total Additional Preferred Units”)
such that the Total Additional Preferred Units multiplied by the Earn-Out VWAP equals (x) $15 million for the first Earn-Out Target,
(y) $12 million for the second Earn-Out Target and (z) $10 million for the third Earn-Out Target; provided that in no event shall more
than 4.5 million True-up Units be issued for the first Earn-Out Target, in no event shall more than 4.0 million True-up Units be issued
for the Second Earn-Out Target and in no event shall more than 3.0 million True-up Units be issued for the Third Earn-Out Target.
In
accordance with the Purchase Agreement, the Company’s existing operating agreement was amended and restated. The amended and restated
operating agreement (the “Operating Agreement”) provides for, among other things, a put right for designated members (the
“Preferred Members”). The Preferred Members (who are the Sellers) will have a put right to cause Cryptyde to redeem certain
Preferred Units, from time to time on or after the six-month anniversary following the Closing. Upon exercise of the put right, each
Initial Base Preferred Unit (as defined in the Purchase Agreement) shall be exchanged for one Cryptyde share.
The
Preferred Members have a put right, on terms and conditions set forth in Section 7.01 of the Operating Agreement, to cause Cryptyde to
redeem the Preferred Units as follows:
(a)
starting on the later of (i) six (6) months following the Closing and (ii) the Threshold Date (as defined in the Subordination Agreement),
one (1) Cryptyde Share per Initial Base Preferred Unit being redeemed up to a maximum of 6,281,949 Initial Base Preferred Units;
(b)
upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the Closing
and (iii) the occurrence of the Threshold Date, one (1) Cryptyde Share per Initial Base Preferred Units that could not be converted due
to the 6,281,949 unit limit in Section 7.01(a) of the Operating Agreement (such shares being an aggregate of 718,051 Initial Base Preferred
Units being defined as the “Extra Initial Base Preferred Units”) being redeemed, and one (1) TYDE Share per Additional Base
Preferred Unit being redeemed;
(c)
if Shareholder Approval is not obtained on or before June 30, 2023, subject to both (i) six (6) months following the Closing and (ii)
the terms of the Subordination Agreement, a cash payment equal to the difference between $3.07 minus the Additional Base Preferred Unit
VWAP (as defined in the Purchase Agreement with it being subject to a $2.00 floor) (such difference being the “Additional Base
Preferred Unit Cash Catch Up Amount”) with the Additional Base Preferred Unit Cash Catch Up Amount being multiplied by each Extra
Initial Base Preferred Unit and each Additional Base Preferred Unit being redeemed;
(d)
upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time
a Preferred Unit issued in connection with the first Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii)
the occurrence of the Threshold Date, one (1) TYDE Share per Earnout One Unit being redeemed;
(e)
if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout
One Unit is earned under Section 1.04 of Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal to
the amount of $15,000,000 divided by the number of Earnout One Units (the “Earnout One Unit Redemption Amount”) with such
Earnout One Unit Redemption Amount then being multiplied by each Earnout One Unit being redeemed;
(f)
upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time
a Preferred Unit issued in connection with the second Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii)
the occurrence of the Threshold Date, one (1) TYDE Share per Earnout Two Unit being redeemed;
(g)
if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout
Two Unit is earned under Section 1.04 of the Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal
to the amount of $12,000,000 divided by the number of Earnout Two Units (the “Earnout Two Unit Redemption Amount”) with such
Earnout Two Unit Redemption Amount then being multiplied by each Earnout Two Unit being redeemed;
(h)
upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time
a Preferred Unit issued in connection with the third Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii)
the occurrence of the Threshold Date, one (1) TYDE Share per Earnout Three Unit being redeemed;
(i)
if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout
Three Unit is earned under Section 1.04 of the Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal
to the amount of $10,000,000 divided by the number of Earnout Three Units (the “Earnout Three Unit Redemption Amount”) with
such Earnout Three Unit Redemption Amount then being multiplied by each Earnout Three Unit being redeemed.
Pursuant
to the Operating Agreement, Cryptyde unconditionally guaranteed the payment, when due, of obligations pursuant to the put right. Cryptyde
shall satisfy these obligations to the Preferred Members either in cash or, if Shareholder Approval has been obtained, through the issuance
and delivery to each Preferred Member of one TYDE Share per Preferred Unit held by each Preferred Member.
Upon
the Closing, Cryptyde issued the Promissory Notes. The Promissory Notes bear interest at the rate per annum equal to (i) ten (10%) for
the first twelve (12) months of the Promissory Notes and (ii) twelve percent (12%) thereafter until the maturity date of the Promissory
Notes (the “Note Maturity Date”). The Note Maturity Date is the date that is the later of (i) 91 days after the Maturity
Date (as defined in the Investor Note (as defined below)) of the Senior Secured Convertible Note issued by Cryptyde in favor of the Investor
on May 5, 2022 (the “Investor Note”) and (ii) three years following the Closing. Subject to the terms of the Subordination
Agreement, the Promissory Notes may be prepaid in full or in part at any time without premium or penalty, provided, however, that Cryptyde
agrees that, subject to the terms of the Subordination Agreement which specifically permit such prepayments in accordance therewith,
it will make prepayments on the Promissory Notes and all other Seller Notes (as defined in the Promissory Notes) in amounts equal to
the pro rata amount of the outstanding principal amount of the Seller Notes as a whole, as follows: (i) after Section 4(d) of the Amendment
Agreement is satisfied such that excess cash may be removed from the Control Account, 50% of the cash proceeds of warrants exercised
for common stock of the Cryptyde until an aggregate amount of $10 million in prepayments is made on the Seller Notes from such warrant
exercises, (ii) 25% of all gross proceeds received by Cryptyde in any and all debt and equity capital raises by the Cryptyde (excluding
warrant exercises) from and after the date of the Purchase Agreement and (iii) at least an aggregate of $11.5 million (including any
prepayments made pursuant to clauses (i-ii) above) within the first twelve (12) months of the issuance of the Promissory Notes.
So
long as the Cryptyde has received Shareholder Approval and the Threshold Date has been reached, at any time commencing after the 12-month
anniversary of the date of the Promissory Notes, the holder of the Promissory Notes may, in its sole and absolute discretion, convert
all or part of the Promissory Notes into shares of common stock of the Cryptyde (the “Conversion Shares”) at a per share
conversion price equal to the VWAP of a TYDE Share for the ten trading days immediately preceding the conversion notice being provided
to the Cryptyde by the holder of the Promissory Notes (the “Conversion Price”), with the Conversion Price being subject to
a conversion price floor of $2.00 per share of common stock. If the VWAP is less than $2.00 and the holder converts all or part of the
Note at $2.00 per share, then the holder shall be entitled to receive an additional Promissory Note with the same economic terms as the
original Promissory Note in a principal amount equal to (A) $2.00 minus the VWAP multiplied by (B) the number of Conversion Shares issued
upon the conversion.
On September 29, 2022, the Company repurchased
611,111 Units for a total amount of $1,375,000.
