UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal year ended December 31, 2018

  

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from ___________ to ___________ __________

  

OR

 

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  Date of event requiring this shell company report

  

Commission file number: 333-207107

 

EHAVE, INC

(Exact name of Registrant as specified in its charter)

 

Canada

(Jurisdiction of incorporation or organization)

 

203-277 Lakeshore Road East

Oakville, Ontario, Canada L6J 6J3

(Address of principal executive offices)

 

Prateek Dwivedi, Chief Executive Officer

203-277 Lakeshore Road East

Oakville, Ontario, Canada L6J 6J3

+1(905) 362-1499

info@ehave.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which
registered
None   None   None

  

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

 

Common Shares, no par value
(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

 

None
(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 75,102,816 common shares as at December 31, 2018

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x No ¨

 

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

 

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Emerging growth company x

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

US GAAP International Financial Reporting
Standards as issued  by the
International Accounting Standards
Board
Other
x ¨ ¨

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

 

Item 17 ¨                       Item 18   ¨

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ¨ No x  

 

 

 

  

EHAVE INC.

 

FORM 20-F

 

TABLE OF CONTENTS

 

Item 1. Identity of Directors, Senior Management and Advisers 5
Item 2. Offer Statistics and Expected Timetable 5
Item 3. Key Information 5
Item 4. Information on the Company 19
Item 4A. Unresolved Staff Comments 3 2
Item 5. Operating and Financial Review and Prospects 32
Item 6. Directors, Senior Management and Employees 41
Item 7. Major Shareholders and Related Party Transactions 48
Item 8. Financial Information 51
Item 9. The Offer and Listing 52
Item 10. Additional Information 52
Item 11. Quantitative and Qualitative Disclosures About Market Risk 65
Item 12. Description of Securities Other Than Equity Securities 65
Item 13. Defaults, Dividend Arrearages and Delinquencies 65
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 6 5
Item 15. Controls and Procedures 66
Item 16. [Reserved] 67
Item 16A. Audit Committee Financial Expert 67
Item 16B. Code of Ethics 67
Item 16C. Principal Accountant Fees and Services 67
Item 16D. Exemptions from the Listing Standards for Audit Committees 68
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchases 68
Item 16F. Change in Registrant’s Certifying Accountants 68
Item 16G. Corporate Governance 68
Item 16H. Mine Safety Disclosure 68
Item 17. Financial Statements 68
Item 18 Financial Statements 68
Item 19. Exhibits 68
Signatures 72
Financial Statements F2 - F15

 

  2  

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This annual report contains “forward-looking statements”. Forward-looking statements reflect the current view about future events. When used in this annual report, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements contained in this annual report relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward–looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, our ability to develop and commercialize new and improved products and services; our ability to raise capital to fund continuing operations; a continued decline in general economic conditions nationally and internationally; decreased demand for our products and services; market acceptance of our products and services; our ability to protect our intellectual property rights; the impact of any infringement actions or other litigation brought against us; competition from other providers and products; changes in government regulation; our ability to complete customer transactions and capital raising transactions; and other factors (including the risks contained in the section of this annual report entitled “Risk Factors”) relating to our industry, our operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

 

  3  

 

  

Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

The forward-looking statements in this annual report are subject to various risks and uncertainties, most of which are difficult to predict and generally beyond our control, including without limitation:

 

· The occurrence of any event, change or other circumstances that could cause a failure to consummate the Asset Sale (as defined below).
· An increase in the amount of costs, fees, expenses and other charges related to the Asset Sale.
· If the Asset Sale is completed, our operations will be significantly curtailed, and we will have limited sources of revenue following the Asset Sale, which may negatively impact the value and liquidity of our common stock.
· Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.
· We have a history of operating losses and expect to continue incurring losses for the foreseeable future.
· If we are unable to obtain additional funding, our business operations will be harmed.
· Our independent auditors have expressed their concern as to our ability to continue as a going concern.
· Our inability to regain or maintain the eligibility to have our common shares quoted on the OTCQB Venture Market, which may have an unfavorable impact on our stock price and liquidity.
· Our products may not be successful in gaining market acceptance, which would negatively impact our revenues.
· If we are unable to keep up with rapid technological changes in our field, we will be unable to operate profitably.
· Many of our potential competitors are better established and have significantly greater resources which may make it difficult for us to compete in the markets in which we intend to sell our products.
· If we lose any of our key management personnel or consultants, we may not be able to successfully manage our business or achieve our objectives.
· Developments or assertions by us or against us relating to intellectual property rights could materially impact our business.
· Our products could infringe on the intellectual property rights of others which may result in costly litigation and, if we do not prevail, could also cause us to pay substantial damages and prohibit us from selling or licensing our products.
· We have identified material weaknesses in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting or effective disclosure controls, we may be at risk to accurately report financial results or detect fraud, which could have a material adverse effect on our business.
· The market for our products is immature and volatile and if it does not develop, or if it develops more slowly than we expect, the growth of our business will be harmed.
· If our security measures are breached and unauthorized access to a customer’s data are obtained, our products may be perceived as insecure, we may incur significant liabilities, our reputation may be harmed and we could lose sales and customers.
· If we fail to comply with applicable health information privacy and security laws and other state and federal privacy and security laws, we may be subject to significant liabilities, reputational harm and other negative consequences, including decreasing the willingness of current and potential customers to work with us.
· Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business and operating results.
· We depend on data centers operated by third parties for our products, and any disruption in the operation of these facilities could adversely affect our business.
· If currency exchange rates fluctuate substantially in the future, the results of our operations, which are reported in U.S. dollars, could be adversely affected.
· We may not be in compliance with rules and regulations of the U.S. Food and Drug Administration (the “FDA”) should they become applicable to any products we develop in the future.
· The results of any future clinical trials that we may need to perform in the future may not support our medical device candidate requirements or intended use claims or may result in the discovery of unanticipated inconsistent data.
· A security breach or disruption or failure in a computer or communications systems could adversely affect us.

 

  4  

 

  

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable

 

ITEM 3. KEY INFORMATION

 

  A. Selected Financial Data

 

The selected financial data presented below for the four years ended December 31, 2018, is presented in U.S. dollars and is derived from our financial statements prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). We have derived the selected financial data as of December 31, 2018, 2017, and 2016 and for the years ended December 31, 2018, 2017, and 2016 from our audited financial statements included elsewhere in this Annual Report on Form 20-F. We have derived the selected financial data as of December 31, 2015, and for the year ended December 31, 2015, from our audited financial statements not included in this annual report. The information set forth below should be read in conjunction with our financial statements (including notes thereto) included under Item 18 and “Operating and Financial Review and Prospects” included under Item 5 and other information provided elsewhere in this annual report on Form 20-F and our financial statements and related notes. The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety thereby.

 

    2018     2017     2016     2015  
    $     $     $     $  
Revenues from continuing operations                        
Net loss     (5,588,334, )     (4,141,613 )     (1,502,204 )     (600,835 )
Net comprehensive loss     (5,381,156 )     (4,208,936 )     (1,466,776 )     (573,461 )
Basic and diluted loss per share (1)     (0.06 )     (0.06 )     (0.05 )     (0.03 )
Total assets (1)     460,234       59,275       48,380       138,995  
Shareholders’ deficit (1)     (3,733,435 )     (2,009,266 )     (1,191,960 )     (446,680 )
Cash dividends declared per share (2)                        
Weighted average number of common shares outstanding     75,102,816       69,030,618       32,144,065       22,433,195  

 

Notes:

 

  (1) We issued 3,798,781 shares in 2018. We issued 26,914,315 common shares in 2017. We issued 16,286,796 common shares for net cash proceeds of $366,455 in 2016.  We did not issue any common shares in  2015.

 

  (2) We have not declared or paid any dividends since incorporation.

 

Exchange Rate Data

 

The following table sets forth the exchange rates for Canadian dollars expressed in U.S. dollars that have been used in the audited financial statements included elsewhere in this Annual Report on Form 20-F.

 

$1 Canadian dollar equivalent in U.S. dollars      
At December 31, 2017     0.7955  
At December 31, 2018     0.7329  
Average for the year ended December 31, 2018     0.7715  

 

  5  

 

  

B. Capitalization and Indebtedness

 

Not applicable

 

C. Reasons for the Offer and Use of Proceeds

 

Not applicable

 

D. Risk Factors

 

Investment in our common shares involves a high degree of risk. You should carefully consider, among other matters, the following risk factors in addition to the other information in this Annual Report on Form 20-F when evaluating our business because these risk factors may have a significant impact on our business, financial condition, operating results or cash flow. If any of the material risks described below or in subsequent reports we file with the Securities and Exchange Commission (“SEC”) actually occur, they may materially harm our business, financial condition, operating results or cash flow. Additional risks and uncertainties that we have not yet identified or that we presently consider to be immaterial may also materially harm our business, financial condition, operating results or cash flow.

  

Risks Related to Proposed Sale of Ehave Connect Assets

 

The announcement and pendency of the sale of our Ehave Connect assets pursuant to the Asset Purchase Agreement, dated March 22, 2019 (the “Agreement”), between us and ZYUS Life Sciences Inc. (“Zyus”), whether or not consummated, may adversely affect our business.

 

The announcement and pendency of the Asset Sale (See “Item 4. Information on the Company—A. History and Development of the Company—Proposed Sale of Ehave Connect Asset”) whether or not consummated, may adversely affect the trading price of our common shares, our business or our relationships with customers, suppliers and employees. In addition, pending the completion of the Asset Sale, we may be unable to attract and retain key personnel and the focus and attention of our management and employee resources may be diverted from operational matters during the pendency of the Asset Sale.

 

We cannot be sure if or when the Asset Sale will be completed.

 

The closing of the Asset Sale is subject to the satisfaction or waiver of various conditions. We cannot guarantee that the closing conditions set forth in the Agreement will be satisfied. If we are unable to satisfy the closing conditions in ZYUS’s favor or if other mutual closing conditions are not satisfied, ZYUS will not be obligated to complete the Asset Sale. In the event that the Asset Sale is not completed, the announcement of the termination of the Agreement may adversely affect the trading price of our common shares, our business and operations or our relationships with customers, suppliers and employees. In addition, we will need an alternative source of raising additional capital, without which we may be required to cease operations at any time.

 

The Agreement limits our ability to pursue alternatives to the Asset Sale.

 

The Agreement contains provisions that make it more difficult for us to sell the Ehave Connect assets or engage in another type of transaction relating to the Ehave Connect assets with a party other than ZYUS. These provisions could discourage a third party that might have an interest in acquiring all of, or substantially all of, our assets or our common shares from considering or proposing such an acquisition, even if that party were prepared to pay consideration with a higher value than the consideration to be paid by ZYUS.

 

  6  

 

  

The Agreement exposes us to indemnification liabilities that could reduce the proceeds from Asset Sale and have a material adverse effect on our financial condition.

 

We have agreed to deliver a security agreement granting ZYUS a security interest in the shares of ZYUS received as a portion of the consideration for the Asset Sale in support of any indemnity claims by ZYUS pursuant to the Agreement until the second anniversary of the closing date. Significant indemnification claims by ZYUS could have a material adverse effect on the proceeds from the Asset Sale and our financial condition.

 

If the Asset Sale is completed, our operations will be significantly curtailed and we will have limited sources of revenue following the Asset Sale, which may negatively impact the value and liquidity of our common stock.

 

The Asset Sale constitutes a sale of substantially all of the assets of the Company. Upon closing of the Asset Sale, our operations will be significantly curtailed as our sources of potential revenue will be limited to our remaining Megateam and NinjaReflex business. There can be no assurance that we will be successful at generating revenue from the remaining business, if any. A failure by us to secure additional sources of revenue following the closing of the Asset Sale could negatively impact the value and liquidity of our common shares.

 

We have incurred and will incur significant expenses in connection with the Asset Sale, regardless of whether the Asset Sale is completed.

 

We have incurred and expect to incur significant expenses related to the Asset Sale. These expenses include, but are not limited to, financial advisory and opinion fees and expenses, legal fees, accounting fees and expenses, certain employee expenses, filing fees, printing expenses and other related fees and expenses. Many of these expenses will be payable by us regardless of whether the Asset Sale is completed.

 

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

 

Our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of your investment.

 

We have a very limited operating history on which investors can base an evaluation of our business, operating results and prospects. We have no operating history with respect to commercializing our software applications and products. Consequently, it is difficult to predict our future revenues, if any, and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business.

 

We began processes to develop relationships with potential customers and distribution partners in November 2016. Completion of our cognitive assessment and remediation tools and the further development and commercialization of our products is dependent upon the availability of sufficient funds. This limits our ability to accurately forecast the cost of the development of our products. If the markets and applications of our products do not develop as we expect or develop more slowly than we expect, our business, prospects, financial condition and operating results will be harmed.

 

We have a history of operating losses and expect to continue incurring losses for the foreseeable future.

 

We were incorporated in 2011. We reported a net loss of $5,588,334 for the fiscal year ended December 31, 2018 and had a net loss of $4,141,613 during the fiscal year ended December 31, 2017. As of December 31, 2018, we had an accumulated deficit of $12,577,458. We cannot anticipate when, if ever, our operations will become profitable. We expect to incur significant net losses as we develop and commercialize our products and pursue our business strategy. We intend to invest significantly in our business before we expect cash flow from operations to be adequate to cover our operating expenses. If we are unable to execute our business strategy and grow our business, for any reason, our business, prospects, financial condition and results of operations will be adversely affected.

 

As reflected in the financial statements for the years ended December 31, 2018, and December 31, 2017, included elsewhere in this Annual Report on Form 20-F, we had no revenues from continuing operations in 2018 and 2017 and need additional cash resources to maintain its operations. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital. We cannot predict when, if ever, we will be successful in raising additional capital and, accordingly, we may be required to cease operations at any time, if we do not have sufficient working capital to pay our operating costs.

 

  7  

 

  

If we are unable to obtain additional funding, our business operations will be harmed.

 

We raised an aggregate of $2,832,910 through loans and issuance of convertible debentures and warrants in 2018 and 2019 to date. We raised an aggregate of $869,183 through issuance of convertible debentures and warrants in 2017. We raised an aggregate of $330,750 through a public offering of common shares and warrants closed in June 2016. We anticipate that we will continue to incur losses and negative cash flows from operations, and that such losses will increase over the next several years due to development costs associated with our MegaTeam and Ninja Reflex products, until our products reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, based on our current projections, we may not have sufficient resources to fund operations through the third quarter of 2019. To the extent that we are required to raise additional funds to conduct research and acquire facilities, and to cover costs of operations, we intend to do so through additional public or private offerings of debt or equity securities. There are no assurances that we will be successful in obtaining the level of financing needed for our operations, and we may be unable to secure such funding when needed in adequate amounts or on acceptable terms, if at all. Any additional equity financing may involve substantial dilution to our then existing shareholders. In February 2019, we have entered a definitive agreement to sell the Ehave Connect asset in consideration for $895,122 (CDN$1,200,000) of cash and shares of the purchaser’s common shares; however, there is no assurance that the transaction will close. See “—Risks Related to Proposed Sale of Ehave Connect Assets— We cannot be sure if or when the Asset Sale will be completed. ” The inability to raise the additional capital will restrict our ability to develop and conduct business operations. If we cannot raise additional capital, we will need to reduce our cash burn to last 12 months by focusing our efforts on existing products only, leveraging research funding to conduct additional clinical studies on efficacy and integration and development of new techniques for assessment and rehabilitation.

 

Our independent auditors have expressed their concern as to our ability to continue as a going concern.

 

We reported an accumulated deficit of $12,577,458 and had a stockholders’ deficit of $3,733,435 at December 31, 2018. As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2018 and 2017 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern without the infusion of significant additional capital. There can be no assurance that management will be successful in implementing its plans. If we are unable to raise additional financings we may cease operations.

 

Our products may not be successful in gaining market acceptance, which would negatively impact our revenues.

 

Currently, our business strategy is to continue to support the clinical trials of our therapeutic video games and gain access to additional technologies at a time and in a manner that we believe is best for our development. We may have difficulties in reaching market acceptance, which could negatively impact our revenues, for a number of reasons including: 

 

· any delays in securing partnerships and strategic alliances;
· any technical delays and malfunctions;
· failure to receive regulatory approval on a timely basis or at all; and
· failure to receive a sufficient level of reimbursement from government, insurers or other third-party payors.

 

If we are unable to keep up with rapid technological changes in our field, we will be unable to operate profitably.

 

Our industry is characterized by extensive research efforts and rapid technological progress. If we fail to anticipate or respond adequately to technological developments, our ability to operate profitably could suffer. We cannot assure you that research and discoveries by other companies will not render our software or potential products uneconomical or result in products superior to those we develop or that any products or services we develop will be preferred to any existing or newly-developed products.

 

  8  

 

  

Many of our potential competitors are better established and have significantly greater resources which may make it difficult for us to compete in the markets in which we intend to sell our products.

 

The market for the products we develop is highly competitive. Many of our potential competitors are well established with larger and better resources, longer relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources than we have. Increased competition may result in price reductions, reduced gross margins, loss of market share and loss of licensees, any of which could materially and adversely affect our business, operating results and financial condition. We cannot ensure that prospective competitors will not adopt technologies or business plans similar to ours, or develop products which may be superior to ours or which may prove to be more popular. It is possible that new competitors will emerge and rapidly acquire market share. We cannot ensure that we will be able to compete successfully against future competitors or that the competitive pressures will not materially and adversely affect our business, operating results and financial condition.

 

If we lose any of our key management personnel or consultants, we may not be able to successfully manage our business or achieve our objectives.

 

Our future success depends in large part upon the leadership and performance of our management and consultants. The Company's operations and business strategy are dependent upon the knowledge and business contacts of our executive officers and our consultants. Although, we hope to retain the services of our officers and consultants, if any of our officer or consultants should choose to leave us for any reason before we have hired additional personnel, our operations may suffer. If we should lose their services before we are able to engage and retain qualified employees and consultants to execute our business plan, we may not be able to continue to develop our business as quickly or efficiently.

 

In addition, we must be able to attract, train, motivate and retain highly skilled and experienced technical employees in order to successfully develop our business. Qualified technical employees often are in great demand and may be unavailable in the time frame required to satisfy our business requirements. We may not be able to attract and retain sufficient numbers of highly skilled technical employees in the future. The loss of technical personnel or our inability to hire or retain sufficient technical personnel at competitive rates of compensation could impair our ability to successfully grow our business. If we lose the services of any of our personnel, we may not be able to replace them with similarly qualified personnel, which could harm our business.

 

Developments or assertions by us or against us relating to intellectual property rights could materially impact our business.

 

Pursuant to an amendment to the collaboration agreement, effective January 1, 2014, with Toronto’s Hospital for Sick Children (the “Hospital”), all intellectual property rights to the cognitive assessment and rehabilitation software jointly developed with the Hospital belong to the Hospital. Our agreement with Multi-Health Systems Inc. (“MHS”), as amended, provides that all right, title and interest in and to certain tests and other materials published by MHS relating to the tests are and will remain solely and exclusively vested in MHS.

 

We will attempt to protect proprietary and intellectual property rights to our products through licensing and distribution arrangements although we currently do not have any patents or applications for our products.

 

Litigation may also be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others or to defend against claims of invalidity. Such litigation could result in substantial costs and the diversion of resources.

 

As we create or adopt new software, we will also face an inherent risk of exposure to the claims of others that we have allegedly violated their intellectual property rights.

 

Our products could infringe on the intellectual property rights of others which may result in costly litigation and, if we do not prevail, could also cause us to pay substantial damages and prohibit us from selling or licensing our products.

 

Third parties may assert infringement or other intellectual property claims against us. We may have to pay substantial damages, including damages for past infringement if it is ultimately determined that our products or technology infringe a third party’s proprietary rights. Further, we may be prohibited from selling or providing products before we obtain additional licenses, which, if available at all, may require us to pay substantial royalties or licensing fees. Even if claims are determined to be without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from our other business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our business to be harmed and our stock price to decline.

 

  9  

 

  

We have identified material weaknesses in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting or effective disclosure controls, we may be at risk to accurately report financial results or detect fraud, which could have a material adverse effect on our business.

 

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring an annual assessment by management of the effectiveness of a public company’s internal controls over financial reporting and an attestation report by the company’s independent auditors addressing this assessment, if applicable. As discussed in Item 15 “Controls and Procedures” based on a review of our internal controls over financial reporting, management concluded that our internal controls over financial reporting was not effective due to the existence of a material weakness relating to a lack of sufficient accounting records and underlying supporting detail as of December 31, 2018. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. Management has since addressed this weakness and has implemented the necessary changes to have effective controls over financial reporting. For additional information, see Item 15 “Controls and Procedures.”

 

We cannot assure you that we will be able to remediate our existing material weaknesses in a timely manner, if at all, or that in the future additional material weaknesses will not exist, reoccur or otherwise be discovered, a risk that is significantly increased in light of the complexity of our business. If our efforts to remediate these material weaknesses, as described in Item 15 “Controls and Procedures”, are not successful or if other deficiencies occur, our ability to accurately and timely report our financial position, results of operations, cash flows or key operating metrics could be impaired, which could result in late filings of our annual or interim reports under the Exchange Act, restatements of our consolidated financial statements or other corrective disclosures. Our failure to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm our business and negatively impact the trading price of the common shares. In addition, future changes in our accounting, financial reporting, and regulatory environment may create new areas of risk exposure. Failure to modify our existing control environment accordingly may impair our controls over financial reporting and cause our investors to lose confidence in the reliability of our financial reporting, which may adversely affect our share price, suspension of trading or delisting of our common shares by Pink Open Market, or, if we regain the eligibility to have our common shares quoted on the OTCQB Venture Market, the OTCQB Venture Market, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity. Furthermore, if we continue to have these existing material weaknesses, other material weaknesses or significant deficiencies in the future, it could create a perception that our financial results do not fairly state our financial condition or results of operations. Any of the foregoing could have an adverse effect on the value of our shares.

 

The market for our products is immature and volatile and if it does not develop, or if it develops more slowly than we expect, the growth of our business will be harmed.

 

The market for software-based systems for mental health or treatments using medical cannabis is a new and unproven market, and it is uncertain whether it will achieve and sustain demand and market adoption. Our success will depend to a substantial extent on the willingness of customers and healthcare professionals to use our systems, as well as on our ability to demonstrate the value of our software and products to customers and to develop new applications that provide value to customers and users. If customers and users do not perceive the benefits of our products, then our market may not develop at all, or it may develop more slowly than we expect, either of which could significantly adversely affect our operating results. In addition, we have limited insight into trends that might develop and affect our business. We might make errors in predicting and reacting to relevant business, legal and regulatory trends, which could harm our business. If any of these events occur, it could materially adversely affect our business, financial condition or results of operations.

  

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If our security measures are breached and unauthorized access to a customer’s data are obtained, our products may be perceived as insecure, we may incur significant liabilities, our reputation may be harmed and we could lose sales and customers.

 

Our products involve the storage and transmission of customers’ proprietary information, as well as protected health information, or PHI, which, in the United States, is regulated under the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations, collectively “HIPAA,” and other state and federal privacy and security laws. Because of the extreme sensitivity of this information, the security features of our product are very important. If our security measures, some of which will be managed by third parties, are breached or fail, unauthorized persons may be able to obtain access to sensitive data, including HIPAA-regulated protected health information. A security breach or failure could result from a variety of circumstances and events, including but not limited to third-party action, employee negligence or error, malfeasance, computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, user errors, and catastrophic events.

 

If our security measures were to be breached or fail, our reputation could be severely damaged, adversely affecting customer or investor confidence, customers may curtail their use of or stop using our products and our business may suffer. In addition, we could face litigation, damages for contract breach, penalties and regulatory actions for violations of HIPAA and other state and federal privacy and security regulations, significant costs for investigation, remediation and disclosure and for measures to prevent future occurrences. In addition, any potential security breach could result in increased costs associated with liability for stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to customers or other business partners in an effort to maintain the business relationships after a breach and implementing measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. While we maintain insurance covering certain security and privacy damages and claim expenses we may not carry insurance or maintain coverage sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational damage that could result from a security incident.

 

We plan to outsource important aspects of the storage and transmission of customer information, and thus rely on third parties to manage functions that have material cyber-security risks. These outsourced functions include services such as software design and product development, software engineering, database consulting, data-center security, IT, network security, data storage and Web application firewall services. We cannot assure you that any measures that are taken will adequately protect us from the risks associated with the storage and transmission of customers’ proprietary information and protected health information.

 

We may experience cyber-security and other breach incidents that may remain undetected for an extended period. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against us, we may be unable to anticipate these techniques or to implement adequate preventive measures. In addition, in the event that our customers authorize or enable third parties to access their data or the data of their employees on our systems, we cannot ensure the complete integrity or security of such data in our systems as we would not control access. If an actual or perceived breach of our security occurs, or if we are unable to effectively resolve such breaches in a timely manner, the market perception of the effectiveness of our security measures could be harmed, we could be subject to regulatory action or other damages and we could lose sales and customers.

 

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If we fail to comply with applicable health information privacy and security laws and other state and federal privacy and security laws, we may be subject to significant liabilities, reputational harm and other negative consequences, including decreasing the willingness of current and potential customers to work with us.

 

Once our products are deployed in the United States, we will be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA established uniform federal standards for certain “covered entities,” which include health care providers, health plans, and health care clearing houses, governing the conduct of specified electronic health care transactions and protecting the security and privacy of protected health information, or PHI. The Health Information Technology for Economic and Clinical Health Act, or HITECH, which was signed into law on February 17, 2009, makes certain of HIPAA’s privacy and security standards directly applicable to “business associates,” which are individuals or entities that create, receive, maintain, or transmit PHI in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA’s requirements and seek attorney’s fees and costs associated with pursuing federal civil actions.

 

In addition, states have enacted privacy and security laws and regulations that regulate the use and disclosure of certain data, with some state laws covering medical and healthcare information. These laws vary by state and could impose additional requirements and penalties on us. For example, some states impose restrictions on the use and disclosure of health information pertaining to mental health or substance abuse. Further, state laws and regulations may require us to notify affected individuals in the event of a data breach involving individually identifiable information, which may be broader than the type of information covered by HIPAA. In addition, the Federal Trade Commission may use its consumer protection authority to initiate enforcement actions in data privacy and security matters.

 

If we are unable to protect the privacy and security of our customers’ data, we could be found to have breached our contracts with our customers, we could face civil and criminal penalties under federal and state laws, we could be subject to litigation and we could suffer reputational harm or other damages. We may not be able to adequately address the business, technical and operational risks created by HIPAA and other privacy and security regulations. Furthermore, we are unable to predict what changes to HIPAA or other laws or regulations might be made in the future or how those changes could affect our business or the costs of compliance.

 

Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business and operating results.

 

Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties. We may encounter technical obstacles, and it is possible that we discover additional problems that prevent our proprietary applications from operating properly. We are currently implementing software with respect to a number of new applications and services. If our software does not function reliably or fails to achieve client expectations in terms of performance, clients could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain clients.

 

Moreover, data services are complex as those we offer have in the past contained, and may in the future develop or contain, undetected defects or errors. Material performance problems, defects or errors in our existing or new software and applications and services may arise in the future and may result from interface of our offering with systems and data that we did not develop and the function of which is outside of our control or undetected in our testing. These defects and errors and any failure by us to identify and address them could result in loss of revenue or market share, diversion of development resources, injury to our reputation and increased service and maintenance costs. The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating results.

 

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We depend on data centers operated by third parties for our products, and any disruption in the operation of these facilities could adversely affect our business.

  

We provide our products through a third-party data center. While we control and have access to our servers and all of the components of our network that are located in our external data centers, we do not control the operation of these facilities. The owners of our data centers have no obligation to renew agreements with us on commercially reasonable terms, or at all. If we are unable to renew any such agreements we may enter into on commercially reasonable terms, or if our data center operator is acquired, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.

 

Problems faced by our third-party data center locations could adversely affect the experience of our customers. The operators of the data centers could decide to close their facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by the operators of the data centers or any of the service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict. Additionally, if our data centers are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business. For example, a rapid expansion of our business could affect the service levels at our data centers or cause such data centers and systems to fail. Any changes in third-party service levels at our data centers or any disruptions or other performance problems with our products could adversely affect our reputation or result in lengthy interruptions in our services. Interruptions in our services might reduce our revenue, cause us to issue refunds to customers for prepaid and unused subscriptions, subject us to potential liability or adversely affect our renewal rates.

  

If currency exchange rates fluctuate substantially in the future, the results of our operations, which are reported in U.S. dollars, could be adversely affected.

 

As our head office and operations are primarily based in Canada, we become more exposed to the effects of fluctuations in currency exchange rates. We incur expenses for employee compensation and other operating expenses in Canadian dollars. Fluctuations in the exchange rates between the U.S. dollar and the Canadian dollar could result in the dollar equivalent of such expenses being higher. This could have a negative impact on our reported results of operations. Although we may in the future decide to undertake foreign exchange hedging transactions to cover a portion of our foreign currency exchange exposure, we currently do not hedge our exposure to foreign currency exchange risks.

 

Our future U.S. operations and relationships with healthcare providers, investors, consultants, third-party payors, patients, and other customers may be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which in the event of a violation could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

 

Our future U.S. operations and arrangements with healthcare providers, physicians and third-party payors may expose us to broadly applicable fraud and abuse and other federal and state healthcare laws and regulations. These laws may constrain the business and/or financial arrangements and relationships through which we market, sell and distribute our products. Potentially applicable U.S. laws include:

 

· the federal Anti-Kickback Statute, which prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing of, items or services payable by Medicare, Medicaid or any other federal healthcare program;

 

· federal false claims laws and civil monetary penalty laws, including the False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government healthcare programs that are false or fraudulent, or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

 

· HIPAA, which imposes federal criminal and civil liability for executing, or attempting to execute, a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

 

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· HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and

 

· analogous state laws and regulations, such as state anti-kickback and false claims laws, which may be broader in scope and apply to referrals and items or services reimbursed by any third-party payers, including commercial insurers, many of which differ from each other in significant ways and often are not preempted by federal law, thus complicating compliance efforts.

 

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that some of our business activities could be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Our risk of being found in violation of these laws is increased by the fact that some of these laws are open to a variety of interpretations. If our past or present operations, practices, or activities are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Further, defending against any such actions can be costly, time-consuming and may require significant resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our customers may be unwilling to use our products and our business may be impaired.

 

We may not be in compliance with rules and regulations of the U.S. Food and Drug Administration (the “FDA”) should they become applicable to any products we develop in the future.

  

We have no current plans to market, advertise or sell computerized cognitive assessment aids in the United States. Types of computerized cognitive assessment aids for the measurement and assessment of behavioral and cognitive abilities such as brain games are games purporting to increase intelligence or cognitive function are currently regulated by the FDA as Class II medical devices. Such brain games may be subject to clinical processes to determine their accuracy or validity. Terminology such as “neuroplasticity”, “attention” and “working memory” have become ubiquitous as the “brain game” market has grown. Current clinical practice refers to the use of cognitive software for the measurement of deficits as an “assessment”, and the use of software tools as rehabilitation methods as “remediation”. Should we decide in the future to market, advertise, or sell products that may be considered by the FDA as computerized cognitive assessment aids, we may be required to undergo costly and time consuming clinical trials to prove the accuracy and validity of our computerized cognitive assessment aids, should we have any such products to market, sell or advertise in the future.

 

The results of any future clinical trials that we may need to perform in the future may not support our medical device candidate requirements or intended use claims or may result in the discovery of unanticipated inconsistent data .

 

We have no current plans to market, advertise or sell computerized cognitive assessment aids in the United States. The clinical trial process may fail to demonstrate that our computerized cognitive assessment aids that we may develop in the future, are safe, effective, and consistent for the desired or proposed indicated uses, which could cause us to abandon a product and may delay development of others. Any requirement to perform unanticipated clinical trials or delay or termination of any such unanticipated future clinical trials may delay or inhibit our ability to commercialize any computerized cognitive assessment aids that we may develop in the future; and affect our ability to generate revenues.

 

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A security breach or disruption or failure in a computer or communications systems could adversely affect us.

 

Our operations depend on the continued and secure functioning of our computer and communications systems and the protection of electronic information (including sensitive personal information as well as proprietary or confidential information) stored in computer databases maintained by us or by third parties. Such systems and databases are subject to breach, damage, disruption or failure from, among other things, cyber-attacks and other unauthorized intrusions, power losses, telecommunications failures, fires and other natural disasters, armed conflicts or terrorist attacks. We may be subject to threats to our computer and communications systems and databases of unauthorized access, computer hackers, computer viruses, malicious code, cyber-crime, cyber-attacks and other security problems and system disruptions. Unauthorized persons may attempt to hack into our systems to obtain personal data relating to clinical trial participants or employees or our confidential or proprietary information or of third parties or information relating to our business and financial data.  If, despite our efforts to secure our systems and databases, events of this nature occur, we could expose clinical trial participants or employees to financial or medical identity theft, lose clinical trial participants or employees or have difficulty attracting new clinical trial participants or employees, be exposed to the loss or misuse of confidential information or business and financial data, have disputes with clinical trial participants or employees, suffer regulatory sanctions or penalties under applicable laws, incur expenses as a result of a data privacy breach, or suffer other adverse consequences including legal action and damage to our reputation.

 

RISKS ASSOCIATED WITH OUR COMMON SHARES AND COMPANY

 

We expect that our stock price will fluctuate significantly.

 

The trading price of our common shares may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:

 

announcement of new products by our competitors;

 

release of new products by our competitors;

 

adverse regulatory decisions;

 

developments in our industry or target markets; and

 

general market conditions including factors unrelated to our operating performance.

 

Recently, the stock market in general has experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme market volatility in the price of our common shares which could cause a decline in the value of our shares.

 

Market prices for securities of software development companies generally are volatile and the share price for our common shares has been historically volatile. This increases the risk of securities litigation. Factors such as announcements of technological innovations, new commercial products, patents, the development of proprietary rights, results of clinical trials, regulatory actions, publications, financial results, our financial position, future sales of shares by us or our current shareholders and other factors could have a significant effect on the market price and volatility of the common shares.

 

If our business is unsuccessful, our shareholders may lose their entire investment.

 

Although shareholders will not be bound by or be personally liable for our expenses, liabilities or obligations beyond their total original capital contributions, should we suffer a deficiency in funds with which to meet our obligations, the shareholders as a whole may lose their entire investment in our Company.

 

Trading of our common shares on the Pink Open Market is limited and sporadic, making it difficult or impossible for our shareholders to sell their shares or liquidate their investments.

 

There is a very limited market for our common shares. On April 30, 2019, our common shares were removed from the OTCQB Venture Market to the Pink Open Market. Prior to the listing of our common shares for trading on the OTCQB Venture Market in November 2016, there was no public market for our common shares. The Pink Open Market is a significantly more limited market than the OTCQB Venture Market and established exchanges such as the New York Stock Exchange or NASDAQ. There is no assurance that a sufficient market will develop in our shares, and the lack of an active market will impair your ability to sell your common shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of our common shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration. Even after trading volume increases, trading through the Pink Open Market or the OTCQB Venture Market, if our shares regain eligibility to be quoted on the OTCQB Venture Market, is frequently thin and highly volatile.

 

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We may not regain or maintain the eligibility to have our common shares quoted on the OTCQB Venture Market, which may have an unfavorable impact on our stock price and liquidity.

 

On April 30, 2019, our common shares were removed from the OTCQB Venture Market to the Pink Open Market because we were unable to cure our bid price deficiency. The OTCQB Venture Market requires a minimum bid price of $0.01. Broker-dealers often decline to trade in over-the-counter stocks that are quoted on the OTC Pink tier given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. The OTC Pink marketplace also does not provide as much liquidity as the OTCQB Venture Market. Many broker-dealers will not trade or recommend OTC Pink stocks for their clients. Because the OTCQB generally increases transparency by maintaining higher reporting standards and requirements and imposing management certification and compliance requirements, broker-dealers are more likely to trade stocks on the OTCQB marketplace than on the OTC Pink marketplace. If we do not regain our eligibility to be quoted on the OTCQB Venture Market or maintain such eligibility once we regain the eligibility, these factors may reduce the potential market for our common shares by reducing the number of potential investors. This may make it more difficult for investors in our common shares to sell shares to third parties or to otherwise dispose of their shares and could cause our stock price to decline.

We expect the share consolidation, expected to be effective as of May 27, 2019, to cure the bid price deficiency; however, the expected increase in the price of our common shares from the share consolidation may not be maintained, and there can be no assurance that the market price of our common shares following the share consolidation will remain above the minimum bid price requirement to restore or maintain eligibility for quotation of our common shares on OTCQB Venture Market. It is not uncommon for the market price of a company’s stock to decline in the period following a share consolidation. If the market price of our common shares declines following the expected share consolidation, the percentage decline may be greater than would occur in the absence of a share consolidation. In any event, other factors unrelated to the number of our common shares outstanding, such as negative financial or operational results, could adversely affect the bid price of our common shares to fall below the minimum bid price requirement to be quoted on OTCQB Venture Market.

The share consolidation may decrease the liquidity of our common shares.  

At the special meeting of our shareholders held on May 6, 2019, our shareholders approved a resolution authorizing the amendment of our articles to consolidate our issued and outstanding common shares in up to three consecutive share consolidations to occur at any time as determined by our board of directors, within one calendar year of the date of the special meeting, provided that the first consolidation, the second consolidation, and the third consolidation shall collectively effect a consolidation on a basis of between (i) two pre-consolidation shares to one post-consolidation share, and (ii) 200 pre-consolidation shares to one post-consolidation share. On May 13, 2019, we determined a share consolidation ratio of 100 pre-consolidation shares to one post-consolidation share, expected to be effective as of May 27, 2019. The liquidity of our common shares may be affected adversely by the share consolidation given the reduced number of shares that are outstanding following the share consolidation. In addition, the share consolidation will increase the number of shareholders who own odd lots (less than 100 shares) of our common shares, creating the potential for such shareholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.

 

Our common shares are subject to the “penny stock” rules of the SEC and we have no established market for our securities, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

 

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

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

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common shares and cause a decline in the market value of our stock.

 

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

 

We are a “foreign private issuer”, and you may not have access to the information you could obtain about us if we were not a “foreign private issuer”.

 

We are considered a “foreign private issuer” under the Securities Act of 1933, as amended. As a foreign private issuer we will not have to file quarterly reports with the SEC nor will our directors, officers and 10% stockholders be subject to Section 16(b) of the Exchange Act. Such exemption may result in shareholders having less data and there being fewer restrictions on insiders’ activities in our securities. As a foreign private issuer we will not be subject to the proxy rules of Section 14 of the Exchange Act. Furthermore, Regulation FD does not apply to non-U.S. companies and will not apply to us. Accordingly, you may not be able to obtain information about us as you could obtain if we were not a “foreign private issuer”.

   

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Because the majority of our assets and of our officers and directors are located outside the United States, it may be difficult for an investor to enforce within the United States any judgments obtained against us or any of our officers and directors.

 

All of our assets are presently located outside of the United States and we do not currently maintain a permanent place of business within the United States. In addition, some of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for an investor to effect service of process or enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether the courts of Canada would recognize or enforce judgments of United States courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. There is even uncertainty as to whether the Canadian courts would have jurisdiction to hear original actions brought in Canada against us or our directors and officers predicated upon the securities laws of the United States or any state thereof.

 

Because we do not intend to pay any cash dividends on our common shares, our shareholders will not be able to receive a return on their shares unless they sell them.

 

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common shares in the foreseeable future. Unless we pay dividends, our shareholders will not be able to receive a return on their shares unless they sell them at a price higher than that which they initially paid for such shares.

 

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our shareholders have limited protections against interested director transactions, conflicts of interest and similar matters.

 

The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York Stock Exchange, the NYSE MKT and NASDAQ, as a result of Sarbanes-Oxley Act of 2002, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges. Because we will not be seeking to be listed on any of the exchanges, we will not be presently required to comply with many of the corporate governance provisions.

 

The concentration of the capital stock ownership with our insiders enable their exercise of significant control over our corporate governance and affairs which may result in their taking actions with which other shareholders do not agree and may limit the ability of other shareholders to influence corporate matters.

 

As of April 15, 2018, approximately 45.5% of our outstanding common shares was controlled by our officers, directors, beneficial owners of 10% or more of our securities and their respective affiliates. These shareholders, if they act together, may be able to exercise significant influence over the outcome of all corporate actions requiring approval of our shareholders, including the election of directors and approval of significant corporate transactions, which may result in corporate action with which other shareholders do not agree. This concentration of ownership may also have the effect of delaying or preventing a change in control which might be in other shareholders’ best interest but which might negatively affect the market price of our common shares.

 

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Our authorized capital consists of an unlimited number of shares of one class designated as common shares. We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.

  

Our Articles of Incorporation authorizes the issuance of an unlimited number of our common shares, no par value, of which 2,541,383,906 shares are currently issued and outstanding. The future issuance of common shares may result in substantial dilution in the percentage of our common shares held by our then existing shareholders. We may value any common shares issued in the future on an arbitrary basis. The issuance of common shares for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and may have an adverse effect on any trading market of our common shares.

 

Offers or availability for sale of a substantial number of our common shares may cause the price of our common shares to decline.

 

If our shareholders sell substantial amounts of our common shares in the public market, including shares issued in the public offering and shares issued upon conversion of outstanding convertible notes or exercise of outstanding warrants, or upon the expiration of any statutory holding period, under Rule 144, or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common shares could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

 

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act, or JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

 

For so long as we are an emerging growth company, we will not be required to:

 

●          have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002;

 

●          comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

 

●          submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

 

●          disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

 

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

Until such time, however, we cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.

 

In addition, when these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of us ceasing to be an emerging growth company or the timing of such costs. In addition, once we no longer qualify as an emerging growth company under the JOBS Act and lose the ability to rely on the exemptions related thereto, depending on our status as per Rule 12b-2 of the Securities Exchange Act of 1934, as amended, our independent registered public accounting firm may also need to attest to the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and eventual auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 when we are no longer an emerging growth company. This process will require the investment of substantial time and resources, including by our senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete.

 

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Since we have elected under Section 107 of the JOBS Act to use the extended transition period with respect to complying with new or revised accounting standards, our financial statements may not be comparable to companies that comply with public company effective dates making it more difficult for an investor to compare our results with other public companies.

 

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 102(b)(2)(B) of the Act for complying with new or revised accounting standards. In other words, as an emerging growth company we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We may be classified as a Passive Foreign Investment Company, or PFIC, for U.S. federal income tax purposes in 2019 and may continue to be, or become, a PFIC in future years, which may have negative tax consequences for U.S. investors.

 

We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of our gross income is “passive income” or (ii) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Based on our estimated gross income, the average value of our gross assets, and the nature of our business, we may be classified as a PFIC in the current taxable year and may be treated, or may become, a PFIC in future years. If we are treated as a PFIC for any taxable year during which a U.S. investor held our common shares, certain adverse U.S. federal income tax consequences could apply to the U.S. investor. See “Item 10. Additional Information – E. Taxation– Passive Foreign Investment Company Rules.”

 

ITEM 4.  INFORMATION ON THE COMPANY

 

A. History and Development of the Company

 

We were incorporated under the laws of the Province of Ontario (specifically under the Business Corporations Act (Ontario)) on October 31, 2011, in the Province of Ontario, Canada, and did business as Behavioural Neurological Applications and Solutions. Effective November 4, 2015, we changed our name to Ehave, Inc.

 

Our principal office is located at 203-277 Lakeshore Road East, Oakville, Ontario, Canada L6J 6J3 and our telephone number is (905) 362-1499.

 

The SEC maintains an Internet site that contains reports and other information regarding us that we file electronically with the SEC website at www.sec.gov. We also make available free of charge on our website at www.ehave.com, as soon as reasonably practicable after such reports are available on the SEC website.

 

We are not aware of any indication of any public takeover offers by third parties in respect of our common shares during our last and current financial years.

 

Proposed Sale of Ehave Connect Assets

 

On March 22, 2019, we entered into an Asset Purchase Agreement with ZYUS, pursuant to which we will sell to ZYUS all of our property and assets, including intellectual property, relating to our business relating to our technology stack, data models, user interface flows, application programming interfaces and all existing builds to the health informatics Ehave Connect platform, which includes but is not limited to the input, tracking and extraction of clinical data, but excluding intellectual property in certain patient outcome reporting applications, clinical games, clinical patient data, facts related to patient assessments and personal property (the “Asset Sale”). The Ehave Connect platform contains components specifically designed to be used by medical cannabis patients to efficiently gather and verify patient-reported outcomes and experiences, evaluate treatment progress, enhance patient engagement and improve data modeling.

 

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In connection with the Agreement, ZYUS will (i) pay us a total purchase price of CAD $1.2 million in cash, CAD $260,000 of which was provided to us upon execution of a non-binding term sheet and CAD $100,000 of which was provided to us on April 30, 2019, pursuant to an advance, and (ii) issue to us at closing 361,011 common shares of ZYUS, priced at CAD$5.54 per share (the “Consideration Shares”).

 

The Agreement also contains representations, warranties and covenants of the parties customary for transactions similar to those contemplated by the Agreement. Pursuant to the Agreement, ZYUS, among other things, agreed not to redeem, purchase or otherwise acquire any of its outstanding shares or other securities, subject to certain exceptions, from the date of the Agreement and until the closing date of the Asset Sale, and we agreed to enter into a six month lock-up agreement restricting the resale of the Consideration Shares if ZYUS completes an initial public offering or going public transaction. Such representations and warranties are made solely for purposes of the Agreement and, in some cases, may be subject to qualifications and limitations agreed to by the parties in connection with the negotiated terms of the Agreement and may have been qualified by disclosures that were made in connection with the parties’ entry into the Agreement.

 

The closing of the Asset Sale is subject to waiver or satisfaction of closing conditions set forth in the Agreement, which includes, among other things, termination of certain collaboration and services agreements between us and certain partners and approval by at least two-thirds (2/3) of our shareholders present in person or represented by proxy at a shareholder meeting, which was obtained at a special meeting held on May 6, 2019.

 

The Agreement also contains indemnification provisions by each party. We will deliver a security agreement granting ZYUS a security interest in the Consideration Shares in support of any indemnity claims by ZYUS pursuant to the Agreement until the second anniversary of the closing date.

 

In addition, we agreed to enter into a non-competition agreement with ZYUS, pursuant to which we will agree not to, for a period of four years from the date of the non-competition agreement, within Canada and the United States, conduct business or have any financial or other interest in any business that is the same as or substantially similar to or is competitive with the business of a healthcare software development company for stakeholders in health sectors related to plant-based therapeutics. The non-competition agreement also includes a confidentiality provision that prohibits us from using the confidential information relating to the assets acquired in the Asset Sale for its own benefit or for the benefit of others.

 

The foregoing descriptions of the Agreement, the security agreement and the non-competition agreement are qualified in their entirety by reference to the full text of the Agreement, a form of the security agreement and a form of the non-competition agreement, a copy of which is attached to this Annual Report on Form 20-F as Exhibits 4.60, 4.61 and 4.62.

 

On October 30, 2018, we entered in an agreement (the “CHT Agreement”) with Companion Healthcare Technologies Inc. (“CHT”), for the use of Ehave Connect whereby CHT would acquire the exclusive rights to Ehave Connect for use in companion animals. On April 18, 2019, we and CHT agreed that upon closing of the Asset Sale, the CHT Agreement shall be terminated, and we, as consideration, within ten business days following the date of the closing of the Asset Sale, shall pay CHT, in cash, up to CAD$242,000, which includes up to $37,000 for legal fees that CHT incurred in connection with the CHT Agreement, provided that the agreement to terminate the CHT Agreement and our obligation to pay CHT shall no longer be effective if the closing of the Asset Sale does not occur on or prior to June 30, 2019.

 

Share Consolidation

 

At the special meeting of our shareholders held on May 6, 2019, our shareholders approved a resolution authorizing the amendment of our articles to consolidate our issued and outstanding common shares in up to three consecutive share consolidations to occur at any time as determined by our board of directors, within one calendar year of the date of the special meeting, provided that the first consolidation, the second consolidation, and the third consolidation shall collectively effect a consolidation on a basis of between (i) two pre-consolidation shares to one post-consolidation share, and (ii) 200 pre-consolidation shares to one post-consolidation share. On May 13, 2019, we determined a share consolidation ratio of 100 pre-consolidation shares to one post-consolidation share, expected to be effective as of May 27, 2019.

 

Removal of our Common shares from the OTCQB Venture Market to Pink Open Market

 

On April 30, 2019, our common shares were removed from the OTCQB Venture Market to the Pink Open Market because we were unable to cure our bid price deficiency. The OTCQB Venture Market requires a minimum bid price of $0.01. Broker-dealers often decline to trade in over-the-counter stocks that are quoted on the OTC Pink tier given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. We expect the share consolidation, expected to be effective as of May 27, 2019, to cure the bid price deficiency; however, the expected increase in the price of our common shares from the share consolidation may not be maintained, and there can be no assurance that the market price of our common shares following the share consolidation will remain above the minimum bid price requirement to restore or maintain eligibility for quotation of our common shares on OTCQB Venture Market. 

 

Financings

 

From inception and prior to our public offering closed in June 2016, we had been funded by a combination of investment capital and grant financing totaling approximately $1,100,000, comprised of approximately $630,000 of grant financing and $470,000 of equity financing.

  

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On May 14, 2015, we effectuated a 100,000:1 forward stock split of our common shares.

 

On July 7, 2015, we closed a private placement of convertible notes with a principal value of $325,000 and commenced the legal and financial processes of becoming an SEC registrant and commencing a public offering.

 

On September 24, 2015, we filed our registration statement on Form F-1, which was declared effective on April 4, 2016, for a public offering of up to 11,002,445 common shares and warrants to purchase 11,002,445 common shares. The registration statement also included a prospectus for resale of up to 11,393,642 common shares issuable upon the conversion of certain convertible notes and 11,393,642 common shares issuable upon the exercise of certain warrants offered by the selling shareholders named in the prospectus.

 

On June 14, 2016, we had a closing of the offering of an aggregate of 6,503,667 common shares and warrants to purchase an aggregate of 6,503,667 common shares, for gross proceeds of $266,000. Subsequent to the initial closing, on June 24, 2016, we had a second closing of the offering of an aggregate of 1,589,242 common shares and warrants to purchase 1,589,242 common shares, for gross proceeds of $65,000. We received total gross proceeds of $331,000 from the offering.

 

On November 14, 2016, we received notice from the Financial Industry Regulatory Authority (“FINRA”) that pursuant to FINRA Rule 6432 and Rule 15c2-11 that our company may initiate a priced quotation on the OTC Bulletin Board under the trading symbol EHVVF. On November 21, 2016, our common shares were listed for trading on the OTCQB Venture Market. On April 30, 2019, our common shares were moved to the Pink Open Market because we were unable able to cure our bid price deficiency.

  

On November 14, 2016, we entered into a definitive securities purchase agreement to sell up to $1,500,026 of convertible promissory notes and warrants in multiple closings in a private placement. We have used the net proceeds from the private placement to further the development of Ehave Connect, for MegaTeam clinical trials, for general marketing and investor relations’ purposes, and for working capital. As of December 31, 2016, we received $259,357 of $309,357 of the firmly committed amount and waived $50,000 of the firmly committed amount for future reassignment as permitted under the agreement. Certain lenders notified us that it will not elect to fund an aggregate of $683,130 of additional loans and have permitted its reassignment, of which $489,368 has been reassigned. In the year ended December 31, 2017, we issued additional convertible promissory notes in an aggregate principal amount of $609,826 pursuant to the note and warrant purchase agreement. As of December 31, 2017, we had received total proceeds of $869,183 pursuant to the note and warrant purchase agreement. On September 24, 2018 we entered into a letter agreement to convert all outstanding convertible promissory notes with aggregate principal amount of $869,183 into common shares of the company upon the closing of a bridge financing of up to $500,000. On February 27, 2019, we closed the bridge loan and all such outstanding convertible promissory notes were converted into 372,228,244 common shares of the Company, and all outstanding warrants were canceled

   

On October 11, 2017, we entered into Investor Letters, pursuant to which certain persons agreed to purchase securities of the Company on similar terms as certain offerings of the Company that are consummated prior to December 31, 2017, or, if such an offering is not consummated, the purchase amount will be converted into a secured promissory note that matures on January 31, 2018 (which, at the investor’s option, may be converted into common shares of the Company). We received aggregate proceeds of $100,000. No such offerings were consummated prior to December 31, 2017, and such notes were converted into Unsecured Debentures on January 31, 2018 (see below).

 

On November 15, 2017, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $196,237. Lenders of the promissory notes were issued 2,133,333 common share warrants at an exercise price of $0.075 per share with an expiry date of November 16, 2022. On January 31, 2018 $148,745 of the promissory notes were repaid and $47,932 of the promissory notes were exchanged for Unsecured Debentures. On February 27, 2019, we entered into an agreement to cancel the warrants issued to the lenders in exchange for 31,109,865 common shares of the Company.

 

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On January 31, 2018, the Company entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. The Secured Debentures are secured against certain of our assets. Under the terms of the Secured Debentures, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Secured Debentures is at the option of the holder. At the time of conversion, the holder will also receive an equal amount of common share purchase warrants with an exercise price equal to the issue price. The Secured Debentures are due on July 31, 2018 and bear interest at 10% per annum. The initial installment of the Secured Debentures was issued on January 31, 2018 for proceeds of $609,310 (CDN$750,000). On March 19, 2018, the final instalment of $573,307 (CDN$750,000) was received. The Secured Debentures are secured against the general assets and intellectual property of the Company. On February 27, 2019, we entered into an agreement to convert the note into 1,268,274,936 common shares of the Company.

 

On January 31, 2018, promissory notes with an aggregate principal amount of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures (the “Unsecured Debentures”). From January 1, 2018 to January 31, 2018, the Company issued an additional $20,098 (CDN$25,000) Unsecured Debentures for total proceeds of $332,065 (CDN$409,000). On March 19, 2018, an installment of the Unsecured Debentures in the amount of $382,263 (CDN$500,000) was received. Under the terms of the Unsecured Debentures, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Unsecured Debentures is at the option of the holder. At the time of conversion, the holder will also receive 120% of the amount of the common shares issued of common share purchase warrants with an exercise price equal to the issue price. The Unsecured Debentures are due on July 31, 2018 and bear interest at 10% per annum. On February 27, 2019, we entered into an agreement to convert the note into 276,809,884 common shares of the Company.

 

On September 27, 2018, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$111,110), including $11,110 of original issue discount. On February 27, 2019, promissory notes with an aggregate principal amount of $85,756 (CDN$111,110) were exchanged for unsecured debentures for a bridge loan. On February 28, 2019, we entered into an agreement to convert the note into 54,203,662 common shares of the Company.

 

On October 31, 2018, we issued demand senior secured promissory notes in the aggregate principal amount of $57,000.

 

On December 5, 2018, we entered into a securities purchase agreement for $141,000 of promissory notes, including $13,000 of original issue discount. Under the terms of the agreement, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 73% of the market price. The conversion of the debentures is at the option of the holder between 180 days following the issue of the debentures and the maturity date. The debentures are due on December 5, 2019 and bear interest at 8% per annum.

 

On January 21, 2019, we issued a senior secured promissory note in the aggregate principal amount of $263,192 (CDN$350,000). The secured promissory note is secured against certain of our assets, including all development tax credits that the Company has applied for and receives. The loan is due on May 21, 2020 and bears and interest rate at 20.07% per annum.

 

On January 28, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$125,000), including $18,841(CDN$25,000) of original issue discount.

 

On February 27, 2019, we entered into an agreement to exchange $150,000 in fees owed to Scott Woodrow, a former Director of the Company resigned in February 2019, for 47,564,189 common shares of the Company.

 

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On February 27, 2019, we entered into an agreement to exchange $100,000 in fees owed to KW Capital Partners Ltd. for 31,709,460 common shares of the Company.

 

On February 27, 2019, we entered into an agreement to exchange $150,000 in fees and issue common shares previously owed to Bezalel Partners LLC for 47,564,189 common shares of the Company.

 

On February 27, 2019, we entered into agreements to cancel options, cancel option anti-dilution clauses, and cancel employee severance liabilities in exchange for 304,437,002 common shares of the company

 

On February 27, 2019, we entered into an agreement to cancel 2,250,000 compensation warrants that had anti-rachet and anti-dilution provisions for 32,811,191 common shares of the Company.

 

On March 26, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $98,351 (CDN$131,683), including $23,663 (CDN$31,683) of original issue discount.

 

The proceeds from these private placements were used for general working capital purposes, particularly the development and marketing of the Ehave Connect platform and support of our trials of our games, MegaTeam and NinjaReflex. 

 

Business Development Agreements

 

 On December 13, 2016, we entered into an agreement with Multi-Health Systems (“MHS”), an international healthcare technology developer of scientifically validated assessments, granting us access to MHS’s extensive library of mental health assessments.

 

On February 3, 2017, we entered into a Strategic Relationship Agreement (the “MedReleaf Agreement”) with MedReleaf Corp. (“MedReleaf”), pursuant to which we and MedReleaf agreed to develop a branded MedReleaf app to advance the study and therapeutic use of medical cannabis. In connection with the MedReleaf Agreement, MedReleaf made an investment of $100,000 into the Company in the form of a convertible note, and was granted an option to invest $200,000 into our TSX-V common stock public offering.

 

B. Business Overview

 

We are creating a mental health data platform that integrates with our proprietary and third-party assessment and therapeutic digital applications. Our product focus is based on two tiers of activities: (1) MegaTeam and Ninja Reflex, our clinically validated digital assessment and rehabilitation software that is engaging for the patient and (2) adaptation of third-party clinically validated digital assessment and rehabilitation software for enhanced patient engagement and data modeling. We intend to provide technology solutions to clinicians, patients, researchers, pharmaceutical companies and payors.

 

Currently our products are being deployed in Canada.

 

MegaTeam and Ninja Reflex Digital Assessment and Rehabilitation Applications

 

Our MegaTeam and Ninja Reflex assessment and rehabilitation products are built on established methodologies for the measurement of cognitive abilities in populations with attention deficit and hyperactivity disorder, or ADHD. Methodologies commonly used today involve repetitive performance of tasks using digital interface. These tasks are repeatedly administered to the patient in order to obtain accurate measures. Many of the assessments used today had been developed using programming methodologies whereby the task is simply exhibited on screen and the patient is instructed to respond to stimuli. Our research has found that patients, in particular those with symptoms of ADHD, have difficulty completing the necessary regiment of tasks due to lack of engagement. Additionally, these tasks are often administered in a clinical setting, often resulting in the patient and their accompanying parent or guardian staying in clinical settings for an extended time. Our products have been developed to address these primary concerns as well as to enable a breadth of cognitive tasks to be assessed and an individualized cognitive rehabilitation program to be administered remotely.

 

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The MegaTeam and NinjaReflex applications involve the imbedding of cognitive assessment and rehabilitation tasks within an engaging video game environment. MegaTeam and NinjaReflex were designed and programmed with the intention of providing comparable engagement to video game play. In the design, narrative and programming of our MegaTeam and NinjaReflex games, we utilize experts in children’s digital content and programming. Our tools have been developed on Unity, a common game development platform that can be used on most fixed and mobile devices, enabling the expansion of narrative and the adaptation of new character and game environments to maintain long-term engagement of product differentiation. The underlying cognitive tools and data remain unchanged as the “skin” is adapted for future versions and client profiles. A significant part of the MegaTeam and NinjaReflex development involved assessing user engagement and consultation on characters, narrative and graphic design.

 

MegaTeam and NinjaReflex applications have been designed for deployment on multiple digital interfaces including PC, Mac, Android and iOS systems. Our applications may be used in a clinic or a patient’s home or remotely, provided there is an adequate data connection.

 

Based on feedback from users and clinical psychologists regarding strong user engagement of our MegaTeam and NinjaReflex products, we believe that our products have a strong capacity for training compliance.

 

Developed MegaTeam and NinjaReflex products include: (1) Stop Signal Reaction Time Assessment (2) N Back Assessment (3) Inhibitory Control Rehabilitation (4) and Working Memory Rehabilitation. We are planning the development of a broader suite of cognitive tasks and rehabilitation mechanisms in order to increase the addressable mental health indications.

 

Ehave Connect Software Platform

 

 

On March 22, 2019, we entered into the Agreement with Zyus, pursuant to which we will sell to Zyus all of our assets relating to its health informatics Ehave Connect platform. The Ehave Connect platform contains components specifically designed to be used by medical cannabis patients to efficiently gather and verify patient-reported outcomes and experiences, evaluate treatment progress, enhance patient engagement and improve data modeling.

 

Ehave Connect is a cloud-based platform that allows for the input, tracking and extraction of clinical data. Based on the clinical data collected, Ehave Connect is intended to provide patient management and digital assessment tools to healthcare providers and physicians so that they are better equipped to provide diagnosis and treatment to patients in their care.

 

Third Party Content

 

We believe that it is critical to partner across the mental healthcare community, and we have secured partnerships with industry leaders.

 

Partnership with MedReleaf

 

On February 3, 2017, we entered into the MedReleaf Agreement with MedReleaf, pursuant to which we and MedReleaf agreed to develop a branded MedReleaf App to advance the study and therapeutic use of medical cannabis. MedReleaf is Canada’s premium licensed producer and distributor of medical cannabis. The objective of the partnership with MedReleaf is to validate and optimize the use of MedReleaf’s medical cannabis products as therapeutic treatments for various health conditions. We and MedReleaf monitor every step of the medical cannabis treatment life cycle, collect diagnosis data and intake assessments, run validated psychological assessments to monitor treatment response, manage patient treatment plans, and objectively analyze patient outcomes.

 

Partnership with MHS

 

In December 2016, we signed an agreement with MHS, a leading provider of psychological assessment tools. We have licensed MHS’s gold standard Connors® suite of ADHD assessments, as well as the Davidson Trauma Scale and SPAN assessments for PTSD. We expect to offer MHS’s entire catalogue of tests in time, and in so doing we believe that we can enhance the evaluation of any mental health indication. We plan to move into areas such as anxiety, depression, OCD, autism, and more.

 

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The Hospital for Sick Children

 

In December 2011, we entered into a collaboration with Toronto’s Hospital for Sick Children to identify the clinical needs, design and processes required to create clinical grade toolsets. In addition to specific tools, we have developed a content delivery and patient data platform, known as Resource Knowledge Information Access that enables content to be deployed, monitored, analyzed and accessed remotely by clinicians and patients. These tools were used during randomized control studies of the MegaTeam game, and will be used in future trials with the Hospital for Sick Children.

 

Third-party Contract Services

 

We believe that we have the expertise of understanding the complexities of mental health assessments and rehabilitation methodologies, along with game design and programming. Researchers and developers of digital applications for mental health may recognize the advantage of engaged users, but lack the expertise in game based translation. We intend to market our company to researchers and developers with fee-based services to enhance their digital applications. We are working closely with mental health research networks to avail our existing MegaTeam and NinjaReflex tools as well as our programming expertise to enhance and commercialize new products and services.

 

Business Strategy

 

Our business strategy is to develop and MegaTeam and Ninja Reflex in an effective and timely manner and gain access to additional technologies at a time and in a manner that we believe is best for our development.  We intend to achieve our business strategy by focusing on these key areas:

 

· expanding MegaTeam and Ninja Reflex with additional game titles, and participate in further clinical studies with Hospital for Sick Children on the CHILD-BRIGHT network, which is a Canadian research network that aims to improve the lives of children with brain-based development disabilities we are a partner to and provider of in-kind services and support);

 

· forming strategic alliances with publishers of psychological assessments, at a time and in a manner where such alliances may complement and expand our research and development efforts on the product and provide sales and marketing capabilities;

 

· developing relationships with pharmaceutical and insurance companies that could be instrumental in deploying our technology to drug development and treatment monitoring; and

 

· developing relationships with companies that could be instrumental in assisting us to access other innovative therapeutics.

 

Our business strategy is based on attaining a number of commercial objectives, which, in turn, are supported by a number of product development goals.  Our product development presently being conducted is primarily of a research and development nature.

 

Market

 

We anticipate that the principal markets in which our products will compete will initially include North America. Thereafter, we hope to expand our markets to Europe and Asia. Currently our products are being deployed in Canada.

 

Mental healthcare, including its assessment and treatment, is a significant market. Forty-four million adults in the United States are estimated to experience mental illness per year, which is 20% of the population. The size of the U.S. mental health treatment market is $113 billion, and the size of private insurance spending on mental health is $32 billion. The size of the cognitive assessment market world-wide is over $2.4 billion. (Source: Mental Health America - State of Mental Health Report, 2016; SAMSHA Spending Estimates Project, 2010; MarketsandMarkets, 2015).

 

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ADHD is a common affliction with worldwide prevalence estimated at approximately 7% ( Source: “Prevalence of Attention-Deficit/Hyperactivity Disorder: A Systematic Review and Meta-analysis”, Rae Thomas, Sharon Sanders, Jenny Doust, Elaine Beller, Paul Glasziou, Pediatrics Feb 2015, peds.2014-3482; DOI: 10.1542/peds.2014-3482 ). ADHD symptoms typically start or are first noticed in preschool age children (“Prevalence of Attention-Deficit/Hyperactivity Disorder: A Systematic Review and Meta-analysis”, Rae Thomas, Sharon Sanders, Jenny Doust, Elaine Beller, Paul Glasziou, Pediatrics Feb 2015, peds.2014-3482; DOI: 10.1542/peds.2014-3482 ). While symptoms may decline with age, ADHD symptoms and impairments can persist into adolescence and adulthood (Source: “A lifetime of attention-deficit/hyperactivity disorder: diagnostic challenges, treatment and neurobiological mechanism”, Julia Geissler and Klaus-Peter Lesch, Expert Review Of Neurotherapeutics Vol. 11 , Iss. 10,2011 ).

   

Competition

 

For our MegaTeam and Ninja Reflex game applications, we are aware of a few competitors, including Akili Ineractive, Attentiv, Myndlift and C8Sciences. Many of these companies are currently conducting clinical trials. Our strategy for game development starts from using known proven clinical measures rather than creating new measures, and we believe that the advantage of this methodology is that broad normative data does not need to be established and the barrier to clinical adoption may be lower with known measures that clinicians are already comfortable with.

 

Product Differentiation

 

We strive to provide the best tools and resources for today’s populations suffering from mental illness. Many of the incumbent products have been developed and validated in their academic forms, which, we believe, lack appeal for today’s clients and practitioners. We believe there is a demand for real time, data-rich digital tools that enable individual treatment and ongoing monitoring, while a significant portion of the existing market for cognitive assessment and therapy relies upon paper-based tools and checklists that have little or no connected monitoring capacity or real-time progress reporting. As such, we seek to develop products with the following key features: (1) user engagement, (2) data richness, (3) clinically validated, and (4) multi-screen and mobile deployment.

 

Our assessment products are derived from designs and methods clinically studied. Our plans include the study of our derived products and cognitive rehabilitation software through clinical studies led by hospitals. These studies include multiple phases from pilot studies through affected population studies and allow the measurement, using various criteria and techniques, of the effect of our cognitive rehabilitation program on target populations.

 

Marketing

 

Our marketing channels consist of direct sales and leveraging partners for market outreach. Our current strategy is for direct sales to publishing partners, medical device partners and pharmaceutical companies. Through these partnerships, we gain access to clinicians and the patients they serve.

 

We also engage a public relations firm to help reach media outlets.

 

Regulatory Requirements

 

Our future business operations and activities in the U.S. may be directly or indirectly subject to subject to certain federal and state laws relating to the privacy and security of health information, and state and federal laws designed to guard against healthcare fraud and abuse, including, but not limited to, those described below.

 

· HIPAA, as amended by HITECH, established comprehensive requirements related to the privacy, security, and transmission of individually identifiable health information. It governs patient privacy practices of healthcare providers, health plans, and healthcare clearinghouses (or “covered entities”), as well as their respective business associates to the extent that they perform services for or on behalf of the covered entities that involve the use or disclosure of protected health information. HIPAA also mandates notification in the event of a breach and regulates standardization of data content, codes and formats used in healthcare transactions. Covered entities and business associates may be subject to significant civil and criminal penalties, as well as enforcement by state attorneys general, for violations of HIPAA or its implementing regulations.

 

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· HIPAA also imposes federal criminal and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

 

· The federal Anti-Kickback Statute which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, or recommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs.

 

· The federal Civil False Claims Act imposes liability on any person or entity, which, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The “qui tam” or “whistleblower” provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government, alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery.

 

· The federal Civil Monetary Penalties Law prohibits, among other things, the offering or transfer of remuneration to a Medicare or state health care program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies.

 

· Analogous state fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, may apply to items or services reimbursed under Medicaid, other state programs, or, in some states, private third-party payors. In addition, many U.S. states have enacted patient confidentiality laws that protect against the disclosure of confidential medical information, and many states have adopted or are considering adopting further legislation in this area, including privacy safeguards, security standards, and data security breach notification requirements. These state laws, which may be even more stringent than the HIPAA requirements, many of which differ from each other in significant ways and are often not preempted by the federal requirements.

 

FDA's Medical Device Regulation

 

The FDA has broad authority over the regulation of medical devices marketed for sale in the United States. The FDA regulates the research, clinical testing, manufacturing, safety, labeling, storage, recordkeeping, premarket clearance or approval, promotion, distribution and production of medical devices. The FDA also regulates the export of medical devices manufactured in the United States to international markets.

 

Under the Food, Drug, and Cosmetic Act, or FDCA, the FDA classifies medical devices into one of three classes: Class 1, Class 2 or Class 3. Medical devices deemed to pose lower risk are placed into either Class 1 or Class 2.

 

Class 1 medical devices are deemed to pose the lowest risk to the patient. Accordingly, Class 1 medical devices are subject to the lowest degree of regulatory scrutiny and need only comply with the FDA's General Controls. The General Controls include compliance with the registration, listing, adverse event reporting requirements, and applicable portions of the Quality Systems Regulation, or QSR, as well as the general misbranding and adulteration prohibitions. Unless specifically exempted in the regulations, general controls require a company that intends to market a Class 1 medical device, like us, to gain clearance for marketing through the 510(k) process. Many Class 1 medical devices, however, are exempt from 510(k) clearance because the level of risk is low.

 

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Class 2 medical devices are considered higher risk devices than Class I medical devices. Class 2 medical devices are subject to General Controls as well as additional Special Controls. Special Controls may include labeling requirements, mandatory performance standards, and post market surveillance. Generally companies that intend to market Class 2 medical devices, like us, must comply with applicable regulations and submit a 510(k) premarket submission for review to receive clearance to list and market their medical devices. The 510(k) must establish substantial equivalence to a predicate medical device. Some Class 2 medical devices are exempt from filing a 510(k) but in some instances, Class II medical devices may be required to file a Premarket Approval, or PMA, application.

 

Medical devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared medical device, are classified as Class 3 medical devices and require a PMA before commercialization.

 

All medical device manufacturers must register their establishments with the FDA; such registrations require the payment of user fees. In addition, both 510(k) premarket submissions and PMA applications are subject to the payment of user fees, paid at the time of submission for FDA review.

 

The use of forms and tools for the measurement and assessment of behavioral and cognitive abilities are considered computerized cognitive assessment aids by the FDA. The FDA currently classifies such products as Class II medical devices. Currently we are engaging in clinical trials of Ehave MegaTeam games outside of the United States. Such clinical trials are being performed to prove efficacy and may have supporting evidence in the event that we filed an marketing application in the United States and the FDA requires this data before we are able to market, advertise or sell our Ehave MegaTeam games in the United States.

 

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510(k) Clearance Pathway

 

If required to obtain 510(k) clearance for our Ehave MegaTeam games or any other computerized cognitive assessment aid products in the future, such products may be classified as medical devices and we would may be required to submit a premarket notification demonstrating that the proposed medical device is substantially equivalent to a previously cleared 510(k) device. FDA's 510(k) clearance pathway usually takes from three to twelve months. On average the review time is approximately six months, but it can take significantly longer than twelve months in some instances, as the FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.

 

After a medical device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, require a PMA. The FDA requires each manufacturer to determine whether the proposed change requires submission of a new 510(k) notice, or a premarket approval, but the FDA can review any such decision and can disagree with a manufacturer's determination. If the FDA disagrees with a manufacturer's determination, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or premarket approval is obtained. If the FDA requires us to seek 510(k) clearance or premarket approval for any modifications to a previously cleared product, we may be required to cease marketing or recall the modified device until we obtain this clearance or approval. Also, in these circumstances, we may be subject to significant regulatory fines or penalties. We have made and plan to continue to make additional product enhancements to products that we believe do not require new 510(k) clearances, but we cannot guarantee that the future enhancements, should they occur, will be exempt from new 510(k) clearances.

 

De Novo Reclassification

 

If we decide to market, advertise or sell our Ehave MegaTeam games or any other any other computerized cognitive assessment aid products in the future, such products may not have a suitable predicate medical device to be cleared as a 510(k) medical device. If the FDA finds that there is no suitable predicate medical device, it will automatically be considered our Ehave MegaTeam games or any other computerized cognitive assessment aid products that we apply for clearance to market, advertise or sell in the future a Class III medical device. However, in instances where a medical device is novel and there is no suitable predicate device, but that medical device is deemed to be of low to moderate risk, the FDA may reclassify the device to Class I or Class II via de novo reclassification petition pathway. This process involves the submission of a de novo reclassification petition, and the FDA's acceptance that “special controls” are adequate to ensure the product’s performance and safety.

 

The FDA now allows de novo reclassification petitions, a mechanism by which a sponsor can directly submit a detailed de novo reclassification petition as the device’s initial submission without having to first receive a not substantially equivalent, or NSE, decision on a 510(k) submission. Historically, the de novo reclassification pathway typically would take at least 9 to 12 months from filing to clearance. Since the enactment of the 21 st Century Cures Act, de novo classification petitions may be submitted to the FDA at any time and does not require a FDA finding of not substantially equivalent to a 510(k) application before the petition is made. FDA must respond to any de novo classification requests within 120 days of a completed petition.

 

In the future, we may decide to submit a de novo reclassification petition for our Ehave MegaTeam games or any other computerized cognitive assessment aid products that we may develop. To support a de novo reclassification petition, our objective would be to demonstrate that the proposed medical device poses a low to moderate risk to patients. If the FDA determines that such a product is not a candidate for de novo reclassification, it will require approval of the device for market through the PMA application process.

 

Alternatively, if we seek 510(k) clearance and our medical device is found not substantially equivalent, or NSE, the FDA will consider a de novo petition if our proposed medical device has been determined to be NSE due to: (1) the lack of an identifiable predicate medical device, (2) a new intended use, or (3) different technological characteristics to a predicate device that raise different questions of safety and effectiveness. The de novo classification request should include a description of the medical device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Should the FDA believe our proposed medical device’s general controls or general and special controls provides reasonable assurance of safety and effectiveness, the FDA may classify our medical device as a Class II medical device. If the FDA classifies the device into Class II, we will then receive an approval order to market the device. This device type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in the Class III category, then we may not be marketed until we have obtained a PMA.

 

Premarket Approval Pathway

 

A PMA application must be submitted if a medical device cannot be cleared through the 510(k) process or by de novo reclassification petition. The PMA application process is generally more costly and time consuming than the 510(k) process. A PMA application must be supported by extensive data including, but not limited to, analytical, preclinical, clinical trials, manufacturing, statutory preapproval inspections, and labeling to demonstrate to the FDA's satisfaction the safety and effectiveness of the medical device for its intended use.

 

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After a PMA application is sufficiently complete, the FDA will accept the application and begin an in-depth review of the submitted information. By statute, the FDA has 180 days to review the "accepted application," although, generally, review of the application can take between one and three years, but it may take significantly longer. During this review period, the FDA may request additional information or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the medical device. The preapproval inspections conducted by the FDA include an evaluation of the manufacturing facility to ensure compliance with the QSR, as well as inspections of the clinical trial sites by the Bioresearch Monitoring group to evaluate compliance with good clinical practice and human subject protections. New premarket approval applications or premarket approval application supplements are required for modifications that affect the safety or effectiveness of the medical device, including, for example, certain types of modifications to the medical device's indication for use, manufacturing process, labeling and design. Significant changes to an approved PMA require a 180-day supplement, whereas less substantive changes may utilize a 30-day notice, or the 135-day supplement. PMA supplements often require submission of the same type of information as a PMA application, except that the supplement is limited to information needed to support any changes from the medical device covered by the original PMA application, and may not require as extensive clinical data or the convening of an advisory panel. None of our products are currently approved under a premarket approval and we do not believe that we will ever have a product that requires a PMA.

 

Clinical Trials

 

Clinical trials are almost always required to support a PMA application or de novo reclassification petition and are sometimes required for a 510(k) premarket notification. If we decide to market, advertise or sell our Ehave MegaTeam and NinjaReflex games or any other any other computerized cognitive assessment aid products that we may develop in the future, and if the FDA believes that such product presents a potential “significant risk” to health, safety, or the welfare of a human subject, the FDA may require us to collect safety and effectiveness data on human subjects regardless of our device’s classification. If we are required to collect data on human subjects, the FDA will require us to file an application for an Investigational Device Exemption, or IDE with the FDA and obtain IDE approval prior to commencing the human clinical trials. The IDE application must be supported by appropriate pre-clinical data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of patients, unless the product is deemed a “non-significant risk” device and eligible for more abbreviated investigational device exemption requirements. Clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the appropriate institutional review boards at the clinical trial sites. Future clinical trials of our motion preservation designs will require that we obtain an IDE from the FDA prior to commencing clinical trials and that the trial be conducted under the oversight of an institutional review board at the clinical trial site. Our clinical trials must be conducted in accordance with FDA regulations and other federal and state regulations concerning human subject protection, including informed consent and healthcare privacy. A clinical trial may be suspended by the FDA or the IRB at any time for various reasons, including a belief that the risks to the study participants outweigh the benefits of participation in the study. Even if a study is completed, the results of our clinical trials may not demonstrate the safety and efficacy of the medical device, or may be equivocal or otherwise not be sufficient to obtain approval of our Ehave MegaTeam and NinjaReflex game or any other computerized cognitive assessment aid products that we may develop in the future. At this time, we do not plan on marketing, advertising or selling our Ehave MegaTeam and NinjaReflex games or any other computerized cognitive assessment aid products in the United States and therefore, do not anticipate performing clinical trials in the United States.

 

Patents and Trade Secrets

 

The patent positions and proprietary rights of pharmaceutical and biotechnology firms, including us, are generally uncertain and involve complex legal and factual questions. We believe there will continue to be significant litigation in the industry regarding patent and other intellectual property rights.

 

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We have not registered any patents in respect of Megateam and NinjaReflex ; however we maintain our proprietary server architecture and mobile applications as trade secrets. We have registered the trade name “Ehave, Inc.” and owns the domain “ehave.com.”

 

We rely on unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. No assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets or disclose such technology, or that we can meaningfully protect our rights to our unpatented trade secrets.

 

We require our employees and consultants to execute confidentiality agreements upon the commencement of employment and consulting relationships with us. These agreements provide that all confidential information developed by or made known to an individual during the course of the employment or consulting relationship generally must be kept confidential. In the case of employees, the agreements provide that all inventions conceived by the individual, while employed by us, relating to our business are our exclusive property. While we have implemented reasonable business measurements to protect confidential information, these agreements may not provide meaningful protection for our trade secrets in the event of unauthorized use or disclosure of such information.

 

Seasonality of Business

 

Our results of operations have not been materially impacted by seasonality.

 

C. Organizational Structure

 

Not applicable.

 

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D. Property, Plants and Equipment

 

We currently lease approximately 1,636 square feet of office space located at 277 Lakeshore Road East, Suite 203, Oakville, Ontario, Canada. The term under our lease agreement, as amended on April 6, 2018, will expire on May 1, 2020. We do not own or lease any other office space, manufacturing facilities or equipment and do not have any current plans to construct or acquire any facilities.

 

ITEM 4A.  UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report on Form 20-F. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, including our belief as to the potential of MegaTeam and Ninja Reflex applications as an effective remediation tool for ADHD and our expectations as to the success of our research and related content distribution in 2019 and beyond, future financial position, business strategy and plans for future operations, and statements that are not historical facts, involve known and unknown risks and uncertainties]. 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 Annual Report on Form 20-F, particularly those in “Item 3. Key Information – D. Risk Factors.” See also “Special Note Regarding Forward-Looking Statements.”

 

With respect to the forward-looking statements made within this Item 5, we have made numerous assumptions regarding among other things: our ability to obtain financing to fund our continuing development programs, the results of our clinical trials, our ability to obtain commercial sales, and future expense levels being within our current expectations.  Investors are cautioned against placing undue reliance on forward-looking statements.  We do not undertake to update these forward-looking statements except as required by applicable law.

 

Overview

 

We are creating a medical cannabis and mental health data platform that integrates with our proprietary and third-party assessment and therapeutic digital applications. Our product focus is based on two tiers of activities: (1) MegaTeam and Ninja Reflex, our clinically validated digital assessment and rehabilitation software that is engaging for the patient, and (2) adaptation of custom and third-party clinically validated digital assessment and rehabilitation software for enhanced patient engagement and data modeling. We intend to provide technology solutions to clinicians, patients, researchers, pharmaceutical companies and payors.

 

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

 

- have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
- comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
- submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
- disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

 

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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

Recapitalization

 

In February 2019, we entered into agreements with holders of $2.8 million of promissory notes and debentures to exchange such notes and debentures for common shares. In February 2019, we also issued shares of Ehave common stock in return for the cancelation of 4,383,333 Ehave warrants and the cancellation of 8,051,791 Ehave stock options. As a result of the recapitalization described above, all outstanding promissory notes, warrants and certain options were exchanged for common shares.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires companies to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses 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. These estimates and judgments are subject to an inherent degree of uncertainty, and actual results may differ. Our significant accounting policies are more fully described in Note 1 to our financial statements included elsewhere in this Annual Report. Critical accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and are particularly important to the portrayal of our financial position and results of operations. Our estimates are primarily guided by observing the following critical accounting policies.

 

Financial Overview

 

Our operations have been funded, to date, primarily through the sale of our common shares in a public offering and series of private placements of convertible notes and warrants. From our inception through December 31, 2018, we have raised an aggregate of approximately $4,474,085 to fund our operations, of which approximately $366,455 was from our public offering in June 2016, and approximately $4,107,630 was from the issuance of convertible notes and warrants. In addition, we received additional aggregate investments of $192,556 from promissory notes that closed in each of January and March of 2019.

 

Operating Losses

 

Since our inception, we have incurred significant operating losses. Our net losses were $5,588,334 and $4,141,613 for the year ended December 31, 2018 and 2017, respectively. As of December 31, 2018, we had an accumulated deficit of $12,577,458. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and from year to year. We anticipate that our expenses will increase significantly as we plan to continue development and commercialization of MegaTeam and NinjaReflex products as well as to engage in continuing research and development related to products and services.

 

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A. Operating Results

 

On March 22, 2019, we entered a definitive asset purchase agreement with ZYUS, pursuant to which ZYUS will acquire all of the assets and rights relating to Ehave Connect Sale (See “Item 4. Information on the Company—A. History and Development of the Company—Proposed Sale of Ehave Connect Asset”). Ehave will continue in our development and trials of digital assessment and therapeutic video games for children with ADD/ADHD. The closing of the Asset Sale remains subject to the satisfaction of customary closing conditions, with a target close date at or around May 22, 2019. Operating results have been separated consistent with this sale between continuing and discontinued operations.

 

Years Ended December 31, 2018, and December 31, 2017

 

Revenues

 

We have no revenue from continuing operations for the year ended December 31, 2018 and the year ended December 31, 2017.

 

Operating Expenses

 

Our total operating expenses, excluding discontinued operations, for the year ended December 31, 2018 was $761,936 compared to $796,585 in 2017, a decrease of $34,649. The decrease in operating expenses is primarily due to the application for tax credits against operating expenses. The operating expenses, excluding discontinued operations for the year ended December 31, 2018, consisted of salaries of $294,222, rent of $46,348, professional fees of $209,255, insurance expenses of $29,831, travel expenses of $11,932, software development of $90,060, communications of $139,172 and general and administrative expenses of $381,740 and tax credits of $440,624. The operating expenses, excluding discontinued operations, for the year ended December 31, 2017, consisted of salaries of $134,506, rent of $26,235, professional fees of $223,928, insurance expenses of $10,277, travel expenses of $12,112, software development of $151,981, communications of $231,662 and general and administrative expenses of $5,885.

 

    For the years ended
December 31,
 
    2018     2017  
    $     $  
Operating Expenses, excluding discontinued operations                
Salaries     294,222       134,506  
Rent     46,348       26,235  
Professional fees     209,255       223,928  
Insurance     29,831       10,277  
Travel     11,932       12,112  
Communications     139,172       231,662  
Software development     90,060       151,981  
General and administrative     381,740       5,885  
Tax credits     (440,624 )     -  
Total operating expenses from continuing operations     761,936       796,585  
Total operating expenses from discontinued operations     934,181       463,989  
Total operating expenses     1,696,117       1,260,574  
Other expenses                
Warrant expense     3,454,400       2,745,731  

 

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Salaries

 

    For the years ended December 31,              
    2018     2017     Increase     %  
    $     $     (decrease)     Change  
                         
From continuing operations     294,222       134,506       159,716       119  
From discontinued operations     909,607       425,938       483,669       114  
Total     1,203,829       560,444       643,385       115  

 

The increase in salaries is primarily attributable to an increase in the number of employees and full year salaries. During the year ended December 31, 2018, we had stock options expense of $202,588 (2017 - $139,758) related to stock option grants to our CEO and CTO that is not included in salaries.

 

Professional Fees

 

    For the years ended December 31,              
    2018     2017     Increase     %  
    $     $     (decrease)     Change  
                         
From continuing operations     209,255       223,928       (14,673 )     7  
From discontinued operations     -       -       -          
Total     209,255       223,928       (14,673 )     7  

 

The decrease in professional fees is primarily attributable to reduction in outside use of consultants.

 

Communications

 

    For the years ended December 31,              
    2018     2017     Increase     %  
    $     $     (decrease)     Change  
                         
From continuing operations     139,172       231,662       (92,490 )     40  
From discontinued operations     -       -       -          
Total     139,172       231,662       (92,490 )     40  

 

The decrease in communications is primarily attributable to fewer news releases and targeted investor outreach.

 

Software Development

 

    For the years ended December 31,              
    2018     2017     Increase     %  
    $     $     (decrease)     Change  
                         
From continuing operations     90,060       151,981       (61,921 )     40  
From discontinued operations     22,144       37,995       (15,851 )     42  
Total     112,204       189,976       (77,772 )     41  

 

The decrease in software development expenses is due to the impact of using employees to replace contractors.

 

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Warrant Expense

 

    For the years ended December 31,              
    2018     2017     Increase     %  
    $     $     (decrease)     Change  
                                 
      3,454,4004       2,745,731       708,669       26  

  

The increase in warrant expense related to the additional financing in 2018.

  

Net Loss

 

Net loss for the year ended December 31, 2018, was $5,588,334 as compared to a net loss of $4,141,613 in 2017.

 

B. Liquidity and Capital Resources

 

Through December 31, 2018, we have incurred an accumulated deficit of $12,577,458, primarily as a result of expenses incurred through a combination of development and commercialization activities related to our products and general and administrative expenses supporting those activities, as well as a net loss of $5,588,334 and negative operating cash flows. Our total cash and cash equivalents balance as of December 31, 2018 was $11,222. At December 31, 2018, we had working capital deficit of $4,007,785, of which $2,971,652 relates to convertible notes convertible into common shares subsequent to the year ended December 31, 2018. We anticipate that we will continue to incur losses and negative cash flows from operations, and that such losses will increase over the next several years due to development costs associated with our MegaTeam, and Ninja Reflex products, until our products reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, based on our current projections, we may not have sufficient resources to fund operations through the third quarter of 2019. Therefore, there is substantial doubt about our ability to continue as a going concern.

 

Our plans include the continued commercialization of our products and raising capital through a combination of equity offerings, debt financings, other third-party funding and other collaborations and strategic partnerships. There are no assurances, however, that we will be successful in obtaining the level of financing needed for our operations. In addition, the Asset Sale may not close, in which case we will need an alternative source of raising additional capital, and if the Asset Sale is completed, our operations will be significantly curtailed and we will have limited sources of revenue following the Asset Sale. We are exploring various financing options including equity funding and strategic collaboration. However, there are no assurances that we will be successful in obtaining the level of financing needed for our operations or that any such financing would be on terms favorable to us. Any future financing may involve substantial dilution to existing investors. If we are unsuccessful in commercializing our products and raising capital, we may need to reduce activities, curtail or cease operations.

 

On April 30, 2019, our common shares were removed from the OTCQB Venture Market to the Pink Open Market because we were unable to cure our bid price deficiency. We expect the share consolidation, expected to be effective as of May 27, 2019, to cure the bid price deficiency; however, the expected increase in the price of our common shares from the share consolidation may not be maintained, and there can be no assurance that the market price of our common shares following the share consolidation will remain above the minimum bid price requirement to restore or maintain eligibility for quotation of our common shares on OTCQB Venture Market. If we fail to restore or maintain the eligibility for quotation of our common shares on OTCQB Venture Market, our ability to obtain additional financing through the public or private sale of our securities would be adversely affected.

 

In 2013 and 2014 we entered into convertible loan agreements with investors, including our President and Chief Executive Officer, and affiliates of his, and a former director, pursuant to which such investors loaned us an aggregate of CDN$490,000. All of the loans were converted into an aggregate of 13,176,094 common shares on December 15, 2014.

 

We received approximately CDN$491,204 in grants in connection with our collaboration with the Hospital and CDN$225,000 from Canada-Israel Research and Development Foundation. In addition, we received aggregate gross proceeds of CDN$490,000 pursuant to our convertible loan and an aggregate of CDN$75,000 from the sale of equity securities in December 2014 and March 2015.

 

On July 7, 2015, we closed a private placement of convertible notes with a principal value of $325,000 and commenced the legal and financial processes of becoming an SEC registrant and commencing a public offering.

 

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On September 24, 2015, we filed our registration statement on Form F-1, which was declared effective on April 4, 2016, for a public offering of up to 11,002,445 common shares and warrants to purchase 11,002,445 common shares. The registration statement also included a prospectus for resale of up to 11,393,642 common shares issuable upon the conversion of certain convertible notes and 11,393,642 common shares issuable upon the exercise of certain warrants offered by the selling shareholders named in the prospectus.

 

On June 14, 2016, we had a closing of the offering of an aggregate of 6,503,667 common shares and warrants to purchase an aggregate of 6,503,667 common shares, for gross proceeds of $266,000. Subsequent to the initial closing, on June 24, 2016, we had a second closing of the offering of an aggregate of 1,589,242 common shares and warrants to purchase 1,589,242 common shares, for gross proceeds of $65,000. We received total gross proceeds of $331,000 from the offering.

 

On November 14, 2016, we received notice from the Financial Industry Regulatory Authority (“FINRA”) that pursuant to FINRA Rule 6432 and Rule 15c2-11 that our company may initiate a priced quotation on the OTC Bulletin Board under the trading symbol EHVVF. On November 21, 2016, our common shares were listed for trading on the OTCQB Venture Market. On April 30, 2019, our common shares were moved to the Pink Open Market because we were unable able to cure our bid price deficiency.

  

On November 14, 2016, we entered into a definitive securities purchase agreement to sell up to $1,500,026 of convertible promissory notes and warrants in multiple closings in a private placement. We have used the net proceeds from the private placement to further the development of Ehave Connect, for MegaTeam clinical trials, for general marketing and investor relations’ purposes, and for working capital. As of December 31, 2016, we received $259,357 of $309,357 of the firmly committed amount and waived $50,000 of the firmly committed amount for future reassignment as permitted under the agreement. Certain lenders notified us that it will not elect to fund an aggregate of $683,130 of additional loans and have permitted its reassignment, of which $489,368 has been reassigned. In the year ended December 31, 2017, we issued additional convertible promissory notes in an aggregate principal amount of $609,826 pursuant to the note and warrant purchase agreement. As of December 31, 2017, we had received total proceeds of $869,183 pursuant to the note and warrant purchase agreement. On September 24, 2018 we entered into a letter agreement to convert all outstanding convertible promissory notes with aggregate principal amount of $869,183 into common shares of the company upon the closing of a bridge financing of up to $500,000. On February 27, 2019, we closed the bridge loan and all such outstanding convertible promissory notes were converted into 372,228,244 common shares, and all outstanding warrants were canceled.

  

On October 11, 2017, we entered into Investor Letters, pursuant to which certain persons agreed to purchase securities of the Company on similar terms as certain offerings of the Company that are consummated prior to December 31, 2017, or, if such an offering is not consummated, the purchase amount will be converted into a secured promissory note that matures on January 31, 2018 (which, at the investor’s option, may be converted into common shares of the Company). We received aggregate proceeds of $100,000. No such offerings were consummated prior to December 31, 2017, and such notes were converted into Unsecured Debentures on January 31, 2018 (see below), which have been converted into common shares on February 27, 2019.

 

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On November 15, 2017, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $196,237. Lenders of the promissory notes were issued 2,133,333 common share warrants at an exercise price of $0.075 per share with an expiry date of November 16, 2022. On January 31, 2018 $148,745 of the promissory notes were repaid and $47,932 of the promissory notes were exchanged for Unsecured Debentures. On February 27, 2019, as part of the recapitalization, we entered into an agreement to cancel the warrants issued to the lenders in exchange for 31,109,865 common shares.

 

On January 31, 2018, we entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. The Secured Debentures were secured against the general assets and intellectual property of the Company. Under the terms of the Secured Debentures, the principal amount and accrued interest was convertible into our common shares at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Secured Debentures was at the option of the holder. At the time of conversion, the holder was to also receive an equal amount of common share purchase warrants with an exercise price equal to the issue price. The Secured Debentures were due on July 31, 2018 and bore interest at 10% per annum. The initial installment of the Secured Debentures was issued on January 31, 2018 for proceeds of $609,310 (CDN$750,000). On March 19, 2018, the final instalment of $573,307 (CDN$750,000) was received. On February 27, 2019, as part of the recapitalization, we entered into an agreement to convert the Secured Debentures and right to receive warrants into 1,268,274,936 common shares.

 

On January 31, 2018, certain promissory notes with an aggregate principal amount of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures (the “Unsecured Debentures”). From January 1, 2018 to January 31, 2018, we issued an additional $20,098 (CDN$25,000) Unsecured Debentures for total proceeds of $332,065 (CDN$409,000). On March 19, 2018, an installment of the Unsecured Debentures in the amount of $382,263 (CDN$500,000) was received. Under the terms of the Unsecured Debentures, the principal amount and accrued interest was convertible into our common shares at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Unsecured Debentures was at the option of the holder. At the time of conversion, the holder was to also receive 120% of the amount of the common shares issued of common share purchase warrants with an exercise price equal to the issue price. The Unsecured Debentures were due on July 31, 2018 and bore interest at 10% per annum. On February 27, 2019, we entered into an agreement to convert the Unsecured Debentures and the right to receive warrants an into 276,809,884 common shares.

 

On September 27, 2018, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$111,110), including $11,110 of original issue discount. On February 27, 2019, promissory notes with an aggregate principal amount of $85,756 (CDN$111,110) were exchanged for unsecured debentures for a bridge loan. On February 28, 2019, we entered into an agreement to convert the notes into 54,203,662 common shares.

 

On October 31, 2018, we issued demand senior secured promissory notes in the aggregate principal amount of $57,000.

 

On December 5, 2018, we entered into a securities purchase agreement for $141,000 of promissory notes, including $13,000 of original issue discount. Under the terms of the agreement, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 73% of the market price. The conversion of the debentures is at the option of the holder between 180 days following the issue of the debentures and the maturity date. The debentures are due on December 5, 2019 and bear interest at 8% per annum.

 

On January 21, 2019, we issued a senior secured promissory note in the aggregate principal amount of $263,192 (CDN$350,000). The secured promissory note is secured against certain of our assets, including all development tax credits that the Company has applied for and receives. The loan is due on May 21, 2020 and bears and interest rate at 20.07% per annum.

 

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On January 28, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$125,000), including $18,841(CDN$25,000) of original issue discount.

 

On February 27, 2019, we entered into an agreement to exchange $150,000 in fees owed to Scott Woodrow, a retired Director of the Company for 47,564,189 common shares of the Company.

 

On February 27, 2019, we entered into an agreement to exchange $100,000 in fees owed to KW Capital Partners Ltd. for 31,709,460 common shares of the Company.

 

On February 27, 2019, we entered into an agreement to exchange $150,000 in fees and common shares owed to Bezalel Partners LLC for 47,564,189 common shares of the Company.

 

On February 27, 2019, we entered into agreements to cancel options, cancel option anti-dilution clauses, and cancel employee severance liabilities in exchange for 304,437,002 common shares of the company

 

On February 27, 2019, we entered into an agreement to cancel 2,250,000 compensation warrants that had anti-rachet and anti-dilution provisions for 32,811,191 common shares of the Company.

 

On March 26, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $98,351 (CDN$131,683), including $23,663 (CDN$31,683) of original issue discount.

 

We earned total revenue of $610,596 during the year ended December 31, 2018, for providing services pursuant to contracts we entered into with MedReleaf and credits related to applications submitted for Ontario Interactive Digital Media Tax Credits.

 

The proceeds from these private placements were used for general working capital purposes, particularly the development and marketing of our platform, Ehave Connect, which is subject to the proposed Asset Sale (See “Item 4. Information on the Company—A. History and Development of the Company—Proposed Sale of Ehave Connect Asset”).

 

Operating Activities

 

Net cash used in operating activities increased to $1,422,077 for the year ended December 31, 2018, from $977,372 for the year ended December 31, 2017. The increase of $444,705 in net cash used in the year ended December 31, 2017 was primarily due to increased operating expenses as described above under “–A. Operating Results—Operating Expenses.”

 

Investing Activities

 

Net cash provided by investing activities decreased to (468,354) for the year ended December 31, 2018, from $450,229 for the year ended December 31, 2017. The decrease of $918,583 in net cash provided in the year ended December 31, 2018, was primarily due to the effect of foreign exchange fluctuations.

 

Financing Activities

 

Net cash provided by financing activities increased to $1,897,982 for the year ended December 31, 2018, from $524,033 for the year ended December 31, 2017. The increase of $1,373,949 in net cash provided by financing activities in the year ended December 31, 2018 was primarily due to the increased amount raised from the private placement of convertible notes and promissory notes raised in the year ended December 31, 2018, compared to the year ended December 31, 2017.

 

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C. Research and Development, Patents, and Licenses, etc.

 

Ongoing research and development is critical to our success. We seek to engage with reputable research and clinical institutions to access and assist tools and methods developed. We hope to finance our research and development with government and research grants and internal funds. Our research and development is comprised primarily of software development expenditures. We intend to continue to research and develop new technologies and products for the mental health market. There can be no assurance that we can achieve any or all of our research and development goals.

 

Excluding discontinued operations, we spent $90,060 and $151,981 on software development in 2018 and 2017, respectively. These amounts were spent on the development or improvement of our technologies and products, including salary paid to our employees engaged in research and development activities. See the disclosure in “Item 4. Information on the Company—B. Business Overview” for further information on the Company’s research and development policies.

 

D. Trend Information

 

It is important to note that historical patterns of expenditures cannot be taken as an indication of future expenditures.  The amount and timing of expenditures and availability of capital resources vary substantially from period to period, depending on the level of development activity being undertaken at any one time and the availability of funding from investors and prospective strategic partners. See discussion in Parts A and B of Item 5:“Operating and Financial Review and Prospects” for a description of the trend information relevant to us. Except as disclosed elsewhere in our annual report, we know of no trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our liquidity or capital resources or that would cause reported financial information not necessarily to be indicative of future operating results or financial conditions.

 

E. Off-Balance Sheet Arrangements

 

We are not party to any transactions, agreements or other contractual arrangements with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

 

F. Tabular Disclosure of Contractual Obligations

 

We have the following contractual obligations as of December 31, 2018:

 

Contractual Obligations   Payments Due by Period  
    Total
$
    Less than 1 year
$
    2-3 years
$
    4-5 years
$
    After 5 years
$
 
Capital lease obligations     -       -       -       -       -  
Operating lease (1)     56,131       39,622       16,509       -       -  
Purchase obligations     -       -       -       -       -  
Other long term obligations     -       -       -       -       -  
Total contractual obligations     56,131       39,622       16,509       -       -  

 

Note:

 

(1) Our operating leases are comprised of our office leases and exclude our portion of operating costs.

 

We expect to fund our capital expenditure requirements and commitments with existing working capital.

 

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G. Safe Harbor

 

We seek safe harbor for our forward-looking statements contained in Items 5.E and F.  See “ Cautionary Note Regarding Forward-Looking Statements”.

 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A. Directors and Senior Management

 

The following table sets forth the names, ages and positions of our current board members and executive officers:

 

Name    Age   Position with the Company   Director of the
Company Since
Prateek Dwivedi   47   President, Chief Executive Officer, Director   November 18, 2016
Binyomin Posen   27   Chairman of the Board, Director   August 21, 2018
Zeke Kaplan   34   Director   August 21, 2018
             
Dianne Parsons   55   Acting Chief Financial Officer and Controller   Not applicable
David Goyette   58   Chief Technology Officer   Not applicable

  

The business address of our officers and directors is c/o Ehave, Inc., 277 Lakeshore Road East, Suite 203, Oakville, Ontario, Canada L6J 6J3.

 

Our directors are elected for a term of one year and serve until such director’s successor is duly elected and qualified. Our executive officer serves at the pleasure of the Board of Directors. None of our directors have any family relationships with any of our other directors or executive officer.

 

Certain of our directors are associated with other companies, which may give rise to conflicts of interest.  In accordance with the Business Corporations Act (Ontario), directors who have a material interest in any person who is a party to a material contract or a proposed material contract with us are required, subject to certain exceptions, to disclose that interest and abstain from voting on any resolution to approve that contract.  In addition, the directors are required to act honestly and in good faith with a view to the best interests of Ehave Inc.

 

We are not aware of any arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or officer.

 

Biographies

 

Binyomin Posen, Chairman of the Board, Director

 

Mr. Posen is a Senior Analyst at Plaza Capital Limited, where he focuses on corporate finance, capital markets and helping companies to go public. After three and a half years of studies overseas, he returned to complete his baccalaureate degree in Toronto. Upon graduating (on the Dean's List) he began his career as an analyst at a Toronto boutique investment bank where his role consisted of raising funds for IPOs and RTOs, business development for portfolio companies and client relations. He is currently director and senior officer at Agau Resources Inc. and director of Senternet Phi Gamma Inc. and director and senior officer at Jiminex Inc.

  

Zeke Kaplan, Director

 

Mr. Kaplan is an entrepreneur committed to sustainability and creativity in the Construction and Real Estate industries. Mr. Kaplan is also active in the technology and cannabis industries. He earned a First Class Honors degree from McGill University and holds numerous construction accreditations including being licensed by the City of Toronto. 

 

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Prateek Dwivedi, President, Chief Executive Officer, Director

 

Prateek (Teek) Dwivedi is the chief executive officer of Ehave, bringing 20 years of technology and healthcare leadership experience. Prior to joining Ehave in 2015, Teek led Cancer Informatics at Princess Margaret Hospital at the University Health Network in Toronto, Canada. In this position, Teek was responsible for building a next generation health and research informatics platform designed to capture and analyze cancer patient data. From 2008 to 2011, Teek was the Vice President and Chief Information Officer at Mount Sinai Hospital in Toronto, where he led a 170+ person team responsible for technology infrastructure. At Mount Sinai, Teek was instrumental in implementing a personalized medicine informatics platform strategy.

 

Before his tenure at Mount Sinai, Teek was the Vice President of Operations at AudienceView Ticketing, where he managed a team of 47 engineers. Teek has held key strategy and product development positions at Cascada Mobile (exit via acquisition), Casero (exit via acquisition) and Solect Technology group (exit via acquisition). Teek received his undergraduate and graduate degrees in Systems Design Engineering from the University of Waterloo.

  

Dianne Parsons , Acting Chief Financial Officer and Controller

 

Dianne Parsons was appointed as the acting chief financial officer in April 2018. Prior to joining Ehave, Dianne has held senior financial officer positions focused on strategic planning, operations and financial management in technology-based businesses, turnaround management situations, and manufacturing. In addition to her role at Ehave, Ms. Parsons provides consulting services to Alpha Cancer Technologies Inc. since May 2016 and has held a part time CFO position with Alpha Cancer Technologies Inc. since January 2017. Ms. Parsons holds a Master of Accounting degree from the University of Waterloo and is a Chartered Professional Accountant and Chartered Accountant.

 

David Goyette, Chief Technology Officer

 

David Goyette is the chief technology officer of Ehave, Inc. Dave joined Ehave in December 2016 and brings over 30 years of technology, software architecture, and innovation experience in healthcare, imaging solutions, embedded systems, distributed systems, and gaming. Dave’s most recent experience includes the position of software architect for the Cancer Informatics program at Princess Margaret Hospital at University Health Network in Toronto. Dave was also recently a software architect at Symcor, responsible for architecting and designing a next generation platform to be used by new initiatives. Prior to these positions, Dave designed and implemented the next generation console and analytic tools for Novadaq’s SPY fluorescent imaging platform (Dave co-authored several patents for this product). Before Novadaq, Dave proposed a concept for a new MMOG game to the Montecito Picture Company, and partnered with them on developing the concept and building a prototype in cooperation with a team of artists and game developers from Seneca at York.

 

Dave is experienced in building applications for the Android ecosystem, and in building cross platform applications for Android and IOS. Dave’s other healthcare experience includes the architecture and design for both the Philip and Hitachi Medical System MRI devices. Dave has been a trainer for Sun Microsystems, and has successfully led technical teams on a score of other projects throughout his career. Dave received his undergraduate degree in B.Math (double honours in Computer Science and C&O) from the University of Waterloo, and successfully completed 7 of the 9 courses required for an M.Eng degree from the University of Toronto.

 

  B. Compensation

 

Directors

 

In the year ended December 31, 2018, each director who is not a salaried employee of the Company earned a fee of $33,000, which will be paid in 2019.

 

Directors, annually, may elect to take up to 100% of their respective annual retainer in either options or restricted share awards.

 

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Officers

 

Summary Compensation Table

 

The following table sets forth information concerning the total compensation paid to our officers in 2018. Our officers are paid fees in Canadian dollars. These amounts are presented in U.S. dollars and have been converted at the average rate of exchange for 2018 ($1.00 = CDN$1.2961).

 

Name and principal
position
  Year     Salary
$
    Share-
based
awards
(1)
    Option-
based
awards
(1)
    Bonus
$ (4)
    All other
compensation
$
    Total
compensation
$
 
Prateek Dwivedi   2018       300,912       N/A       92,770       150,456       N/A       544,138  
Chief Executive Officer   2017       304,572        N/A       2,672        N/A        N/A       307,244  
(2)   2016       25,853        N/A       73,435        N/A        N/A       99,288  
                                                       
Scott Woodrow   2018       0       N/A       N/A       N/A       0       0  
Former President and Chief Executive Officer, Former Chief Financial Officer and VP of Corporate and Business Development, Former Director   2017       0       N/A       N/A        N/A       116,238 (3)     116,238  
(2)   2016       236,525       N/A       N/A        N/A       N/A       236,525  
                                                       
David Goyette   2018       154,309       N/A       109,812       38,579       N/A       302,700  
Chief Technology Officer   2017       154,214        N/A       137,086        N/A        N/A       291,300  
    2016       13,315        N/A        N/A        N/A        N/A       13,315  

 

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Notes:

 

(1) The value of share and option based awards are based on the grant date assumptions as disclosed in Note 7 ” Stock Based Compensation” in our 2018 audited financial statements.
(2) On December 1, 2016, Mr. Woodrow resigned as President and Chief Executive Officer and Mr. Dwivedi was appointed President and Chief Executive Officer. From October 2011 through April 2018, Scott served as the Company’s Chief Financial Officer, and from July 31, 2018 through April 2018, Scott served as the Company’s VP Corporate and Business Development. Mr. Woodrow served as a director of the Company from October 31, 2011, through February 15, 2019.
(3) Consulting fees paid to NView Management Inc. pursuant to the Services Agreement with the Company, dated January 15, 2017. Scott Woodrow is the president of the NView Management Inc.and provided services as Vice President Corporate and Business Development.

 

(4) Bonuses were declared in 2018 and remain outstanding at year end.

 

Narrative Discussion

 

We have entered into employment agreements with each of the following Executive Officers (each an “Employment Agreement”).  Pursuant to the terms of the Employment Agreements, the salary for the year 2018 are:

 

Name and principal position   Year     Salary
$(1)
 
Mr. Prateek Dwivedi   2018       300,912  
Chief Executive Officer              
Mr. David Goyette   2018       154,309  
Chief Technology Officer              

 

(1) Our officers are paid fees in Canadian dollars. These amounts are presented in U.S. dollars and have been converted at the rate of exchange ($1.00 = CDN$1.2961).

 

Further, each executive officer is entitled to additional benefits and performance-based bonuses. Such benefits relate to supplemental health care plans and travel allowances. Performance based bonuses are based on the achievement of our plans and objectives and may be up to 100% of the base salary in which a proportion may be paid in the form of additional stock options.  Each of the foregoing officers’ Employment Agreements provides that such officer is subject to certain confidentiality and non-competition restrictions during and following the course of his employment with the Company.

 

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Prateek Dwivedi

 

Pursuant to the Employment Agreement with Prateek Dwivedi, dated July 25, 2016, we appointed Mr. Dwivedi as our chief executive officer, his employment to begin upon our achievement of the closure of a financing round in $500,000. Mr. Dwivedi began serving as our president and chief executive officer as of December 1, 2016. Mr. Dwivedi’s annual base salary is set at $300,912 (CDN$390,000 converted at the rate of exchange of $1.00 = CDN$1.2961), and he is eligible to receive a performance-based bonus from time to time, up to 100% of his annual base salary, subject to the approval and reasonable discretion of the board of directors as may be delegated to our Compensation Committee from time to time, in a combination of cash payments and the granting of option awards, again subject to the reasonable discretion of the board of directors. Notwithstanding the foregoing, Mr. Dwivedi shall be paid his discretionary bonus in the form of cash payments alone until he has received the equivalent of 50% of his annual base salary, after which time any additional discretionary bonus payments may be made as a combination of cash payments or option awards, subject to the reasonable discretion of the board of directors. On the date of Mr. Dwivedi’s hire, Mr. Dwivedi is entitled to receive an initial equity award of in the form of participation in our incentive stock option plan, of 5% of our total outstanding common shares, subject to regulatory approval (the “Initial Equity Award”). The Initial Equity Award will commence vesting immediately, with a vesting period of six (6) months. Conditional upon completion of the next financing round of $10 million, we will grant to Mr. Dwivedi a single one-time adjustment equity award in an amount sufficient to maintain his 5% share of our total outstanding common shares, subject to regulatory approval (the “Adjustment Equity Award”). The Adjustment Equity Award will commence vesting immediately, with a vesting period of twelve (12) months. In the event that Mr. Dwivedi’s employment with the Company is terminated without cause, vesting of the Initial Equity Award and the Adjustment Equity Award will occur in the normal course, as if Mr. Dwivedi’s employment had not terminated. If we terminate Mr. Dwivedi’s Employment Agreement for “cause” (as set forth in his Employment Agreement), Mr. Dwivedi shall receive payment of any salary and vacation pay earned to the date of termination, and any stock options will vest and be exercisable in accordance with the express terms of our stock option plan, as may be amended from time to time. We may terminate Mr. Dwivedi’s Employment Agreement without “cause,” by providing 6 to 24 months’ pay, depending on the duration of his service to the Company, in lieu of notice of termination, and Mr. Dwivedi will be entitled to a discretionary bonus for the period of pay in lieu of notice calculated as the average of the discretionary bonus received by him over the previous 3 years, or part thereof if his employment is terminated earlier than his 3rd anniversary date. Mr. Dwivedi may terminate his Employment Agreement for any reason at any time with 3 months’ written notice to the Company. Mr. Dwivedi may resign for “good reason” (as set forth in his Employment Agreement) within 60 days of him learning of the facts that are the basis for the resignation for good reason. Upon Mr. Dwivedi’s written notice tendering of his resignation for good reason, it shall be deemed that Mr. Dwivedi’s employment by the Company is terminated without cause. At the time of Mr. Dwivedi’s appointment, Mr. Dwivedi was also appointed to the board of directors. On February 27, 2019, we entered into an agreement with Mr. Dwivedi to amend his employment agreement to cancel his Adjustment Equity Award, cancel his outstanding options, and cancel his termination without cause provisions in exchange for 253,654,987 common shares of the company, which constitutes 10% of the issued and outstanding common shares in the capital of the Company as of the date of the agreement.

  

David Goyette

 

On October 24, 2016, we entered into the Employment Agreement with David Goyette as our chief technology officer, his employment to begin upon our achievement of the closure of a financing round in CDN$500,000. Mr. Goyette began serving as our chief technology officer as of December 1, 2016. Mr. Goyette’s annual base salary is set at $154,309 (CDN$200,000 converted at the rate of exchange of $1.00 = CDN$1.2961), and he is eligible to receive a performance-based bonus from time to time, up to 25% of his annual base salary, in cash, subject to the approval and sole discretion of the board of directors. On the date of Mr. Goyette’s hire, Mr. Goyette is entitled to receive an initial equity award of 365,000 common shares, subject to regulatory approval. Such award will commence vesting immediately, with a vesting period of 2 years. In the event that Mr. Goyette’s employment is terminated for any reason, vesting will cease immediately on the date of termination, and any unvested options will be forfeited. If we terminate Mr. Goyette’s Employment Agreement for “cause” (as set forth in his Employment Agreement), Mr. Goyette shall receive payment of any salary and vacation pay earned to the date of termination. We may terminate Mr. Goyette’s Employment Agreement without “cause,” by providing Mr. Goyette with the minimum notice (or pay in lieu of such notice) and severance pay (if any) to which he is entitled under the Employment Standards Act, 2000 or any amended or replacement legislation, plus any other minimum rights, benefits and entitlements to which he is entitled under the Employment Standards Act, 2000 at such time. Mr. Goyette may terminate his Employment Agreement for any reason at any time with 2 months’ written notice to the Company. On February 27, 2019, we entered into an agreement with Mr. Goyette to amend his employment agreement to cancel his outstanding options, and cancel his notice period in exchange for 50,730,997 common shares of the Company, which constitute 2% of the issued and outstanding common shares in the capital of the Company as of the date of the agreement.

 

Dianne Parsons

 

On April 28, 2018, we entered into a Services Agreement with Dianne Parsons, C.P.A., pursuant to which, as a contractor, she will provide services as controller and chief financial officer of the Company. The term of her engagement will continue until June 30, 2019, unless terminated by either the Company or Dianne upon one month prior notice. In addition, the Company may immediately terminate the Services Agreement, with no other obligations, upon default by Dianne in the performance of any of her obligations under the Services Agreement. For the term of the Services Agreement, the Company agreed to pay Dianne CDN$60 per hour for controller activities and CDN$105 per hour for chief financial officer activities.

 

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We do not provide pension, retirement or similar benefits to its directors and executive officers. No funds were set aside or accrued by the Company during the fiscal year ended December 31, 2018, to provide pension, retirement or similar benefits to our directors or officers pursuant to any existing plan provided or contributed to by us or our subsidiaries. We do not currently have a stock appreciation rights plan.

 

C. Board Practices

 

Our directors are elected by the shareholders at each Annual General Meeting (or Annual Special Meeting) and typically hold office until the next meeting, at which time they may be re-elected or replaced.  Casual vacancies on the board are filled by the remaining directors and the persons filling those vacancies hold office until the next Annual General Meeting (or Annual Special Meeting), at which time they may be re-elected or replaced.  Our officers are appointed by the Board of Directors and hold office indefinitely at the pleasure of the Board of Directors.

 

Directors’ Contracts

 

We receive a director’s consent from each of the independent directors upon their acceptance of their director’s position. 

 

We do not have any contracts with any of its directors which provide for benefits upon the termination of employment.

 

Compensation Committee

 

Our compensation committee consists of two outside, independent directors under Canadian law: Mr. Kaplan and Mr. Posen. Mr. Kaplan serves as chairman of the compensation committee. The members of the compensation committee have not been officers of the company. Our compensation committee is responsible for making recommendations to the board of directors regarding compensation terms for our officers and directors and for determining salaries and incentive compensation for our executive officers and incentive compensation for our other employees and consultants.

 

Audit Committee

 

Our audit committee consists of Mr. Posen, Mr. Kaplan and Mr. Dwivedi. Mr. Posen serves as chairman of the audit committee. The audit committee ensures that the Company’s management has designed and implemented an effective system of internal financial controls, assesses the integrity of the financial statements and related financial disclosure of the Company, and reviews the Company’s compliance with regulatory and statutory requirements as they relate to financial statements, taxation matters and disclosure of financial information. The audit committee also reports to the board of directors with respect to such matters and recommends the selection of independent auditors. Additionally, the committee monitors and reports on the independence and performance of the Company’s independent auditors.

 

D. Employees

 

The following table sets out the number of our employees at the end of each of the last three fiscal years by activity. All employees are located in Canada.

  

 

Activity   2018     2017     2016  
Research and development     4       5       4  
Operating     2       2       2  
Total     6       7       6  

 

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  E. Share Ownership

 

The following table sets forth certain information as of April 15, 2019, regarding the beneficial ownership of our common shares by each of our directors and all of our executive officers and directors as a group.

 

    Number of common shares
beneficially owned  (1)
    % of  
Outstanding common
shares  (2)
 
Directors and Executive Officers                
Scott Woodrow     144,464,470 (3)     5.7 %
Prateek Dwivedi     253,654,987       10 %
David Goyette     50,730,997       2 %
Binyomin Posen     -       -  
Zeke Kaplan     -       -  
All officers and directors as a group (6 persons):     429,073,117       17.7 %

   

Notes:

 

(1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.

 

(2) Based on 2,541,383,906 common shares issued and outstanding on April 15, 2019.

 

(3) Mr. Woodrow resigned from the board on February 15, 2019. Includes 13,973,623 common shares beneficially owned by 2110345 Ontario Inc. and NView Management Inc. over which Mr. Woodrow has sole voting and dispositive power. 

 

The following table sets forth the amount and terms of options to acquire common shares of our Company we have granted to our directors, senior management and key employees:

 

Name and office
held
  Number of
Options(1)
    Date of
Grant
  Exercise
Price
    Expiry Date(1)
                     
Prateek Dwivedi
Chief Executive Officer, President
    2,808,359      November 28, 2016     0.12     November 28, 2021
David Goyette
Chief Technology Officer
    433,000      January 12, 2017     0.50     January 12, 2022
Prateek Dwivedi
Chief Executive Officer, President
    1,404,118     October 20, 2017     0.08     October 20, 2022
David Goyette
Chief Technology Officer
    274,415     October 20, 2017     0.08     October 20, 2022
Prateek Dwivedi
Chief Executive Officer, President
    1,235,100     March 27, 2018     0.06     March 27, 2023
Prateek Dwivedi
Chief Executive Officer, President
    1,235,100     March 27, 2018     0.12     March 27, 2023
Prateek Dwivedi
Chief Executive Officer, President
    1,235,100     March 27, 2018     0.20     March 27, 2023
 Total:     8,625,192                  

 

(1) On February 27, 2019, we entered into agreements with Mr. Dwivedi and Mr. Goyette to amend their employment agreements to cancel their outstanding options in exchange for common shares of the company.
  47  

 

  

Option Plan

 

Our Stock Option Plan (“SOP”) sets the maximum number of common shares which may be issued under options granted pursuant to the SOP which shall be 15% of the number of issued and outstanding common shares of the Company.

 

The SOP authorizes the board of directors of the Company or a committee of the board of directors to issue options to directors, officers, employees and consultants of the Company.

 

The purpose of the SOP is to provide consultants, officers, directors and employees with a proprietary interest in the Company in order to: (i) increase the interest in the Company’s welfare of those individuals who share primary responsibility for the management, growth and protection of the business of the Company; (ii) furnish an incentive to such individuals to continue providing their services to the Company and its subsidiaries; and (iii) provide a means through which the Company and its subsidiaries may attract qualified persons to engage as consultants, officers, directors and employees.

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A. Major Shareholders

 

The following table lists the beneficial ownership of our securities as of April 15, 2019 by each person known by us to be the beneficial owner of 5% or more of the outstanding shares of any class of our securities. As of April 15, 2019, 2,541,383,906 of our ordinary shares were outstanding. As at April 15, 2019, with the exception of Shareholders disclosed in “Item 6.E Share Ownership”, we are not aware of any shareholder who beneficially owns, directly or indirectly, or exercises control or direction over, our common shares, of more than 5% of the outstanding common shares.

 

Name of Beneficial Owner   Number of
Shares
Beneficially
Owned
    Percentage of Shares
Outstanding
 
Rocfrim, Inc. (1)(2)     192,907,759       7.6 %
                 
Anthony Heller (3)     1,154,991,372      

45.5

%
                 
Sruli Weinreb (3)     1,154,991,372      

45.5

%
                 
Eisenberg Family Foundation(4)     9,088,710       5.2 %
                 
Wannigan Partners(5)     152,260,580       6.0 %

 

(1) Includes (i) 697,248 shares held by Rocpart Inc. ("Rocpart") over which Mr. Kaplan, as President of Rocpart has sole voting and dispositive power and (ii) 5,476,772 shares held by Rocfrim over which Mr. Kaplan has sole voting and dispositive power.
(2) Jesse Kaplan, President of Rocfrim has sole voting and dispositive power over shares held by Rocfrim.
(3) Includes 286,220,455 common shares directly held by Plazacorp Investments Limited and 868,770,917 common shares held directly by KW Capital Partners Ltd. Anthony Heller is the sole owner of Plazacorp Investments Limited. Anthony Heller and Sruli Weinreb share voting and dispositive power over shares held by Plazacorp Investments Limited and may be deemed to beneficially own the securities held by Plazacorp Investments Limited. KW Capital Partners Ltd. is wholly-owned by Helmsquire Holdings Limited. Anthony Heller is the sole owner of Helmsquire Holdings Limited. Anthony Heller and Sruli Weinreb share voting and dispositive power over shares held by KW Capital Partners Ltd. and may be deemed to beneficially own the securities held by KW Capital Partners Ltd.

 

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(4) Solomon Eisenberg has sole voting and dispositive power over shares held by Eisenberg Family Foundation.

 

(5) Scott Coleman, Vice President of Wannigan Partners has sole voting and dispositive power over shares held by Wannigan Partners

 

The voting rights of our major shareholders do not differ from the voting rights of holders of our shares who are not major shareholders. Each of the above listed securities entitles the holder to one vote at our company’s shareholder meetings.

 

Changes in Percentage Ownership by Major Shareholders

 

As of April 15, 2019, Mr. Woodrow, a founder of the Company, beneficially owned 144,464,470 common shares, or 5.7%, of our then outstanding common shares.

 

As of May 14, 2018, Mr. Woodrow, beneficially owned 19,777,338 common shares, or 27.73%, of our then outstanding common shares.

 

As of May 15, 2017, Mr. Woodrow beneficially owned 19,777,338 common shares, or 27.73%, of our then outstanding common shares.

 

As of March 10, 2016, Romena Holdings Inc. beneficially owned 5,000,000 common shares, or 17.81%, of our then outstanding common shares.

 

As of April 15, 2019 Rocfrim Inc. beneficially owned 192,907,759 common shares, or 7.6%, of our then outstanding common shares.

 

As of May 14, 2018, Rocfrim Inc. beneficially owned 7,840,882 common shares, or 10.84%, of our then outstanding common shares.

 

As of May 15, 2017, Rocfrim Inc. beneficially owned 7,449,646 common shares, or 9.6%, of our then outstanding common shares.

 

As of March 10, 2016, Rocfrim Inc. beneficially owned 5,476,772 common shares, or 16.32% of our then outstanding common shares.

 

As of April 15, 2019, Plazacorp Investments Limited beneficially owned 286,220,455 common shares, or 11.3%, of our then outstanding common shares.

 

As of May 14, 2018, Plazacorp Investments Limited beneficially owned 8,601,992 common shares, or 11.9%, of our then outstanding common shares.

 

As of May 15, 2017, Plazacorp Investments Limited beneficially owned 7,567,951 common shares, or 9.84%, of our then outstanding common shares.

 

As of March 10, 2016, Plazacorp Investments Limited beneficially owned 5,476,772 common shares, or 16.32% of our then outstanding common shares.

 

As of May 14, 2018, David Stefansky beneficially owned 7,612,477 common shares, or 9.99%, of our then outstanding common shares.

 

As of May 15, 2017, David Stefansky beneficially owned 7,567,951 common shares, or 9.84%, of our then outstanding common shares. Includes 5,590,791 common shares and shares issuable upon exercise of warrants beneficially owned by Bezalel Partners, LLC over which Mr. Stefansky has sole voting and dispositive power.

 

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As of March 10, 2016, David Stefansky beneficially owned 7,546,781 common shares, or 9.81% of our then outstanding common shares.

 

As of April 15, 2019, Eisenberg Family Foundation beneficially owned 130,887,307 common shares, or 12.57%, of our then outstanding common shares. Solomon Eisenberg has sole voting and dispositive power over shares held by Eisenberg Family Foundation.

 

As of May 14, 2018, Eisenberg Family Foundation beneficially owned 9,088,710 common shares, or 5.2%, of our then outstanding common shares.

 

As of April 15, 2019, Prateek Dwivedi beneficially owned 253,654,987 common shares, or 10% of our then outstanding common shares.

 

As of April 15, 2019, KW Capital Partners Ltd beneficially owned 868,770,917 common shares, or 34.2% of our then outstanding common shares.

 

As of April 15, 2019, Wannigan Partners beneficially owned 152,260,580 common shares, or 6.0% of our then outstanding common shares. 

 

Shares Held in the United States

 

The following table indicates, as of April 15, 2019, the total number of common shares issued and outstanding, the approximate total number of holders of record of common shares, the number of holders of record of common shares with U.S. addresses, the portion of the outstanding common shares held by U.S. holders of record, and the percentage of common shares held by U.S. holders of record. This table does not indicate beneficial ownership of common shares.

 

Total Number of 

Holders of Record

  Total Number of
Common Shares
Issued and
Outstanding
   

Number of
US Holders 

of
Record

    Number of
Common Shares
Held by
US Holders of
Record
    Percentage of
Common Shares Held
by US Holders of
Record
 
64     2,541,383,906       17       394,895,359       19.02 %

 

Change of Control

 

As of April 15, 2019, there were no arrangements known to the Company which may, at a subsequent date, result in a change of control of the Company.

 

Control by Others

 

To the best of the Company’s knowledge, the Company is not directly or indirectly owned or controlled by another corporation, any foreign government, or any other natural or legal person, severally or jointly.

 

B. Related Party Transactions

 

Other than the transactions described below, since January 1, 2018, we entered into related party transactions as follows:

 

· We have entered into employment contracts with each of our officers (see Item 6).
· On January 31, 2018, the Company entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. On February 27, 2019, we entered into an agreement to convert the note into 1,268,274,936 common shares of the Company.  Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.

 

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· On January 31, 2018, promissory notes with an aggregate principal amount of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures (the “Unsecured Debentures”). On February 27, 2019, we entered into an agreement to convert the note into 276,809,884 common shares of the Company. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.
· On September 27, 2018, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$111,110), including $11,110 of original issue discount. On February 27, 2019, promissory notes with an aggregate principal amount of $85,756 (CDN$111,110) were exchanged for unsecured debentures for a bridge loan. On February 28, 2019, we entered into an agreement to convert the note into 54,203,662 common shares of the Company. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.
· On January 28, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$125,000), including $18,841(CDN$25,000) of original issue discount. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.
· On February 27, 2019, we entered into agreements to exchange $400,000 in fees for 126,837,838 common shares of the Company. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with one of the vendors who exchanged fees.
· On March 26, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $98,351 (CDN$131,683), including $23,663 (CDN$31,683) of original issue discount. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.
· On October 30, 2018, we entered in an agreement with CHT, for the use of Ehave Connect whereby CHT will acquire the exclusive rights to Ehave Connect for use in companion animals. Scott Woodrow, a former director and former executive officer of the Company, is the President and a minority shareholder of CHT. On April 18, 2019, we and CHT agreed that upon closing of the Asset Sale, the CHT Agreement shall be terminated, and we, as consideration, within ten business days following the date of the closing of the Asset Sale, shall pay CHT, in cash, up to CAD$242,000, provided that the agreement to terminate the CHT Agreement and our obligation to pay CHT shall no longer be effective if the closing of the Asset Sale does not occur on or prior to June 30, 2019 (See “Item 4. Information on the Company—A. History and Development of the Company—Proposed Sale of Ehave Connect Asset”).

 

C. Interests of Experts and Council

 

Not applicable

 

ITEM 8. FINANCIAL INFORMATION

 

A. Statements and Other Financial Statements

 

Financial Statements

 

The financial statements filed as part of this annual report are filed under Item 18.

 

Legal Proceedings

 

The directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.

 

The directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

 

Dividend Policy

 

We have not paid any dividends on our common shares.  We anticipate that, for the foreseeable future, we will retain any future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends for at least the next several years. We may pay dividends on our common shares in the future if we generate profits and in accordance with the Business Corporations Act (Ontario).  Any decision to pay dividends on common shares in the future will be made by the board of directors on the basis of the earnings, financial requirements and other conditions existing at such time.

 

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B. Significant Changes

 

Except as otherwise disclosed in this Annual Report on Form 20-F, no significant change has occurred since December 31, 2018. 

 

ITEM 9. THE OFFER AND LISTING

 

A. Offering and Listing Details

 

Our common shares are quoted on the Pink Open Market under the symbol “EHVVF.” Our common shares were quoted on the OTCQB Venture Market under the symbol “EHVVF” from November 21, 2016, until they were removed to the Pink Open Market on April 30, 2019, because we were unable to cure our bid price deficiency. Prior to being quoted on the OTCQB Venture Market, there was no established market for our common shares. Our common shares trade and have traded on a limited or sporadic basis and should not be deemed to constitute an established public trading market. Broker-dealers often decline to trade in over-the-counter stocks that are quoted on the Pink Open Market given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the potential market for our common shares by reducing the number of potential investors. This may make it more difficult for investors in our common shares to sell shares to third parties or to otherwise dispose of their shares. This could cause our share price to decline, and there is no assurance that there will be liquidity in our common shares.

 

In addition, The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

 

We expect the share consolidation, expected to be effective as of May 27, 2019, to cure the bid price deficiency; however, the expected increase in the price of our common shares from the share consolidation may not be maintained, and there can be no assurance that the market price of our common shares following the share consolidation will remain above the minimum bid price requirement to restore or maintain eligibility for quotation of our common shares on OTCQB Venture Market.

 

B. Plan of Distribution

 

Not applicable

 

C. Markets

 

Our common shares are quoted on the Pink Open Market under the symbol “EHVVF”.

 

D. Selling Shareholders

 

Not applicable

 

E. Dilution

 

Not applicable

 

F. Expenses of the Issue

 

Not applicable

 

ITEM 10.  ADDITIONAL INFORMATION

 

A. Share Capital

 

Not applicable

 

B. Memorandum and Articles of Association

 

Articles of Continuance

 

We are governed by our amended articles of incorporation (the “Articles”) under the Business Corporations Act of Ontario (the “Act”) and by our by-laws (the “By-laws”). Our Articles provide that there are no restrictions on the business we may carry on or on the powers we may exercise. Companies incorporated under the Act are not required to include specific objects or purposes in their articles or by-laws.

 

Directors

 

Subject to certain exceptions, including in respect of voting on any resolution to approve a contract that relates primarily to the director’s remuneration, directors may not vote on resolutions to approve a material contract or material transaction if the director is a party to such contract or transaction. The directors are entitled to remuneration as shall from time to time be determined by the Board of Directors with no requirement for a quorum of independent directors. The directors have the ability under the Act to exercise our borrowing power, without authorization of the shareholders. The Act permits shareholders to restrict this authority through a company’s articles or by-laws (or through a unanimous shareholder agreement), but no such restrictions are in place for us. Our Articles and By-laws do not require directors to hold shares for qualification.

 

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Rights, Preferences and Dividends Attaching to Shares

 

The holders of common shares have the right to receive dividends if and when declared. Each holder of common shares, as of the record date prior to a meeting, is entitled to attend and to cast one vote for each common share held as of such record date at such annual and/or special meeting, including with respect to the election or re-election of directors. Subject to the provisions of our By-laws, all directors may, if still qualified to serve as directors, stand for re-election. The numbers of our Board of Directors are not replaced at staggered intervals but are elected annually.

 

On a distribution of assets on a winding-up, dissolution or other return of capital (subject to certain exceptions) the holders of common shares shall have a right to receive their pro rata share of such distribution. There are no sinking fund or redemption provisions in respect of the common shares. Our shareholders have no liability to further capital calls as all shares issued and outstanding are fully paid and non-assessable.

 

No other classes of shares are currently permitted to be issued.

 

Action Necessary to Change the Rights of Shareholders

 

The rights attaching to the different classes of shares may be varied by special resolution passed at a meeting of that class’s shareholders.

 

Annual and Special Meetings of Shareholders

 

Under the Act and our By-laws, we are required to mail a Notice of Meeting and Management Information Circular to registered shareholders not less than 21 days and not more than 50 days prior to the date of the meeting. Such materials must be filed concurrently with the applicable securities regulatory authorities in Canada and the US.  Subject to certain provisions of the By-laws, a quorum of two or more shareholders in person or represented by proxy holding or representing by proxy not less than five (5%) percent of the total number of issued and outstanding shares enjoying voting rights at such meeting is required to properly constitute a meeting of shareholders.  Shareholders and their duly appointed proxies and corporate representatives are entitled to be admitted to our annual and/or special meetings.

 

Limitations on the Rights to Own Shares

 

The Articles do not contain any limitations on the rights to own shares. Except as described below, there are currently no limitations imposed by Canadian federal or provincial laws on the rights of non-resident or foreign owners of Canadian securities to hold or vote the securities held. There are also no such limitations imposed by the Articles and By-laws with respect to our common shares.

 

Disclosure of Share Ownership

 

In general, under applicable securities regulation in Canada, a person or company who beneficially owns, directly or indirectly, voting securities of an issuer or who exercises control or direction over voting securities of an issuer or a combination of both, carrying more than 10% of the voting rights attached to all the issuer’s outstanding voting securities is an insider and must, within 10 days of becoming an insider, file a report in the required form effective the date on which the person became an insider. The report must disclose any direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer. Additionally, securities regulation in Canada provides for the filing of a report by an insider of a reporting issuer whose holdings change, which report must be filed within 10 days from the day on which the change takes place.

 

The rules in the US governing the ownership threshold above which shareholder ownership must be disclosed are more stringent than those discussed above. Section 13 of the Exchange Act imposes reporting requirements on persons who acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act) of more than 5% of a class of an equity security registered under Section 12 of the Exchange Act.  In general, such persons must file, within 10 days after such acquisition, a report of beneficial ownership with the SEC containing the information prescribed by the regulations under Section 13 of the Exchange Act. This information is also required to be sent to the issuer of the securities and to each exchange where the securities are traded.

 

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Other Provisions of Articles and By-laws

 

There are no provisions in the Articles or By-laws:

 

· delaying or prohibiting a change in control of our company that operate only with respect to a merger, acquisition or corporate restructuring;

 

· discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares;

 

· requiring disclosure of share ownership; or

 

· governing changes in capital, where such provisions are more stringent than those required by law.

 

C. Material Contracts

 

We have employment contracts with our chief executive officer and our chief technology officer as summarized in Item 6B. 

 

On March 22, 2019, we entered into an Asset Purchase Agreement with Zyus Life Sciences Inc., pursuant to which the Company will sell to Zyus all of the Company’s intellectual property and license, marketing, and development agreements relating to its health informatics Ehave Connect platform. See “Item 4. Information on the Company—A. History and Development of the Company—Proposed Sale of Ehave Connect Asset”)

 

On February 27, 2019, we entered into an agreement to cancel 2,250,000 compensation warrants that had anti-rachet and anti-dilution provisions for 32,811,191 common shares of the Company.

 

On February 27, 2019, we entered into agreements to exchange $400,000 in fees for 126,837,838 common shares of the Company.

 

On February 27, 2019, we entered an agreement with Mr. Dwivedi to amend his employment agreement to cancel his Adjustment Equity Award, cancel his outstanding options, and cancel his termination without cause provisions in exchange for 253,654,987 common shares of the company, which will constitute 10% of the issued and outstanding common shares in the capital of the Company as of the date of the agreement.

 

On February 27, 2019, we entered into an agreement with Mr. Goyette to amend his employment agreement to cancel his outstanding options, and cancel his notice period in exchange for 50,730,997 common shares of the company, which will constitute 2% of the issued and outstanding common shares in the capital of the Company as of the date of the agreement.

 

On October 30, 2018, we entered in the CHT Agreement for the use of Ehave Connect whereby CHT would acquire the exclusive rights to Ehave Connect for use in companion animals. On April 18, 2019, we and CHT agreed that upon closing of the Asset Sale, the CHT Agreement shall be terminated, and we, as consideration, within ten business days following the date of the closing of the Asset Sale, shall pay CHT, in cash, up to CAD$242,000, which includes up to $37,000 for legal fees that CHT incurred in connection with the CHT Agreement, provided that the agreement to terminate the CHT Agreement and our obligation to pay CHT shall no longer be effective if the closing of the Asset Sale does not occur on or prior to June 30, 2019 (See “Item 4. Information on the Company—A. History and Development of the Company—Proposed Sale of Ehave Connect Asset”).”

 

On September 27, 2018, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$111,110), including $11,110 of original issue discount. On February 27, 2019, promissory notes with an aggregate principal amount of $85,756 (CDN$111,110) were exchanged for unsecured debentures for a bridge loan. On February 28, 2019, we entered into an agreement to convert the note into 54,203,662 common shares of the Company.  

 

On April 6, 2018, we signed an amendment to the lease of our office space in Oakville, Ontario, for a period of two years, commencing on May 1, 2018 and expiring on May 1, 2020. The total monthly payment under the sublease is $1,607, plus any applicable fees and taxes.

 

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On January 31, 2018, the Company entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. The Secured Debentures are secured against certain of our assets. Under the terms of the Secured Debentures, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Secured Debentures is at the option of the holder. At the time of conversion, the holder will also receive an equal amount of common share purchase warrants with an exercise price equal to the issue price. The Secured Debentures are due on July 31, 2018 and bear interest at 10% per annum. The initial installment of the Secured Debentures was issued on January 31, 2018 for proceeds of $609,310 (CDN$750,000). On March 19, 2018, the final instalment of $573,307 (CDN$750,000) was received. The Secured Debentures are secured against the general assets and intellectual property of the Company. On February 27, 2019, we entered into an agreement to convert the note into 1,268,274,936 common shares of the Company.

 

On January 31, 2018, promissory notes with an aggregate principal amount of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures (the “Unsecured Debentures”). From January 1, 2018 to January 31, 2018, the Company issued an additional $20,098 (CDN$25,000) Unsecured Debentures for total proceeds of $332,065 (CDN$409,000). On March 19, 2018, an installment of the Unsecured Debentures in the amount of $382,263 (CDN$500,000) was received. Under the terms of the Unsecured Debentures, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Unsecured Debentures is at the option of the holder. At the time of conversion, the holder will also receive 120% of the amount of the common shares issued of common share purchase warrants with an exercise price equal to the issue price. The Unsecured Debentures are due on July 31, 2018 and bear interest at 10% per annum. On February 27, 2019, we entered into an agreement to convert the note into 276,809,884 common shares of the Company.

 

On November 15, 2017, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $196,237. Lenders of the promissory notes were issued 2,133,333 common share warrants at an exercise price of $0.075 per share with an expiry date of November 16, 2022. On January 31, 2018 $148,745 of the promissory notes were repaid and $47,932 of the promissory notes were exchanged for Unsecured Debentures. On February 27, 2019, we entered into an agreement to cancel the warrants in exchange for 31,109,865 common shares of the Company.

 

On September 12, 2017, we entered into a consulting agreement with Bull Media Consulting LLC, for a period of 3 months, commencing September 15, 2017 for financial advisory, strategic business panning, and investor relations services. The total monthly cost is $10,000 per month.

 

D. Exchange Controls

 

Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of our securities, except as discussed below in Section E,  Taxation .

 

Restrictions on Share Ownership by Non-Canadians

 

There are no limitations under the laws of Canada or in our organizational documents on the right of foreigners to hold or vote securities of our company, except that the Investment Canada Act (the “Investment Canada Act”) may require review and approval by the Minister of Industry (Canada) of certain acquisitions of “control” of our Company by a “non-Canadian.”

 

Investment Canada Act

 

Under the Investment Canada Act, transactions exceeding certain financial thresholds, and which involve the acquisition of control of a Canadian business by a non-Canadian, are subject to review and cannot be implemented unless the Minister of Industry and/or, in the case of a Canadian business engaged in cultural activities, the Minister of Canadian Heritage, are satisfied that the transaction is likely to be of “net benefit to Canada”. If a transaction is subject to review (a “Reviewable Transaction”), an application for review must be filed with the Investment Review Division of Industry Canada and/or the Department of Canadian Heritage prior to the implementation of the Reviewable Transaction. The responsible Minister is then required to determine whether the Reviewable Transaction is likely to be of net benefit to Canada taking into account, among other things, certain factors specified in the Investment Canada Act and any written undertakings that may have been given by the applicant. The Investment Canada Act contemplates an initial review period of up to 45 days after filing; however, if the responsible Minister has not completed the review by that date, the Minister may unilaterally extend the review period by up to 30 days (or such longer period as may be agreed to by the applicant and the Minister) to permit completion of the review. Direct acquisitions of control of most Canadian businesses by or from World Trade Organization (“WTO”) investors are reviewable under the Investment Canada Act only if, in the case of an acquisition of voting securities, the value of the worldwide assets of the Canadian business or, in the case of an acquisition of substantially all the assets of a Canadian business, the value of those assets exceed C$295 million for the year 2008 (this figure is adjusted annually to reflect inflation). Indirect acquisitions (e.g., an acquisition of a US corporation with a Canadian subsidiary) of control of such businesses by or from WTO investors are not subject to review, regardless of the value of the Canadian businesses’ assets. Significantly lower review thresholds apply where neither the investor nor the Canadian business is WTO investor controlled or where the Canadian business is engaged in uranium mining, certain cultural businesses, financial services or transportation services.

 

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Even if the transaction is not reviewable because it does not meet or exceed the applicable financial threshold, the non-Canadian investor must still give notice to Industry Canada and, in the case of a Canadian business engaged in cultural activities, Canadian Heritage, of its acquisition of control of a Canadian business within 30 days of its implementation.

 

Competition Act

 

The Competition Act (Canada) (the “Competition Act”) requires that a pre-merger notification filing be submitted to the Commissioner of Competition (the “Commissioner”) in respect of proposed transactions that exceed certain financial and other thresholds. If a proposed transaction is subject to pre-merger notification, a pre-merger notification filing must be submitted to the Commissioner and a waiting period must expire or be waived by the Commissioner before the transaction may be completed. The parties to a proposed transaction may choose to submit either a short-form filing (in respect of which there is a 14-day statutory waiting period) or a long-form filing (in respect of which there is a 42-day statutory waiting period). However, where the parties choose to submit a short-form filing, the Commissioner may, within 14 days, require that the parties submit a long-form filing, in which case the proposed transaction generally may not be completed until 42 days after the long-form filing is submitted by the parties.

 

The Commissioner may, upon request, issue an advance ruling certificate (“ARC”) in respect of a proposed transaction where she is satisfied that she would not have sufficient grounds on which to apply to the Competition Tribunal for an order under the merger provisions of the Competition Act. If the Commissioner issues an ARC in respect of a proposed transaction, the transaction is exempt from the pre-merger notification provisions. In addition, if the transaction to which the ARC relates is substantially completed within one year after the ARC is issued, the Commissioner cannot seek an order of the Competition Tribunal under the merger provisions of the Competition Act in respect of the transaction solely on the basis of information that is the same or substantially the same as the information on the basis of which the ARC was issued.

 

If the Commissioner is unwilling to issue an ARC, she may nevertheless issue a “no action” letter waiving notification and confirming that she is of the view that grounds do not then exist to initiate proceedings before the Competition Tribunal under the merger provisions of the Competition Act with respect to the proposed transaction, while preserving, during the three years following completion of the proposed transaction, her authority to initiate proceedings should circumstances change.

 

Regardless of whether pre-merger notification is required, the Commissioner may apply to the Competition Tribunal (a special purpose tribunal) for an order under the merger provisions of the Competition Act. If the Competition Tribunal finds that the transaction is or is likely to prevent or lessen competition substantially, it may order that the parties not proceed with the transaction or part of it or, in the event that the transaction has already been completed, order its dissolution or the disposition of some of the assets or shares involved. In addition, the Competition Tribunal may, with the consent of the person against whom the order is directed and the Commissioner, order that person to take any other action as is deemed necessary to remedy any substantial lessening or prevention of competition that the Competition Tribunal determines would or would likely result from the transaction.

 

E. Taxation

 

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

 

The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership and disposition of common shares.

 

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This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including, without limitation, specific tax consequences to a U.S. Holder under an applicable income tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences to U.S. Holders of the acquisition, ownership, and disposition of common shares. In addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each prospective U.S. Holder should consult its own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.

 

No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions described in this summary.

 

Scope of this Summary

 

Authorities

 

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied retroactively. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

 

U.S. Holders

 

For purposes of this summary, the term “U.S. Holder” means a beneficial owner of common shares that is for U.S. federal income tax purposes:

 

· an individual who is a citizen or resident of the United States;

 

· a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;

 

· an estate whose income is subject to U.S. federal income taxation regardless of its source; or

 

· a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

 

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U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

 

This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) have a “functional currency” other than the U.S. dollar; (e) own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) acquire common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) hold common shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); or (h) own, have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power or value of the outstanding shares of the Company. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a business in Canada; (d) persons whose common shares constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.

 

If an entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners or participants). This summary does not address the tax consequences to any such partner (or owner or participants). Partners (or other owners or participants) of entities or arrangements that are classified as partnerships or as “pass-through” entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership and disposition of common shares.

 

Passive Foreign Investment Company Rules

 

PFIC Status of the Company

 

If the Company were to constitute a “passive foreign investment company” under the meaning of Section 1297 of the Code (a “PFIC”, as defined below) for any year during a U.S. Holder’s holding period, then certain potentially adverse rules may affect the U.S. federal income tax consequences to a U.S. Holder as a result of the acquisition, ownership and disposition of common shares. The Company may be a PFIC for its current tax year and subsequent tax years. The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on the assets and income of such corporation over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company (or any subsidiary of the Company) concerning its PFIC status. Each U.S. Holder should consult its own tax advisors regarding the PFIC status of the Company and each subsidiary of the Company.

 

In any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621.

 

The Company generally will be a PFIC if, for a tax year, (a) 75% or more of the gross income of the Company is passive income (the “PFIC income test”) or (b) 50% or more of the value of the Company’s assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets (the “PFIC asset test”). “Gross income” generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.

 

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For purposes of the PFIC income test and PFIC asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, “passive income” does not include certain interest, dividends, rents, or royalties that are received or accrued by the Company from certain “related persons” (as defined in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items are properly allocable to the income of such related person that is not passive income.

 

Under certain attribution rules, if the Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Company’s direct or indirect equity interest in any company that is also a PFIC (a ’’Subsidiary PFIC’’), and will generally be subject to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of common shares. Accordingly, U.S. Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received and no redemptions or other dispositions of common shares are made.

 

Default PFIC Rules Under Section 1291 of the Code

 

If the Company is a PFIC for any tax year during which a U.S. Holder owns common shares, the U.S. federal income tax consequences to such U.S. Holder of the acquisition, ownership, and disposition of common shares will depend on whether and when such U.S. Holder makes an election to treat the Company and each Subsidiary PFIC, if any, as a “qualified electing fund” or “QEF” under Section 1295 of the Code (a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”

 

A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code (described below) with respect to (a) any gain recognized on the sale or other taxable disposition of common shares and (b) any “excess distribution” received on the common shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder’s holding period for the common shares, if shorter).

 

Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of common shares (including an indirect disposition of the stock of any Subsidiary PFIC), and any “excess distribution” received on common shares or with respect to the stock of a Subsidiary PFIC, must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective common shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain preferred rates). The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible.

 

If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds common shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent tax years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above), but not loss, as if such common shares were sold on the last day of the last tax year for which the Company was a PFIC.

 

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QEF Election

 

A U.S. Holder that makes a timely and effective QEF Election for the first tax year in which the holding period of its common shares begins generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to its common shares. A U.S. Holder that makes a timely and effective QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company. However, for any tax year in which the Company is a PFIC and has no net income or gain, U.S. Holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election. If a U.S. Holder that made a QEF Election has an income inclusion, such a U.S. Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.

 

A U.S. Holder that makes a timely and effective QEF Election with respect to the Company generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of common shares. The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding period for the common shares in which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year. If a U.S. Holder does not make a timely and effective QEF Election for the first year in the U.S. Holder’s holding period for the common shares, the U.S. Holder may still be able to make a timely and effective QEF Election in a subsequent year if such U.S. Holder meets certain requirements and makes a “purging” election to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such common shares were sold for their fair market value on the day the QEF Election is effective. If a U.S. Holder makes a QEF Election but does not make a “purging” election to recognize gain as discussed in the preceding sentence, then such U.S. Holder shall be subject to the QEF Election rules and shall continue to be subject to tax under the rules of Section 1291 discussed above with respect to its common shares. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs.

 

A QEF Election will apply to the tax year for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not a PFIC. Accordingly, if the Company becomes a PFIC in another subsequent tax year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described above during any subsequent tax year in which the Company qualifies as a PFIC.

 

U.S. Holders should be aware that there can be no assurances that the Company will satisfy the record keeping requirements that apply to a QEF, or that the Company will supply U.S. Holders with information that such U.S. Holders are required to report under the QEF rules, in the event that the Company is a PFIC. Thus, U.S. Holders may not be able to make a QEF Election with respect to their common shares. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a QEF Election.

 

A U.S. Holder makes a QEF Election by attaching a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed United States federal income tax return. However, if the Company does not provide the required information with regard to the Company or any of its Subsidiary PFICs, U.S. Holders will not be able to make a QEF Election for such entity and will continue to be subject to the rules of Section 1291 of the Code discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains and excess distributions.

 

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Mark-to-Market Election

 

A U.S. Holder may make a Mark-to-Market Election only if the common shares are marketable stock. The common shares generally will be “marketable stock” if the common shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements, and meets other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange effectively promote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Provided that the common shares are “regularly traded” as described in the preceding sentence, the common shares are expected to be marketable stock. However, each U.S. Holder should consult its own tax advisor in this regard.

 

A U.S. Holder that makes a Mark-to-Market Election with respect to its common shares generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to such common shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for the common shares for which the Company is a PFIC and such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the common shares.

 

A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the common shares, as of the close of such tax year over (b) such U.S. Holder’s adjusted tax basis in such common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (a) such U.S. Holder’s adjusted tax basis in the common shares, over (b) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).

 

A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holder’s tax basis in the common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years). Losses that exceed this limitation are subject to the rules generally applicable to losses provided in the Code and Treasury Regulations.

 

A U.S. Holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return. A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the common shares cease to be “marketable stock” or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.

 

Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to the common shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC to its shareholder.

 

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Other PFIC Rules

 

Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which common shares are transferred.

 

Certain additional adverse rules may apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.

 

Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC.

 

The PFIC rules are complex, and each U.S. Holder should consult its own tax advisors regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.

 

General Rules Applicable to the Ownership and Disposition of Common Shares

 

The following discussion describes the general rules applicable to the ownership and disposition of the common shares but is subject in its entirety to the special rules described above under the heading “Passive Foreign Investment Company Rules.”

 

Distributions on Common Shares

 

A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a Common Share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current and accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. A dividend generally will be taxed to a U.S. Holder at ordinary income tax rates if the Company is a PFIC for the tax year of such distribution or the preceding tax year. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the common shares and thereafter as gain from the sale or exchange of such common shares. (See “Sale or Other Taxable Disposition of Common Shares” below). However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution by the Company with respect to the common shares will constitute ordinary dividend income. Dividends received on common shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Subject to applicable limitations and provided the Company is eligible for the benefits of the Canada-U.S. Tax Convention, dividends paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisors regarding the application of such rules.

 

Sale or Other Taxable Disposition of Common Shares

 

Upon the sale or other taxable disposition of common shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the U.S. dollar value of cash received plus the fair market value of any property received and such U.S. Holder’s tax basis in such common shares sold or otherwise disposed of. A U.S. Holder’s tax basis in common shares generally will be such holder’s U.S. dollar cost for such common shares. Gain or loss recognized on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, the common shares have been held for more than one year.

 

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Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.

 

Additional Considerations

 

Additional Tax on Passive Income

 

Certain U.S. Holders that are individuals, estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8% tax on all or a portion of their “net investment income,” which includes dividends on the common shares and net gains from the disposition of the common shares. Further, excess distributions treated as dividends, gains treated as excess distributions under the PFIC rules discussed above, and mark-to-market inclusions and deductions are all included in the calculation of net investment income.

 

Treasury Regulations provide, subject to the election described in the following paragraph, that solely for purposes of this additional tax, that distributions of previously taxed income will be treated as dividends and included in net investment income subject to the additional 3.8% tax. Additionally, to determine the amount of any capital gain from the sale or other taxable disposition of common shares that will be subject to the additional tax on net investment income, a U.S. Holder who has made a QEF Election will be required to recalculate its basis in the common shares excluding QEF basis adjustments.

 

Alternatively, a U.S. Holder may make an election which will be effective with respect to all interests in controlled foreign corporations and QEFs held in that year or acquired in future years. Under this election, a U.S. Holder pays the additional 3.8% tax on QEF income inclusions and on gains calculated after giving effect to related tax basis adjustments. U.S. Holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax to any of their income or gains in respect of the common shares.

 

Receipt of Foreign Currency

 

The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of common shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.

 

Foreign Tax Credit

 

Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

 

Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” Generally, dividends paid by a foreign corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election is properly made under the Code. However, the amount of a distribution with respect to the common shares that is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisors regarding the foreign tax credit rules.

 

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Backup Withholding and Information Reporting

 

Under U.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain thresholds. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless their common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.

 

Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, common shares will generally be subject to information reporting and backup withholding tax, at the rate of 24%, if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.

 

The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.

 

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.

 

F. Dividends and Paying Agents

 

Not applicable

 

G. Statements by Experts

 

Not applicable

 

H. Documents on Display

 

We are subject to the informational requirements of the Exchange Act and file reports and other information with the SEC. The SEC maintains a Website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. We also make available free of charge on our website at www.ehave.com, as soon as reasonably practicable after such reports are available on the SEC website.

  

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We “incorporate by reference” information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this Form 20-F and more recent information automatically updates and supersedes more dated information contained or incorporated by reference in this Form 20-F.

 

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders.

 

We will provide without charge to each person, including any beneficial owner, to whom a copy of this annual report has been delivered, on the written or oral request of such person, a copy of any or all documents referred to above which have been or may be incorporated by reference in this annual report (not including exhibits to such incorporated information that are not specifically incorporated by reference into such information). Requests for such copies should be directed to us at the following address Prateek Dwivedi, Chief Executive Officer, 277 Lakeshore Road East, Suite 203, Oakville, Ontario, Canada L6J 6J3, +1(905)362-1499, info@ehave.com

 

I. Subsidiary Information

 

Not applicable.

 

ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Foreign Currency Risk

 

We operate primarily in Canada and the United States.  Therefore, we are exposed to foreign currency risk associated with our expenses outside of Canada.  We do not use financial derivative instruments to manage this market risk.

 

Interest Rate Risk

 

None of the Company’s long-term debt contain interest rate provisions that may be subject to fluctuations in market interest rates. As such, the Company does not have significant interest rate risk or has entered into any financial instruments to mitigate such risk.

 

We do not use financial instruments for trading purposes and are not parties to any leverage derivatives.  We do not currently engage in hedging transactions.  See “Currency and Exchange Rates” and Item 4 – “Information on the Company”.

 

ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

 

Not applicable.

PART II

 

ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

 

None

 

ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

 

A. Modification of Instruments Defining Rights of Security Holders

 

None

 

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B. Modification or Issuance of Other Class of Securities

 

None

 

C. Withdrawal or Substitution of Security

 

None

 

 

D. Change of Trustee or Paying Agent

 

None

 

E. Use of Proceeds

 

None.

 

ITEM 15.  CONTROLS AND PROCEDURES

 

A. Evaluation of Disclosures and Procedures

 

During the review by our Chief Executive Officer and Chief Financial Officer of our Company’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), and based on the evaluation of these controls and procedures as of the end of the period covered by this annual report, it was determined that a material weakness was identified in our controls for ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. New procedures are being implemented to eliminate this weakness. The information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

B. Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As required by Rule 13a-15(c) of the Exchange Act, our management conducted an evaluation of our company's internal control over financial reporting as of December 31, 2018, based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal controls over financial reporting were not effective due to the existence of a material weakness as it relates to a lack of sufficient accounting records and underlying supporting detail. as of December 31, 2018. Management has since addressed this weakness and has implemented the necessary changes to have effective controls.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

C. Attestation Report of the Registered Public Accounting Firms

 

Not applicable.

 

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D. Changes in Internal Controls over Financial Reporting

 

Other than changes being implemented to address the material weakness discussed above, there were no changes in our internal controls over financial reporting that occurred during the period that is covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

ITEM 16.  [RESERVED]

 

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT

 

Our Audit Committee is comprised of Mr. Posen, Mr. Kaplan and Mr. Dwivedi. Our Board has determined that Mr. Posen is an audit committee financial expert. Mr. Posen is independent either under the Rule 5605(d)(2) of the NASDAQ Capital Market and Rule 10A-3 of the Exchange Act.

 

ITEM 16B.  CODE OF ETHICS

 

Our board of directors has adopted a Code of Conduct for all Company personnel, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  A copy of this Code of Conduct may be found on our website at http://www.ehve.com.

 

There were no amendments to our Code of Conduct during the fiscal year ended December 31, 2018. We did not grant any waivers to the provisions of our Code of Conduct during the fiscal year ended December 31, 2018.

 

ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees and Services

 

During the financial years ended December 31, 2018, and 2017, Turner Stone and Company, L.L.P. received the following fees:

 

    2018     2017  
Item   $     $  
Audit fees     37,500       19,500  
Audit-related fees            
Tax fees            
All other fees            
Total     37,500       19,500  

 

Audit Fees

 

Audit fees were for professional services rendered by Turner Stone and Company for the audit of our annual financial statements and services provided in connection with statutory and regulatory filings or engagements, accounting consultations and subscription to on-line accounting services.

 

Audit-related Fees

 

Audit-related fees are the aggregate fees billed for assurance and related services by Turner Stone and Company that are reasonably related to the performance of the audit or review of our financial statements and are not reported under Audit Fees.

 

Tax Fees

 

Tax fees are the aggregate fees billed for professional services rendered for tax compliance, tax advice, and tax planning.

 

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All Other Fees

 

Other fees are for products and services other than those described under the headings Audit Fees, Audit-Related Fees and Tax Fees above.

 

The Audit Committee pre-approves all audit services to be provided to us by our independent auditors. The Audit Committee’s policy regarding the pre-approval of non-audit services to be provided to us by our independent auditors is that all such services shall be pre-approved by the Audit Committee or by the Chair of the Audit Committee, who must report all such pre-approvals to the Audit Committee at their next meeting following the granting thereof. Non-audit services that are prohibited to be provided to us by our independent auditors may not be pre-approved. In addition, prior to the granting of any pre-approval, the Audit Committee or the Chair, as the case may be, must be satisfied that the performance of the services in question will not compromise the independence of the independent auditors.

 

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

Not applicable.

 

ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES

 

None.

 

ITEM 16F.  CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS

 

None.

 

ITEM 16G. CORPORATE GOVERNANCE

 

Not applicable.

 

ITEM 16H.  MINE SAFETY DISCLOSURE

 

Not applicable.

 

PART III

 

ITEM 17. FINANCIAL STATEMENTS.

 

Not applicable.

 

ITEM 18 FINANCIAL STATEMENTS

 

The financial statements appear on pages F-1 through F-13.

 

ITEM 19. EXHIBITS.

 

The following exhibits are filed as part of this annual report:

 

Exhibit
Number
  Description
     
1.1   Articles of Incorporation (1)
1.2   Articles of Amendment to the Articles of Incorporation dated November 30, 2011 (2)
1.3   Articles of Amendment to the Articles of Incorporation dated May 13, 2015 (3)
1.4   Articles of Amendment to the Articles of Incorporation dated June 26, 2015 (4)
1.5   Articles of Amendment to the Articles of Incorporation dated November 4, 2015 (5)
1.6   Bylaws No. 2 (6)
4.1   Form of Convertible Loan Agreement (7)

 

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4.2   Securities Purchase Agreement, dated July 7, 2015, between the Company and the purchasers identified therein (8)
4.3   Form of Secured Convertible Note, dated July 7, 2015 (9)
4.4   Form of Common Stock Purchase Warrant, dated July 7, 2015 (10)
4.5   Form of Lock Up Agreement (11)
4.6   License Agreement, dated April 24, 2015, between the Company and The Governing Counsel of the University of Toronto (12)
4.7   Form of Subscription Agreement (13)
4.8   Office Suite License and Services Agreement, effective November 1, 2015, between iQ Univeristy LP and the Company (14)
4.9   Form of Warrant sold in the registered public offering (15)
4.10   Services Agreement, dated February 1, 2016 with Artimetrix Software Inc. (16)
4.11   Consulting Agreement, dated August 3, 2015 with 8121346 Canada Inc. (17)
4.12   Amendment to Consulting Agreement, dated February 1, 2016 with 8121346 Canada Inc. (18)
4.13   Master Services Agreement, dated December 8, 2015 with Blog Inc LLC (dba Cress & Company) (19)
4.14   Executive Employment Agreement, dated July 25, 2016, between the Company and its President and CEO, Prateek Dwivedi (20)
4.15   Executive Employment Agreement, dated December 1, 2016, between the Company and its Chief Technology Officer, David Goyette (21)
4.16   Offer to Sublease, dated January 30, 2017, between the Company and Home Trust Company (22)
4.17   API Integration & Distribution Agreement dated December 13, 201,6 between the Company and MHS (23)
4.18   Letter of Agreement, dated November 1, 2017, between the Company and Tiberend Strategic Advisors, Inc. (24)
4.19   Stock Option Plan, approved on January 12, 2017, at the Annual and Special Meeting of Shareholders (25)
4.20   Note and Warrant Purchase Agreement, dated as of November 14, 2016 (26)
4.21   Form of Convertible Promissory Note (27)
4.22   Strategic Relationship Agreement, dated as of February 3, 2017, between the Company and MedReleaf Corp. (28)
4.23   Amendment to API Integration & Distribution Agreement, dated as of May 4, 2017, between the Company and MHS (29)
4.24   Form of Promissory Note (30)
4.25   Form of Investor Letter (31)
4.26   Form of Promissory Note with Warrants (32)
4.27   Form of Secured Subscription Agreement for Units (33)
4.28   Form of Compensation Option to Purchase Common Shares (34)
4.29   Form of Senior Secured Convertible Debenture (35)
4.30   Form of Warrant to Purchase Common Shares (36)
4.31   Form of Unsecured Subscription Agreement for Units (Premium) (37)
4.32   Form of Unsecured Subscription Agreement for Units (Regular) (38)
4.33   Form of Unsecured Convertible Debenture (39)
4.34   Agreement, dated March 1, 2018, between the Company and Revive Therapeutics Ltd. (40)
4.35   Agreement, dated March 5, 2018, between the Company and Aequus Pharmaceuticals Inc. (41)
4.36   Services Agreement, dated January 15, 2017, between the Company and NView Management Inc. (42)
4.37   Services Agreement, dated April 23, 2018, between the Company and Dianne Parsons, C.P.A. (43)
4.38   Lease, dated April 6, 2018, between the Company and Lisgar Development Limited (44)
4.39*   Form of Note Conversion Agreement (Premium, 2018 Notes)
4.40*   Form of Note Conversion Agreement (Regular, 2016 Notes)
4.41*   Form of Note Conversion Agreement (Regular, 2018 Notes)
4.42*   Form of Promissory Note dated September 27, 2018
4.43*   Form of Promissory Note dated September 27, 2018
4.44*   Agreement, dated October 30, 2018, between the Company and Companion Healthcare Technologies.
4.45*   Form of Promissory Note dated November 29, 2018
4.46*   Form of Promissory Note dated October 31, 2018
4.47*   Loan Agreement dated January 1, 2019

 

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4.48*   Form of Promissory Note dated January 28, 2019
4.49*   Form of Promissory Note dated January 28, 2019
4.50*   Form of Warrant Cancellation
4.51*   Memorandum of Understanding, dated February 27, 2019, between the Company and David Goyette, Chief Technology Officer
4.52*   Memorandum of Understanding, dated February 27, 2019, between the Company and Prateek Dwivedi, Chief Executive Officer
4.53*   Form of Bridge Loan Agreement
4.54*   Form of Bridge Loan Note
4.55*   Agreement, dated February 27, 2019, between the Company and Bezalel Partners LLC
4.56*   Agreement, dated February 27, 2019, between the Company and KW Capital Partners Ltd
4.57*   Agreement, dated February 27, 2019, between the Company and Scott Woodrow
4.58*   Form of Note Conversion - Bridge Loan Note
4.59*   Form of Promissory Note dated March 26, 2019
4.60*   Asset Purchase Agreement, dated March 22, 2019, between Ehave, Inc. and ZYUS Life Sciences Inc.
4.61*   Form of Security Agreement, to be entered into between Ehave, Inc. and ZYUS Life Sciences Inc.
4.62*   Form of Non-Competition Agreement, to be entered into between Ehave, Inc. and ZYUS Life Sciences Inc.
4.63*   Minutes of Settlement, dated April 18, 2019, between Ehave, Inc. and Companion Hea lthcare Technologies
12.1*   Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*   Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*   Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2*   Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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*Filed herewith  

+ To be filed by amendment

 

(1) Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015. 
(2) Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(3) Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(4) Incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(5) Incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(6) Incorporated by reference to Exhibit 3.5 to the Form 6-K filed with the SEC on January 12, 2017.
(7) Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(8) Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(9) Incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(10) Incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(11) Incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(12) Incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(13) Incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form F-1/A filed with the SEC on December 18, 2015.

 

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(14) Incorporated by reference to Exhibit 10.21 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(15) Incorporated by reference to Exhibit 10.23 to the Company’s Registration Statement on Form F-1/A filed with the SEC on December 18, 2015.
(16) Incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement on Form F-1/A filed with the SEC on March 11, 2016.
(17) Incorporated by reference to Exhibit 10.25 to the Company’s Registration Statement on Form F-1/A filed with the SEC on March 11, 2016.
(18) Incorporated by reference to Exhibit 10.26 to the Company’s Registration Statement on Form F-1/A filed with the SEC on March 11, 2016.
(19) Incorporated by reference to Exhibit 10.27 to the Company’s Registration Statement on Form F-1/A filed with the SEC on March 11, 2016.
(20) Incorporated by reference to Exhibit 4.14 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(21) Incorporated by reference to Exhibit 4.15 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(22) Incorporated by reference to Exhibit 4.16 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(23) Incorporated by reference to Exhibit 4.17 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(24) Incorporated by reference to Exhibit 4.18 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(25) Incorporated by reference to Exhibit 4.19 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(26) Incorporated by reference to Exhibit 99.1 to the Form 6-K filed with the SEC on November 23, 2016.
(27) Incorporated by reference to Exhibit 99.2 to the Form 6-K filed with the SEC on November 23, 2016.
(28) Incorporated by reference to Exhibit 4.22 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(29) Incorporated by reference to Exhibit 4.23 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.

(30)

Incorporated by reference to Exhibit 4.24 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(31) Incorporated by reference to Exhibit 4.25 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(32) Incorporated by reference to Exhibit 4.26 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(33) Incorporated by reference to Exhibit 4.27 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(34) Incorporated by reference to Exhibit 4.28 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(35) Incorporated by reference to Exhibit 4.29 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(36) Incorporated by reference to Exhibit 4.30 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(37) Incorporated by reference to Exhibit 4.31 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(38) Incorporated by reference to Exhibit 4.32 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.

(39) 

Incorporated by reference to Exhibit 4.33 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(40) Incorporated by reference to Exhibit 4.34 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(41) Incorporated by reference to Exhibit 4.35 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(42) Incorporated by reference to Exhibit 4.36 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(43) Incorporated by reference to Exhibit 4.37 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
(44) Incorporated by reference to Exhibit 4.38 to the Company’s Annual Report on Form 20-F filed with the SEC on June 14, 2019.
   
  71  

 

   

SIGNATURE

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

Date: May 15, 2019

 

EHAVE, INC.

 

/s/ Prateek Dwivedi   /s/ Dianne Parsons
Prateek Dwivedi   Dianne Parsons
Chief Executive Officer   Chief Financial Officer

 

  72  

 

   

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of EHAVE, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of EHAVE, Inc. (the “Company”) as of December 31, 2018 and 2017 and the related statements of operations and other comprehensive income (loss), changes in 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 the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Explanatory Paragraph – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had insufficient operating revenues and cash flows both of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

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

 

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

 

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

 

/s/ Turner, Stone & Company, L.L.P.  
   
Dallas, Texas  
May 15, 2019  

 

We have served as the Company’s auditor since 2015.

 

  F- 1  

 

 

EHAVE, INC.

BALANCE SHEETS

December 31, 2018 and December 31, 2017

 

    2018     2017  
    U.S.$     U.S.$  
ASSETS                
Current Assets                
Cash   11,222     3,671  
Prepaid expenses     -       14,051  
Refundable taxes     9,754       30,847  
Total current assets     20,976       48,569  
Long term assets                
Other receivables (Notes 4 and 11)     439,258       10,706  
Total long term assets     439,258       10,706  
TOTAL ASSETS     460,234       59,275  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current Liabilities                
Accounts payable     438,358       306,638  
Taxes payables     299,241       130,061  
Other payables     182,365       73,059  
Promissory Notes (Note 6)     137,143       196,237  
Current portion of Convertible notes (Note 6)     2,672,768       1,018,885  
Accrued interest on convertible notes     298,884       73,162  
Unearned Revenue     -       91,515  
Total current liabilities     4,028,761       1,889,557  
Long term liabilities                
Development grant     164,908       178,984  
Total long term liabilities     164,908       178,984  
Total Liabilities     4,193,668       2,068,541  
                 
Commitments and Contingencies (Note 10)                
                 
Stockholders’ Deficit                
                 
Common stock, no par value, unlimited authorized, 75,102,816 issued and outstanding (2017 – 71,304,035 issued and outstanding)     1,544,904       1,419,544  
Additional paid in capital (Note 7)     6,999,942       3,468,314  
Accumulated deficit     (12,577,458 )     (6,989,124 )
Accumulated other comprehensive income     299,178       92,000  
Total stockholders' deficit     (3,733,435 )     (2,009,266 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT     460,234       59,275  

 

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

 

  F- 2  

 

 

EHAVE, INC.

STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

 

    For the years ended December 31,  
    2018     2017  
    U.S.$     U.S.$  
             
Revenue from continuing operations     -       -  
                 
Operating Expenses from continuing operations                
Salaries     294,222       134,506  
Rent     46,348       26,235  
Professional fees     209,255       223,928  
Insurance     29,831       10,277  
Travel     11,932       12,112  
Communications     139,172       231,662  
Software development     90,060       151,981  
General and administrative     381,740       5,885  
Tax credits (see Note 4 & 11)     (440,624 )     -  
Total operating expenses     761,936       796,585  
Operating Loss from continuing operations     (761,936 )     (796,585 )
Other expenses from continuing operations                
Warrant expense     3,454,400       2,745,731  
Interest, bank charges and financing fees     148,641       1,208  
Interest on convertible notes     256,560       72,602  
Total other expenses from continuing operations     3,859,601       2,819,541  
Net loss from continuing operations     (4,621,537 )     (3,616,126 )
                 
Net loss from discontinued operations     (966,797 )     (525,487 )
                 
Total Net Loss     (5,588,334 )     (4,141,613 )
Other Comprehensive loss                
Foreign exchange translation adjustment     (207,178 )     (67,323 )
Total other comprehensive income loss     (207,178 )     (67,323 )
Comprehensive loss     (5,381,156 )     (4,208,936 )
                 
Weighted average shares used to compute net loss per share     75,102,816       71,304,035  
Net loss from continuing operations per share   $ (0.06 )   $ (0.05 )
Net loss from discontinued operations per share   $ (0.01 )   $ (0.01 )

 

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

 

  F- 3  

 

  

EHAVE, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2018 AND 2017

 

    2018     2017  
    U.S.$     U.S.$  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss     (5,588,334 )     (4,141,613 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Warrant expense     3,454,400       2,745,731  
Stock options expense     202,588       139,758  
                 
Changes in operating assets and liabilities:                
Other receivables     -       17,738  
Prepaid expenses     (14,051 )     (896 )
Accounts payable     410,207       152,165  
Accrued interest on convertible notes     225,722       49,077  
Unearned revenue     (91,515 )     91,515  
Refundable taxes receivable     (21,094 )     (30,847 )
Net cash used in operating activities     (1,422,077 )     (977,372 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Other receivables     428,552       -  
Proceeds from convertible notes     1,653,883       327,796  
Proceeds/(repayments) from promissory notes     (59,094 )     196,237  
Share issuance     (125,359 )        
Net cash provided by financing activities     1,897,982       524,033  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
                 
Effect of exchange rate on cash     (468,354 )     450,229  
                 
Net increase (decrease) in cash     7,551       (3,110 )
Cash, beginning of year     3,671       6,781  
Cash, end of year     11,222       3,671  
                 
Interest and taxes paid     -       -  
Supplemental cash flow data                
Non-cash payment of directors’ fees     60,000          
Non-cash payment of financing fees     20,000          
Conversion of convertible notes             506,141  

 

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

 

  F- 4  

 

 

EHAVE, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

 

    Common stock                          
    Shares    

Amount

U.S. $

   

Additional

Paid in

Capital

U.S.$

   

Accumulated

Deficit

U.S.$

   

Accumulated
Other
Comprehensive
Income

U.S.$

   

Total Stockholders’ Deficit

U.S.$

 
                                     
Balance December 31, 2016     44,359,162       913,403       582,825       (2,847,511 )     159,323       (1,191,960 )
Prior Year Adjustment     30,558                                          
Issuance of shares, primarily on conversion of debt     26,914,315       506,141                               506,141  
Warrants and stock options issued (Note 7)                     2,885,489                       2,885,489  
Net loss                             (4,141,613 )             (4,141,613 )
Foreign exchange translation                                     (67,323 )     (67,323 )
Balance December 31, 2017     71,304,035     $ 1,419,544     $ 3,468,314     $ (6,989,124 )   $ 92,000     $ (2,009,266 )
Stock options                     202,588                       202,588  
Net loss                             (5,588,334 )             (5,588,334 )
Share issuance     3,798,781       125,360       (125,360 )                     -  
Warrants                     3,454,400                       3,454,400  
Foreign exchange translation                                     207,178       207,178  
Balance December 31, 2018     75,102,816     $ 1,544,904     $ 6,999,942     $ (12,577,458 )   $ 299,178     $ (3,733,435 )

  

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

 

  F- 5  

 

 

 

EHAVE, INC.

NOTES TO FINANCIAL STATEMENTS

 

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A. Organization and General Description of Business

 

EHAVE, Inc. (formerly known as “Behavioural Neurological Applications and Solutions or 2304101 Ontario Inc.”) (“We” or “the Company”), was incorporated under the laws of the Province of Ontario, Canada on October 31, 2011.  The Company is a publicly listed company whose shares are quoted on the Pink Open Market under the symbol EHVVF in the United States. On April 30, 2019, our common shares were removed from the OTCQB Venture Market to the Pink Open Market because we were unable able to cure our bid price deficiency.

 

The Company is a healthcare company developing a health data platform that integrates with proprietary and third-party assessment and therapeutic digital applications. Our product focus is based on two tiers of activities: (1) MegaTeam and Ninja Reflex, our clinically validated digital assessment and rehabilitation software that is engaging for the patient, (2) adaptation of third-party clinically validated digital assessment and rehabilitation software for enhanced patient engagement and data modeling. We intend to provide technology solutions to clinicians, patients, researchers, pharmaceutical companies and payors.

 

On March 25, 2019 the Company announced it had entered into a definitive asset purchase agreement with Zyus Life Sciences Inc. pursuant to which Zyus will acquire certain intellectual property assets and rights relating to the Company’s health informatics platform. (see Note 11).

 

B.  Basis of Presentation

 

Accordingly, the accompanying financial statements present the operating results as discontinued activities. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. The Company’s functional currency is Canadian dollars. The Company’s fiscal year end is December 31.

 

The Company qualifies as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as the Company does not have more than $1,070,000,000 in annual gross revenue and did not have such amount as of December 31, 2018, its last fiscal year. The Company has elected to take advantage of the extended transition period provided in Section 102(b)(1) of the JOBS Act for complying with new or revised accounting standards.

 

Revenue Recognition

 

The following criteria must be met in determining whether revenue may be recorded: (1) persuasive evidence of a contract exists; (2) software has been delivered and/or services have been provided; (3) the price is fixed or determinable; and (4) collection is reasonably assured.

 

Revenue is recorded as the software is delivered and/or services are provided based on the relative fair value of each element. Unbilled receivables are created when services are performed or software is delivered and revenue is recognized in advance of billings. Deferred revenue is created when billing occurs in advance of performing services or when all revenue recognition criteria have not been met.

 

The Company generates revenue from the following sources: (1) Software revenue, (2) Software as a Service [“SaaS”], and (3) Services revenue.

 

Software Revenue : The Company’s software revenue is comprised of traditional software license fees, maintenance and support fees, and fees from the resale of third-party software licenses. These software license fees include term licenses, perpetual licenses and rental fees. Maintenance and support are generally offered under annual or multi-year terms and are billed either monthly or annually in advance. The Company’s maintenance and support provides customers with periodic technology updates and interactive support related to our software. Maintenance and support revenue is recognized ratably over the stated term.

 

  F- 6  

 

  

Services Revenue : The Company’s services offerings help customers to install, optimize and integrate the Company’s software into their computing environment. For fixed-fee professional services contracts, revenue is recorded based upon proportional performance, measured by the actual number of hours incurred divided by the total estimated number of hours for the project. Changes in the estimated costs or hours to complete the contract, and losses, if any, are reflected in the period during which the change or loss becomes known. The Company also provides professional services on a time and materials basis, recognized monthly based upon hours incurred to date. In all cases, contract milestones, project risk profile and refund provisions are taken into consideration.

 

Foreign Currency Translation

 

The functional currency of the Company’s foreign operations is generally the local currency of the country in which the operation is located. All assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Revenue and expenses are translated using average exchange rates during the period. The result from currency translation is reflected in stockholders’ deficit as a component of accumulated other comprehensive income.

 

Software Products and Research and Development

 

Software development costs are expensed as incurred and consist primarily of design and development costs of new products, and significant enhancements to existing products incurred before the establishment of technological feasibility. Costs incurred subsequent to technological feasibility of new and enhanced products, costs incurred to purchase or to create and implement internal-use software, and software obtained through business acquisitions are capitalized. Such costs are amortized over the estimated useful lives of the related products, using the straight-line method.

 

Income Taxes

 

Income tax expense is based on income before income taxes and is accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded when it is more likely than not that a deferred tax asset will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Considerable judgment is required in assessing and estimating these amounts and the difference between the actual outcome of these future tax consequences and the estimates made could have a material impact on the operating results. To the extent that new information becomes available which causes the Company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact income tax expense in the period in which such determination is made. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

 

The Company has made applications for Ontario Interactive Digital Media Tax Credits (“OIDMTC”). Judgment is required in the determination of qualifying expenses. The final determination of qualifying expenses is not known until acceptance by tax authorities. The Company's credits have been reflected in the financial statements.

 

Net Loss per Common Share, basic

 

The Company has adopted Accounting Standards Codification (“ASC”) subtopic 260-10, Earnings Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure requirements of earnings per share (EPS) information. Basic earnings (loss) per share includes no dilution and is computed by dividing net income or loss by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution of securities that could share in the earnings or losses of the entity. The Company had options to purchase 8,625,192 (2017 - 4,919,982) common shares outstanding for the year December 31, 2018. Additionally, 3,705,300 options to purchase common shares of the Company were issued in 2018 (2017 - 11,220,545). Since these options and warrants would be anti-dilutive, no fully diluted loss per share is presented.

 

  F- 7  

 

  

Recent Pronouncements

 

During the years ended December 31, 2018 and 2017 there were several new accounting pronouncements issued by the Financial Accounting Standards Board (FASB). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.

 

New standards and interpretations

 

In March 2016, the FASB issued ASU 2016-02, Leases, which supersedes ASC Topic 840, Leases, and sets forth the principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors. ASU 2016- 02 requires lessees to classify leases as either finance or operating leases and to record on the balance sheet a right-of-use asset and a lease liability, equal to the present value of the remaining lease payments, for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or a straight-line basis over the term of the lease. ASU 2016-02 will be effective for use beginning January 1, 2019, with early adoption permitted. Entities are required to use a modified retrospective transition method for existing leases. The Company has determined there is no impact from this guidance on our financial statements.

 

C. Risks and Uncertainties

 

Foreign Currency Risk

 

The Company is exposed to fluctuations in the exchange rate between the United States dollar and the Canadian dollar. The Company’s continued financing activities are primarily in United States dollars while the Company’s expenditures are primarily in Canadian dollars. Should the exchange rate between the Canadian dollar and the United States dollar fluctuate, the Company may be exposed to resource constraints.

 

2.  GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States, which contemplate the continuation of the Company as a going concern.

 

Through December 31, 2018, we have incurred an accumulated deficit of $12,577,458, primarily as a result of expenses incurred through a combination of development and commercialization activities related to our products and general and administrative expenses supporting those activities, as well as a net loss of $5,588,334 and negative operating cash flows. Our total cash and cash equivalents balance as of December 31, 2018 was $11,222. At December 31, 2018, we had working capital deficit of $4,007,785, of which $2,971,652 relates to convertible notes convertible into common shares subsequent to the year ended December 31, 2018. We anticipate that we will continue to incur losses and negative cash flows from operations, and that such losses will increase over the next several years due to development costs associated with our MegaTeam and Ninja Reflex products, until our products reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, we may not have sufficient resources to fund operations through the third quarter of 2019. Therefore, there is substantial doubt about our ability to continue as a going concern.

 

3.  FAIR VALUE MEASUREMENT

 

ASC Topic 820,  Fair Value Measurement , establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Refundable taxes, accounts payable, development grant and convertible notes are all stated at book value due to the term and nature of such items.

 

. 4.  OTHER RECEIVABLES

 

Other receivables include $418,553 (CDN $571,074) that relates to filed applications for Ontario Interactive Media Tax Credits. In January 2019, this amount was pledged against a loan. See Note 11

 

  F- 8  

 

 

5.  RELATED PARTY TRANSACTIONS

 

The related party transactions are as follows: 

 

We entered into a term sheet with Companion Healthcare Corporation (“CHC”), dated June 30, 2017, whereby CHC will acquire the exclusive rights to the Company’s informatics platform for use in companion animals, and we received a deposit of $135,232 for the Company’s fieldwork. License fees are to be established by a third party evaluator. Scott Woodrow, a director of the Company, is the President and a minority shareholder of CHC.

 

On October 30, 2018, we entered in an agreement with Companion Healthcare Technologies Inc.(“CHT”), for the use of Ehave Connect whereby CHT will acquire the exclusive rights to Ehave Connect for use in companion animals. Scott Woodrow, a director of the Company, is the President and a minority shareholder of CHT.

 

On October 11, 2017 the Company entered into an Investor Letter with Scott Woodrow, a director, pursuant to which he agreed to purchase securities of the Company on similar terms as certain offerings of the Company that are consummated prior to December 31, 2017, or, if such an offering is not consummated, the purchase amount will be converted into a secured promissory note that matures on January 31, 2018 (which, at the investor’s option, may be converted into common shares of the Company). Such investors are also entitled to additional warrant coverage in the event that we do not close such an offering prior to December 31, 2017. No such offering consummated prior to December 31, 2017, and such notes were converted into unsecured convertible debentures notes on January 31, 2018.

 

On October 11, 2017, the Company entered into a demand non-interest bearing unsecured promissory note with Scott Woodrow, a director of the Company, in the principal amount of $80,276 (CDN $100,000). On January 18, 2018 the note was exchanged for an unsecured convertible debenture. (see Note 11)

 

We have entered into employment contracts with each of our officers. As such the Company paid a salary to Prateek Dwivedi, the current Chief Executive Officer and a Director of the Company of $300,912 (CDN $390,000) (2017 - $300,717 (CDN $390,000)).


The Company declared a bonus payable to Mr. Dwivedi of $150,456 (CDN $195,000) (2017 – nil). During the year there were no consulting fees paid to Mr. Dwivedi. During 2017 consulting fees were paid to a company in which Mr. Dwivedi is the beneficial owner of $117,839 (CDN $162,350)). During 2017 the Company paid consulting fees of $116,238 (CDN $150,750) to Scott Woodrow.

 

On January 31, 2018, the Company entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. On February 27, 2019, we entered into an agreement to convert the note into 1,268,274,936 common shares of the Company. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.

 

On January 31, 2018, promissory notes with an aggregate principal amount of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures (the “Unsecured Debentures”). On February 27, 2019, we entered into an agreement to convert the note into 276,809,884 common shares of the Company. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.

 

On January 31, 2018, we entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. The Secured Debentures were secured against the general assets and intellectual property of the Company. Under the terms of the Secured Debentures, the principal amount and accrued interest was convertible into our common shares at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Secured Debentures was at the option of the holder. At the time of conversion, the holder was to also receive an equal amount of common share purchase warrants with an exercise price equal to the issue price. The Secured Debentures were due on July 31, 2018 and bore interest at 10% per annum. The initial installment of the Secured Debentures was issued on January 31, 2018 for proceeds of $609,310 (CDN$750,000). On March 19, 2018, the final instalment of $573,307 (CDN$750,000) was received. On February 27, 2019, as part of the recapitalization, we entered into an agreement to convert the Secured Debentures and right to receive warrants into 1,268,274,936 common shares.

  

  F- 9  

 

  

On September 27, 2018, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$111,110), including $11,110 of original issue discount. On February 27, 2019, promissory notes with an aggregate principal amount of $85,756 (CDN$111,110) were exchanged for unsecured debentures for a bridge loan. On February 28, 2019, we entered into an agreement to convert the note into 54,203,662 common shares of the Company. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.

 

On January 28, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$125,000), including $18,841(CDN$25,000) of original issue discount. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.

 

On February 27, 2019, we entered into agreements to exchange $400,000 in fees for 126,837,838 common shares of the Company. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with one of the vendors who exchanged fees.

 

On March 26, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $98,351 (CDN$131,683), including $23,663 (CDN$31,683) of original issue discount. Binyomin Posen and Zeke Kaplan, directors of the Company, have personal and business relations with some of the lenders.

 

6.  PROMISSORY AND CONVERTIBLE NOTES

  

On October 11, 2017, we entered into Investor Letters, pursuant to which certain persons agreed to purchase securities of the Company on similar terms as certain offerings of the Company that are consummated prior to December 31, 2017, or, if such an offering is not consummated, the purchase amount will be converted into a secured promissory note that matures on January 31, 2018 (which, at the investor’s option, may be converted into common shares of the Company). We received aggregate proceeds of $100,000. No such offerings were consummated prior to December 31, 2017, and such notes were converted into Unsecured Debentures on January 31, 2018 (see below), which have been converted into common shares on February 27, 2019.

 

On November 15, 2017, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $196,237. Lenders of the promissory notes were issued 2,133,333 common share warrants at an exercise price of $0.075 per share with an expiry date of November 16, 2022. On January 31, 2018 $148,745 of the promissory notes were repaid and $47,932 of the promissory notes were exchanged for Unsecured Debentures. On February 27, 2019, we entered into an agreement to cancel the warrants in exchange for 31,109,865 common shares of the Company.

 

  F- 10  

 

 

On January 31, 2018, we entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. The Secured Debentures were secured against the general assets and intellectual property of the Company. Under the terms of the Secured Debentures, the principal amount and accrued interest was convertible into our common shares at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Secured Debentures was at the option of the holder. At the time of conversion, the holder was to also receive an equal amount of common share purchase warrants with an exercise price equal to the issue price. The Secured Debentures were due on July 31, 2018 and bore interest at 10% per annum. The initial installment of the Secured Debentures was issued on January 31, 2018 for proceeds of $609,310 (CDN$750,000). On March 19, 2018, the final instalment of $573,307 (CDN$750,000) was received. On February 27, 2019, as part of the recapitalization, we entered into an agreement to convert the Secured Debentures and right to receive warrants into 1,268,274,936 common shares.

 

On January 31, 2018, certain promissory notes with an aggregate principal amount of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures (the “Unsecured Debentures”). From January 1, 2018 to January 31, 2018, we issued an additional $20,098 (CDN$25,000) Unsecured Debentures for total proceeds of $332,065 (CDN$409,000). On March 19, 2018, an installment of the Unsecured Debentures in the amount of $382,263 (CDN$500,000) was received. Under the terms of the Unsecured Debentures, the principal amount and accrued interest was convertible into our common shares at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Unsecured Debentures was at the option of the holder. At the time of conversion, the holder was to also receive 120% of the amount of the common shares issued of common share purchase warrants with an exercise price equal to the issue price. The Unsecured Debentures were due on July 31, 2018 and bore interest at 10% per annum. On February 27, 2019, we entered into an agreement to convert the Unsecured Debentures and the right to receive warrants an into 276,809,884 common shares.

       

On September 27, 2018, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$111,110), including $11,110 of original issue discount. On February 27, 2019, promissory notes with an aggregate principal amount of $85,756 (CDN$111,110) were exchanged for unsecured debentures for a bridge loan. On February 28, 2019, we entered into an agreement to convert the note into 54,203,662 common shares.

 

On October 31, 2018, we issued demand senior secured promissory notes in the aggregate principal amount of $57,000 (CDN $72,960).

 

On December 5, 2018, we entered a securities purchase agreement for $141,000 (CDN $168,691), including $13,000 of original issue discount. Under the terms of the agreement, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 73% of the market price. The conversion of the debentures is at the option of the holder between 180 days following the issue of the debentures and the maturity date. The debentures are due on December 5, 2019 and bear interest at 8% per annum.

 

7. STOCK BASED COMPENSATION

 

Under the terms of the Company’s employment agreement with the Chief Executive Officer, Prateek Dwivedi, and the Chief Technology Officer, Dave Goyette, Mr. Dwivedi and Mr. Goyette have received stock option grants. During the year Mr. Dwivedi received a grant of stock options to purchase up to 3,705,300 (2017 – 1,404,118) shares of the Company’s common stock at a price of $0.06 per share for the first 1,235,100 shares, $0.12 per share for the second 1,235,100 shares and $0.20 per share for the third 1,235,100 shares. The 2017 Option Shares vested rateably over 12 months and 24 months respectively at the date of issuance.

 

  F- 11  

 

  

During 2017 Mr. Goyette received a grant of stock options to purchase up to 707,415 shares of the Company’s common stock at a price of $0.50 per share for 433,000 shares and $0.08 per share for 274,415 shares. The Option Shares vested rateably over 12 months and 24 months respectively at the date of issuance.

 

Summary Stock Compensation Table

 

The following table sets forth the Company’s paid or accrued stock compensation expense to its officers, directors, employees and contractors.

 

    Stock
Awards
    Stock
Options
Awards
    Non-Vested
Stock
Awards
    Securities
Underlying
Non-Vested
Stock
    Total  
Year ended December 31, 2017   $ -     $ -     $ -       2,111,533     $ -  
Year ended December 31, 2018   $ -     $ -     $ -       5,816,833     $ -  

 

A Summary of the status of the Company’s option grants as of December 31, 2018 and 2017 and the changes during the periods then ended is presented below:

 

    Shares     Weighted-
Average
Exercise
Price
    Weighted
Average
Remaining
Contractual
Term
(in Years)
    Aggregate
Intrinsic
Value
 
Outstanding December 31, 2016     2,808,359     $ 0       5.0       -  
Granted     2,111,533     $ 0.17       5.0       -  
Exercised     -       -       -       -  
Forfeited     -       -       -       -  
Outstanding December 31, 2017     4,919,892     $ -       5.0     $ -  
Granted     3,705,300     $ 0.14       5.0       -  
Exercised           $ -       -       -  
Forfeited     -       -       -       -  
Outstanding December 31, 2018     8,625,192     $ -       5.0     $ -  

 

None of the options granted during 2017 vested within the year. The weighted average fair value at the grant date for options during the year ended December 31, 2017 was estimated using the Black-Scholes option valuation model with the following inputs:

 

    2017  
Average expected life in years     5  
Average risk-free interest rate     2.20 %
Average volatility     253 %
Dividend yield     0 %

 

  F- 12  

 

  

Risk-free interest rates for the options were taken from the 5 year federal treasury rate at December 31, 2017. The expected volatility was based on historical data and other relevant factors such as capital structure and the nature of the Company.

 

In calculating the expected life of stock options, the Company determines the amount of time from grant date to expected contractual term date for vested options. In developing the expected life assumption, all amounts of time are weighted by the number of underlying options.

 

A summary of the status of the Company’s vested and non-vested option grants at December 31, 2018 and December 31, 2017 and the weighted average grant date fair value is presented below:

 

2018   Shares    

Weighted Average
Grant Date

Fair Value per
Share

   

Weighted
Average Grant
Date

Fair Value

 
Vested     4,816,987     $ 0.14     $ 679,553  
Non-vested     3,808,205     $ 0.13     $ 477,570  
Total     8,625,192     $ 0.13     $ 1,157,103  
                   
2017   Shares    

Weighted Average
Grant Date

Fair Value per
Share

   

Weighted
Average Grant
Date

Fair Value

 
Vested     3,410,191     $ 0.14     $ 476,080  
Non-vested     1,509,701     $ 0.14     $ 211,706  
Total     4,919,892     $ 0.14     $ 687,786  

 

Warrants Issued

The following table reflects a summary of Common Stock warrants outstanding and warrant activity during 2017: 

   

Number of
warrants

   

Weighted
Average Exercise

Price

   

Weighted Average
Term

(Years)

 
Warrants outstanding at December 31, 2016     20,591,686       -       -  
Granted during the year     5,433,230     $ 0.0818       4.55  
Exercised during the year     13,300,539       -       -  
Forfeited during the year     -       -       -  
Warrants outstanding at December 31, 2017     12,694,377       -       -  
Granted during the year     47,150,588     $ 0.075       2  
Exercised during the year     3,798,781     $ 0.033       -  
Forfeited during the year     -       -       -  
Warrants outstanding at December 31, 2017     56,046,184       -       -  

 

  F- 13  

 

 

 

The Common stock warrants expire in the years ended December 31 as follows:

 

Year   Amount  
2018     -  
2019     -  
2020     55,096,798  
2021     949,386  
2022     -  
      56,046,184  

 

8.  DEVELOPMENT GRANT

 

On June 7, 2012, the Company entered into a project funding agreement with the Canada-Israel Research and Development Foundation (“CIIRDF”). The purpose of the grant was to fund the Company’s activities related to the development of a cognitive assessment and treatment platform for childhood attention deficit disorder and attention hyperactivity disorder (the “Development”). Under the terms of the grant, CIIRDF would fund up to CDN$300,000 of development activities related to the Development. The grant is repayable to CIIRDF based on 2.5% of annual gross sales related to products developed from the Development. The Company received CDN$225,000 from CIIRDF to fund the Development. The amount presented in these financial statements is reflected in United States dollars.

 

9. INCOME TAXES

 

The Company computes income taxes using the asset and liability approach. The Company currently has no issue that creates timing differences that would mandate a deferred tax expense. Due to the uncertainty as to the utilization of net operating loss carryforwards, a valuation allowance has been made to the extent of any tax benefit that net operating losses may generate. No provision for income tax has been recorded for the years ended December 31, 2018 and December 31, 2017 due to the Company’s operating losses.

 

The Company is entitled to refundable SRED tax credits for qualifying research and development activities performed in Canada. During the year the Company filed applications for Ontario Interactive Media Tax Credits. The Company recognizes the benefit of its tax credits when there is reasonable assurance that they will be realized. The Company has a net operating loss for tax purposes of CDN $1,977,973 (2017 – CDN $1,629,068) that can be carried forward over 20 years.

 

Deferred Income Taxes

Deferred income taxes primarily represent the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. The components of the Company’s deferred taxes are as follows:

 

    2018     2017  
Deferred tax assets (liabilities):                
Net operating loss carryforward   CDN$    933,063       CDN $ 340,489  
Total deferred tax assets     933,063       340,489  
Valuation Allowance     (933,063 )     (340,489 )
Net Deferred tax assets   $ -     $ -  

 

  F- 14  

 

  

10.  COMMITMENTS AND CONTINGENCIES

 

On December 8, 2011 the Company entered into a Collaboration Agreement between The Hospital for Sick Children (“SickKids”) and the Ontario Brain Institute (“OBI”). Under the terms of the Collaboration Agreement, the OBI agreed to fund SickKids activities related to the development of a software based treatment program for Attention Deficit and Hyperactivity Disorder in children (the “Project”). Funding of SickKids by the OBI was based on a Project budget of CDN$491,204 in which the Company was to contribute at least the same financial commitments for its own activities under the Project. During the Project period from December 8, 2011 to March 31, 2014, the Company contributed approximately CDN$540,000 consisting of CDN$437,400 of salaries and consulting fees, CDN$50,000 of software development and CDN$53,000 of equipment, supplies and overhead. Under the terms of the Collaboration Agreement, Project activities were to be substantially completed by March 31, 2014. Under the terms of the Collaboration Agreement, the Company is obligated to pay SickKids a minimum royalty on Project intellectual property of the amount of the Development Grant CDN$491,204. Under the terms of the royalty agreement between the Company and SickKids, such payments are to be made based on 5% of net revenue for the first CDN$15,000,000 of related Project product and 2.5% of net revenue thereafter. As of December 31, 2018, $3,664 (CDN $5,000) is due under the terms of the royalty agreement.

 

We currently lease approximately 1,636 square feet of office space located at 277 Lakeshore Road East, Suite 203, Oakville, Ontario, Canada. The term under our lease agreement, as amended on April 6, 2018, will expire on May 1, 2020. The total contractual obligation of the lease is $56,131 of which $39,622 is current.

 

11  SUBSEQUENT EVENTS

 

On January 21, 2019, we issued a senior secured promissory note in the aggregate principal amount of $263,192 (CDN$350,000). The secured promissory note is secured against certain of our assets, including all development tax credits that the Company has applied for and receives. The loan is due on May 21, 2020 and bears and interest rate at 20.07% per annum.

 

On January 28, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $85,756 (CDN$125,000), including $18,841(CDN$25,000) of original issue discount.

 

On February 27, 2019, we entered into an agreement to exchange $150,000 in fees owed to Scott Woodrow, a retired Director of the Company for 47,564,189 common shares of the Company.

 

On February 27, 2019, we entered into an agreement to exchange $100,000 in fees owed to KW Capital Partners Ltd. for 31,709,460 common shares of the Company.

 

On February 27, 2019, we entered into an agreement to exchange $150,000 in fees and common shares owed to Bezalel Partners LLC for 47,564,189 common shares of the Company.

 

On February 27, 2019, we entered into agreements to cancel options, cancel option anti-dilution clauses, and cancel employee severance liabilities in exchange for 304,437,002 common shares of the company

 

On February 27, 2019, we entered into an agreement to cancel 2,250,000 compensation warrants that had anti-rachet and anti-dilution provisions for 32,811,191 common shares of the Company.

 

On March 22, 2019, we entered into an Asset Purchase Agreement with ZYUS, pursuant to which we will sell to ZYUS all of our property and assets, including intellectual property, relating to technology stack, data models, UI flows, and APIs of its health informatics Ehave Connect platform (the “Asset Sale”). The Ehave Connect platform contains components specifically designed to be used by medical cannabis patients to efficiently gather and verify patient-reported outcomes and experiences, evaluate treatment progress, enhance patient engagement and improve data modeling.

 

In connection with the Agreement, ZYUS will pay us a total purchase price of CAD $1.2 million in cash, CAD $260,000 of which was provided to us upon execution of a non-binding term sheet, and CAD $100,000 of which was provided to us pursuant to an advance provided on April 30, 2019, as well as 361,011 common shares of ZYUS, priced at CDN$5.54 per share, which is to be issued at closing (the “Consideration Shares”).

 

On March 26, 2019, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $98,351 (CDN$131,683), including $23,663 (CDN$31,683) of original issue discount.

 

  F- 15  

  

 

Exhibit 4.39

 

LETTER AGREEMENT

 

This LETTER AGREEMENT (this “ Agreement ”), dated as of September 24, 2018, is entered into by and among EHAVE, INC., an Ontario corporation (the “ Company ”), and •(the “ Lender ”).

 

WHEREAS, the Company and the Lender have previously entered into that certain Subscription Agreement (the “ Subscription Agreement ”), pursuant to which the Company issued to the Lender 50 unsecured Convertible Debentures and 50 Warrants exercisable to acquire that number of Common Shares as equal to the quotient of CDN$1,000 divided by the Conversion Price, at the closing held on January 31, 2018;

 

WHEREAS, the Company has informed the Lender that the Company intends to obtain a bridge financing pursuant to which the Company will borrow up to $500,000 in exchange for issuance of promissory notes, warrants and common shares (the “ Bridge Financing ”);

 

WHEREAS, in connection with the Bridge Financing, the Company and the Lender agreed to convert the outstanding Convertible Debentures and cancel the Warrants;

 

WHEREAS, capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Subscription Agreement.

 

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

 

1.        Conversion of Convertible Debentures . Upon any closing of the Bridge Financing, all principal and accrued and unpaid interest then outstanding under the Lender’s Convertible Debentures shall convert into the number of common shares of the Company that equals to (i) the aggregate amount of the Principal then outstanding under such Convertible Debentures (for the avoidance of doubt, not including any Added Principal) divided by (ii) $0.00088110. The Lender shall surrender its Convertible Debenture Certificate, duly endorsed (or a notice to the effect that the original Convertible Debenture Certificate has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with the Convertible Debenture Certificate), at the office of the Company. The Company shall, as soon as practicable thereafter, issue and deliver to the Lender a certificate or agreement representing the number of common shares issuable upon conversion of the Lender’s Convertible Debentures to which the Lender shall be entitled upon such conversion (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company). The conversion of the Lender’s Convertible Debentures pursuant to this Agreement shall be deemed to have been made at the closing of the Bridge Financing, and on and after such date, the Lender entitled to receive the securities issuable upon such conversion shall be treated for all purposes as the record holder of such securities and the Convertible Debentures, and all obligations of the Company thereunder, shall be deemed to have been indefeasibly satisfied in full. Only whole Common Shares shall be issued upon conversion of the Convertible Debentures pursuant to this Agreement. Any remainder due hereunder which is insufficient to purchase a whole Common Share upon conversion of the Convertible Debentures shall be rounded up to the next whole Common Share.

 

  1  

 

 

2.        Representations and Warranties . The Lender hereby represents and warrants to the Company, and the Company hereby represents and warrants to the Lender, that (i) it has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder and under the Subscription Agreement, the Convertible Debentures and the Warrants as amended by this Agreement, and (ii) the execution of this Agreement by the individual whose signature is set forth at the end of this Agreement on behalf of such party, and the delivery of this Agreement by such party, have been duly authorized by all necessary action on the part of such party; and (iii) this Agreement has been executed and delivered by such party and constitutes the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and equitable principles related to or affecting creditors' rights generally or the effect of general principles of equity. In addition, the Lender further represents and warrants that it is the sole record and beneficial owner of the Convertible Debentures and the Warrants and that it has not transferred or assigned any of the Convertible Debentures and Warrants, or any interest therein, to any other person prior to the date hereof.

 

3.       Release. By execution of this Agreement, Lender hereby acknowledges and agrees that it all Events of Default that have occurred and were continuing prior to the date of this Letter Agreement are hereby waived by Lender, and Lender forever releases and discharges the Company from any and all liability arising as a result of any such Events of Defaults.

 

4.        Counterparts; Choice of Law . This Agreement may be executed in several identical counterparts all of which shall constitute one and the same instrument. This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof.

 

5.        Further Assurances . Each of the parties hereto shall execute and deliver, at the reasonable request of the other party hereto, such additional documents, instruments, conveyances and assurances and take such further actions as such other party may reasonably request to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year written above.

 

THE COMPANY:   LENDER:
         
EHAVE, INC.  
         
By:     By:  
  Name: Prateek Dwivedi     Name:
  Title: Chief Executive Officer     Title:

 

 

 

 

 

 

Exhibit 4.40

 

LETTER AGREEMENT

 

This LETTER AGREEMENT (this “ Agreement ”), dated as of September 24, 2018, is entered into by and among EHAVE, INC., an Ontario corporation (the “ Company ”), and the Lenders identified on the signature page hereto.

 

WHEREAS, the Company and the Lenders have previously entered into that certain Note and Warrant Purchase Agreement, dated as of November 14, 2016 (the “ Purchase Agreement ”), pursuant to which the Company issued the Notes and agreed to issue Warrants upon closing of a Qualified Offering;

 

WHEREAS, the Company has informed the Lenders that the Company intends to obtain a bridge financing pursuant to which the Company will borrow up to $500,000 in exchange for issuance of promissory notes, warrants and common shares (the “ Bridge Financing ”);

 

WHEREAS, in connection with the Bridge Financing, the Company and the Lenders identified on the signature page hereto agreed to convert the outstanding Notes and cancel the rights to receive Warrants upon closing of a Qualified Offering;

 

WHEREAS, any provision of the Purchase Agreement or the Notes may be amended or waived upon the written consent of the Company and the Majority Note Holders;

 

WHEREAS, the Lenders executing the signature page hereto consist of the Majority Note Holders as of the date hereof; and

 

WHEREAS, capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement.

 

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

 

1.        Conversion of Notes . Upon any closing of the Bridge Financing, all principal and accrued and unpaid interest then outstanding under each Note shall convert into the number of common shares of the Company that equals to (i) the aggregate amount of the principal then outstanding under such Note divided by (ii) $0.003154. The Lender shall surrender its Note, duly endorsed (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with the Note), at the office of the Company. The Company shall, as soon as practicable thereafter, issue and deliver to the Lender a certificate or agreement representing the number of common shares issuable upon conversion of the Notes to which the Lender shall be entitled upon such conversion (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company). The conversion of the Notes pursuant to this Agreement shall be deemed to have been made at the closing of the Bridge Financing, and on and after such date, the Lenders entitled to receive the securities issuable upon such conversion shall be treated for all purposes as the record holder of such securities, and the Notes, and all obligations of the Company thereunder, shall be deemed to have been indefeasibly satisfied in full. Only whole Common Shares shall be issued upon conversion of the Notes pursuant to this Agreement. Any remainder due hereunder which is insufficient to purchase a whole Common Share upon conversion of the Notes shall be rounded up to the next whole Common Share.

 

  1  

 

 

2.        Cancellation of the Right to Receive Warrants . In exchange for cancellation of the right to receive Warrants upon closing of a Qualified Offering under Section 2.2 of the Purchase Agreement, upon any closing of the Bridge Financing, each Lender other than Eisenberg Family Foundation shall receive the number of common shares of the Company that equals to (i) the aggregate amount of the principal then outstanding under such Note divided by (ii) $0.01577.

 

3.        Representations and Warranties . Each Lender hereby represents and warrants to the Company, severally, but not jointly, and the Company hereby represents and warrants to the Lender, that (i) it has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder and under the Purchase Agreement as amended by this Agreement, and (ii) the execution of this Agreement by the individual whose signature is set forth at the end of this Agreement on behalf of such party, and the delivery of this Agreement by such party, have been duly authorized by all necessary action on the part of such party; and (iii) this Agreement has been executed and delivered by such party and constitutes the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and equitable principles related to or affecting creditors' rights generally or the effect of general principles of equity. In addition, each Lender further represents and warrants that it is the sole record and beneficial owner of the Notes and that it has not transferred or assigned any Notes, or any interest therein, to any other person prior to the date hereof.

 

4.        Release. By execution of this Agreement, the undersigned Lenders hereby acknowledges and agrees that it all Events of Default that have occurred and were continuing prior to the date of this Agreement are hereby waived by the Lenders, and the Lenders forever releases and discharges the Company from any and all liability arising as a result of any such Events of Defaults.

 

5.        Counterparts; Choice of Law . This Agreement may be executed in several identical counterparts all of which shall constitute one and the same instrument. This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof.

 

6.        Further Assurances . Each of the parties hereto shall execute and deliver, at the reasonable request of the other party hereto, such additional documents, instruments, conveyances and assurances and take such further actions as such other party may reasonably request to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year written above.

 

THE COMPANY:  
     
EHAVE, INC.  
     
By:    
  Name: Prateek Dwivedi  
  Title:  Chief Executive Officer  

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year written above.

 

LENDER:  
     
[NAME OF LENDER]  
     
By:        
Name:    
Title:    

 

 

 

 

 

Exhibit 4.41

 

LETTER AGREEMENT

 

This LETTER AGREEMENT (this “ Agreement ”), dated as of September 24, 2018, is entered into by and among EHAVE, INC., an Ontario corporation (the “ Company ”), and • (the “ Lender ”).

 

WHEREAS, the Company and the Lender have previously entered into that certain Subscription Agreement (the “ Subscription Agreement ”), pursuant to which the Company issued to the Lender

unsecured Convertible Debentures and • Warrants exercisable to acquire that number of Common Shares as equal to the quotient of CDN$1,200 divided by the Conversion Price, at the closing held on March 19, 2018;

 

WHEREAS, the Company has informed the Lender that the Company intends to obtain a bridge financing pursuant to which the Company will borrow up to $500,000 in exchange for issuance of promissory notes, warrants and common shares (the “ Bridge Financing ”);

 

WHEREAS, in connection with the Bridge Financing, the Company and the Lender agreed to convert the outstanding Convertible Debentures and cancel the Warrants;

 

WHEREAS, capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Subscription Agreement.

 

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

 

1.           Conversion of Convertible Debentures . Upon any closing of the Bridge Financing, all principal and accrued and unpaid interest then outstanding under the Lender’s Convertible Debentures shall convert into the number of common shares of the Company that equals to (i) the aggregate amount of the Principal then outstanding under such Convertible Debentures (for the avoidance of doubt, not including any Added Principal) divided by (ii) $0.003154. The Lender shall surrender its Convertible Debenture Certificate, duly endorsed (or a notice to the effect that the original Convertible Debenture Certificate has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with the Convertible Debenture Certificate), at the office of the Company. The Company shall, as soon as practicable thereafter, issue and deliver to the Lender a certificate or agreement representing the number of common shares issuable upon conversion of the Lender’s Convertible Debentures to which the Lender shall be entitled upon such conversion (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company). The conversion of the Lender’s Convertible Debentures pursuant to this Agreement shall be deemed to have been made at the closing of the Bridge Financing, and on and after such date, the Lender entitled to receive the securities issuable upon such conversion shall be treated for all purposes as the record holder of such securities and the Convertible Debentures, and all obligations of the Company thereunder, shall be deemed to have been indefeasibly satisfied in full. Only whole Common Shares shall be issued upon conversion of the Convertible Debentures pursuant to this Agreement. Any remainder due hereunder which is insufficient to purchase a whole Common Share upon conversion of the Convertible Debentures shall be rounded up to the next whole Common Share.

 

 

 

 

2.           Cancellation of the Warrants . In exchange for cancellation of the Lender’s Warrants issued to the Lender pursuant to the Subscription Agreement, upon any closing of the Bridge Financing, the Lender shall receive the number of common shares of the Company equal to (i) the aggregate amount of the Principal then outstanding under the Lender’s Convertible Debentures divided by (ii) $0.01577. The Lender shall surrender its Warrant Certificate, duly endorsed (or a notice to the effect that the original Warrant Certificate has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with the Warrant Certificate), at the office of the Company. The Company shall, as soon as practicable thereafter, issue and deliver to the Lender a certificate or agreement representing the number of common shares issuable upon cancellation of the Lender’s Warrants pursuant to this Agreement (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company).The cancellation of the Lender’s Warrants pursuant to this Agreement shall be deemed to have been made at the closing of the Bridge Financing and on and after such date the Lender entitled to receive the securities issuable upon exercise of the Warrants shall be treated for all purposes as the record holder of such securities and the Lender’s Warrants, and all obligations of the Company thereunder, shall be deemed to have been indefeasibly satisfied in full.

 

3.           Representations and Warranties . The Lender hereby represents and warrants to the Company, and the Company hereby represents and warrants to the Lender, that (i) it has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder and under the Subscription Agreement, the Convertible Debentures and the Warrants as amended by this Agreement, and (ii) the execution of this Agreement by the individual whose signature is set forth at the end of this Agreement on behalf of such party, and the delivery of this Agreement by such party, have been duly authorized by all necessary action on the part of such party; and (iii) this Agreement has been executed and delivered by such party and constitutes the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and equitable principles related to or affecting creditors' rights generally or the effect of general principles of equity. In addition, the Lender further represents and warrants that it is the sole record and beneficial owner of the Convertible Debentures and the Warrants and that it has not transferred or assigned any of the Convertible Debentures and Warrants, or any interest therein, to any other person prior to the date hereof.

 

4.          Release. By execution of this Agreement, Lender hereby acknowledges and agrees that it all Events of Default that have occurred and were continuing prior to the date of this Letter Agreement are hereby waived by Lender, and Lender forever releases and discharges the Company from any and all liability arising as a result of any such Events of Defaults.

 

5.           Counterparts; Choice of Law . This Agreement may be executed in several identical counterparts all of which shall constitute one and the same instrument. This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof.

 

6.           Further Assurances . Each of the parties hereto shall execute and deliver, at the reasonable request of the other party hereto, such additional documents, instruments, conveyances and assurances and take such further actions as such other party may reasonably request to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year written above.

 

THE COMPANY:   LENDER:
         
EHAVE, INC.  
         
By:     By:  
  Name: Prateek Dwivedi     Name:
  Title: Chief Executive Officer     Title:

 

 

 

 

Exhibit 4.42

 

ADDENDUM TO BRIDGE LOAN AGREEMENT DATED SEPTEMBER 24, 2018

 

Borrower: Ehave, Inc. of 277 Lakeshore Road East, Suite 203, Oakville, ON L6J 6J3 (the “Borrower”)
   
Lender: ___________ of ___________ (the “Lender”)

 

Principal Amount: $_______ CDN

 

1. FOR VALUE RECEIVED, before the Initial Closing Date. If the proposed recapitalization of the company and bridge financing does not close in its entirety by October 31 st , 2018, this note shall pay $_________ CDN and be considered part of the existing senior debt of the Borrower.

 

2. Any time while not in default under this Note, the Borrower may repay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.

 

3. This Note will be construed in accordance with and governed by the laws of the State of New York.

 

4. This Note will endure to the benefit of and be binding upon the representative heirs, executors, administrators, successors and assigns of the Borrower and the Lender.

 

IN WITNESS WHEREOF the parties have duly affixed their signatures under seal on this 27 day of September, 2018.

 

SIGNED, SEALED AND DELIVERED Ehave, Inc.
     
September 27, 2018    
     
  Per         
     
SIGNED, SEALED AND DELIVERED ___________________
     
September 27, 2018    
     
  Per  

 

 

  

Exhibit 4.43

 

ADDENDUM TO BRIDGE LOAN AGREEMENT DATED SEPTEMBER 24, 2018

 

Borrower: Ehave, Inc. of 277 Lakeshore Road East, Suite 203, Oakville, ON L6J 6J3 (the “Company”)
   
Lender: ___________ of _____________ (the “Lender”)

 

Principal Amount: $_________ CDN

 

1. FOR VALUE RECEIVED, before the Initial Closing Date. If the proposed recapitalization of the company and bridge financing does not close in its entirety by October 31 st , 2018, this note shall pay $________ CDN and be considered part of the existing senior debt of the Borrower.

 

2. Any time while not in default under this Note, the Borrower may repay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.

 

3. This Note will be construed in accordance with and governed by the laws of the State of New York.

 

4. This Note will endure to the benefit of and be binding upon the representative heirs, executors, administrators, successors and assigns of the Borrower and the Lender.

 

IN WITNESS WHEREOF the parties have duly affixed their signatures under seal on this 27 day of September, 2018.

 

SIGNED, SEALED AND DELIVERED Ehave, Inc.
     
September 27, 2018    
     
  Per
     
SIGNED, SEALED AND DELIVERED ___________
     
September 27, 2018    
     
  Per  

 

 

 

Exhibit 4.44

 

THIS LICENSE AND RESELLER AGREEMENT dated as of the October 30, 2018 is made

 

BETWEEN:

 

EHAVE, INC. , a company incorporated under the laws of the Province of Ontario, Canada (“ Ehave ”);

 

- and -

 

COMPANION HEALTHCARE TECHNOLOGIES CORP , a company incorporated under the laws of the Province of Ontario (“ CHT ”)

 

RECITALS:

 

A. Ehave has developed a software platform that provides an end-to-end patient management solution to healthcare professionals and provides that platform to users as a service.

 

B. CHT has developed a business model to bring a similar service that Ehave provides using the Ehave Platform for the domain of the animal market including companion animals (i.e. pets).

 

C. The Parties desire to enter into this Agreement to enable CHT to pursue its business model whereby CHT will license and provide services in relation to companion and other animals using the Ehave Companion Solution under the terms and conditions contained herein.

 

NOW THEREFORE , in consideration of the premises and the mutual agreements hereinafter set out herein and of other consideration (the receipt and sufficiency of which are acknowledged by each Party), the Parties covenant and agree as follows:

 

1. INTERPRETATION

 

(a) Definitions

 

In this Agreement and the schedules annexed hereto, the following terms shall have the respective meanings indicated below:

 

Acceptance Criteria ” has the meaning ascribed to it in Section 3(d).

 

Acceptance Period ” has the meaning ascribed to it in Section 3(d).

 

Acceptance Procedures ” has the meaning ascribed to it in Section 3(d).

 

Agreement ” means this license and reseller agreement and all Schedules, Appendixes and Exhibits attached hereto.

 

Applicable Laws ” means any and all (i) laws, statutes, rules, regulations, by laws, codes, treaties, constitutions and ordinances, including Privacy Legislation (“ Laws ”), (ii) order, directive, judgment, decree, award or writ of any court (including a court of equity), arbitrator or arbitration panel, or any Governmental Authority or other body exercising adjudicative, regulatory, judicial or quasi-judicial powers, including any stock exchange (“ Orders ”), and (iii) policies, guidelines, standards, requirements, notices and protocols of any Governmental Authority (“ Policies ”); which are applicable to or govern CHT, Ehave or the transactions contemplated by this Agreement.

 

 

 

 

Authentication ID ” means a security mechanism by which an Authorized User identifies herself or himself to the Ehave Companion Solution and gains access thereto, which security mechanism may include user identification, passwords, digital certificates or any other similar process mechanism for authentication and recognition as determined by Ehave from time to time.

 

Authorized User ” means an individual who an End User has authorized to access and use CHT’s services, which includes the use of the Ehave Companion Solution.

 

Business Day ” means any calendar day except for Saturday or Sunday or any statutory holiday observed in the Province of Ontario.

 

CHT Developments ” has the meaning ascribed to it in Section 4(a).

 

CHT Indemnified Parties ” has the meaning ascribed to it on Section 16(a).

 

CHT Marks ” means the names, trademarks, trade names, service marks, designs and logos of CHT.

 

Claim ” has the meaning ascribed to it in Section 16(a).

 

Competitive Transaction ” has the meaning ascribed to it in Section 2(d).

 

Confidential Information ” means this Agreement, the Ehave Companion Solution, End User Data and all ideas, designs, business models, databases, drawings, documents, diagrams, formulas, test data, marketing, financial or personnel data, sales information, customer or supplier information, including information provided by such customers or suppliers, or any other information already furnished and to be furnished or made available by one Party to the other, whether in oral, written, graphic or electronic form including any such information exchanged during informational sessions designated as confidential, including, without limitation, information concerning a Party's actual and potential customers and other Intellectual Property Rights of such Party, provided, however, that Confidential Information shall not include any data or information:

 

(i) that, at the time of disclosure, is in or, after disclosure, becomes part of the public domain, through no act or failure on the part of the receiving Party, whether through breach of this Agreement or otherwise;

 

(ii) that, prior to disclosure by the disclosing Party, was already in the possession of the receiving Party, as evidenced by written records kept by the receiving Party in the ordinary course of its business, or as evidenced by proof of actual prior use by the receiving Party;

 

(iii) independently developed by the receiving Party, by Persons having no direct or indirect access to the disclosing Party’s Confidential Information provided that the receiving Party provides clear and convincing evidence of such independent development;

 

(iv) which, subsequent to disclosure, is obtained from a third Person: (A) who is lawfully in possession of such information; (B) who is not in violation of any contractual, legal, or fiduciary obligation to either Party, as applicable, with respect to such information; and (C) who does not prohibit either Party from disclosing such information to others; or

 

(v) is further disclosed with the prior written consent of the disclosing Party, but only to the extent of such consent.

 

Effective Date ” means the date first written above.

 

Ehave Companion Solution ” means the Ehave Platform, as modified, adapted and customized, as provided herein, the specifications of which are set out in Schedule “1”.

 

  2 .

 

 

Ehave Platform ” means the Software, Ehave Server and such devices and peripherals physically located with the Ehave Server, including all computer hardware, software, network elements, and electrical and telecommunications infrastructure located behind the Point of Access.

 

Ehave Server ” means that computer server located at Ehave’s premises, or a third party provider of hosting and/or network services, that houses the Software.

 

End User ” means CHT’s customers who have entered into a subscription agreement with CHT for CHT services, which services include the use of the Ehave Companion Solution.

 

End User Data ” means collectively any data, files, documentation or other information (including personal information) that an End User or any of its Authorized Users may: (i) upload to the Ehave Companion Solution; and/or (ii) have processed through the use of the Ehave Companion Solution, and includes any data or output resulting from or derived from such use.

 

Escrow Agent ” has the meaning ascribed thereto in Section 12(a).

 

Escrow Agreement ” has the meaning ascribed thereto in Section 12(a).

 

Field of Use ” means indications and outcomes related to any companion and other animals.

 

Governmental Authority ” means any domestic, foreign or supranational government, whether federal, provincial, state, territorial or municipal; and any governmental agency, ministry, department, tribunal, commission, bureau, board or other instrumentality, including international institutions, exercising or purporting to exercise legislative, judicial, regulatory or administrative functions of, or pertaining to, government.

 

Implementation Plan ” has the meaning ascribed to it in Section 3(a).

 

Intellectual Property ” means any property, tangible or intangible, that may be subject to Intellectual Property Rights, including without limitation, ideas, formulae, algorithms, concepts, techniques, processes, procedures, approaches, methodologies, plans, systems, research, information, documentation, data, data compilations, specifications, requirements, designs, diagrams, programs, inventions, technologies, software (including its source code), tools, products knowledge, know-how, including without limitation, trade secrets, and other materials or things.

 

Intellectual Property Rights ” means (a) any and all proprietary rights anywhere in the world provided under (i) patent law; (ii) copyright law, including moral rights; (iii) trademark law; (iv) design patent or industrial design law; (v) semiconductor chip or mask work law; (vi) trade secret law; (vii) privacy law; or (viii) any other statutory provision or common law principle applicable to this Agreement which may provide a right in either (A) Intellectual Property; or (B) the expression or use of Intellectual Property; and (b) any and all applications, registrations, licenses, sub-licenses, franchises, agreements or any other evidence of a right in any of the foregoing.

 

Objectionable Content ” means content that infringes any Applicable Laws or third party rights, and content which is obscene, indecent, pornographic, seditious, defamatory, threatening, liable to incite racial hatred, menacing, blasphemous, misleading, deceptive or in breach of any person’s Intellectual Property Rights.

 

Party ” means either Ehave or CHT; and “ Parties ” means both of them.

 

Person ” means any individual, estate, sole proprietorship, firm, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, limited liability company, corporation, body corporate, trustee, trust, Governmental Authority or other entity or organization and includes any successor to any of the foregoing.

 

  3 .

 

 

Point of Access ” means Ehave’s, or its subcontractor’s, border router, which is used to establish connectivity from the Ehave Platform to Ehave’s, or its subcontractor’s, Internet provider, or the public Internet.

 

Royalties ” means the fees, charges and other amounts to be paid by CHT to Ehave for the rights granted hereunder and which amounts are set out in Schedule “6”.

 

Security Requirements ” means those safeguards and controls set out in Schedule “5”.

 

Software ” means Ehave’s proprietary patient and data management software and any related documentation, as modified for use in the animal (including companion animal) and veterinary industry.

 

Source Code ” means the human-readable form of a computer instruction, including, but not limited to, related system documentation, flow charts, all comments and any procedural code and a description of the procedure for generating object code, all of a level sufficient to enable a programmer reasonably fluent in the programming language in which the Software was written to understand, build, operate, support, maintain and develop modifications, upgrades, updates, adaptations, enhancements, new versions, and other derivative works and improvements of, and to develop computer programs compatible with, the Software. “ Specifications ” has the meaning ascribed to it in Section 3(a).“ Subscription Agreement ” has the meaning ascribed to it in Section 5(b).

 

Term ” has the meaning ascribed to it in Section 9.

 

Territory ” means any jurisdiction in the World where the use of the Ehave Companion Solution for the intended purpose herein is permitted under Applicable Law.

 

Transition out Period ” has the meaning ascribed to it in Section 10(f).

 

Transition-out Services ” has the meaning ascribed to it in Section 10(f).

 

Virus ” means a piece of code usually (but not necessarily) disguised as something else that causes some unexpected and, for the victim, usually undesirable, event and which is designed so that it may automatically spread to other computer users; the term ‘Virus’ will also be deemed to include worms, cancelbots, trojan horses, harmful contaminants (whether self-replicating or not) and nuisance causing or otherwise harmful applets.

 

(b) Headings; Extended Meanings

 

The division of this Agreement into articles, sections, schedules and other subdivisions, and the inclusion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The headings in the Agreement are not intended to be full or precise descriptions of the text to which they refer. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement. The word “including” or “include(s)” means “including without limitation” or “include(s) without limitation”.

 

(c) Currency

 

Unless otherwise specified, all references to monetary amounts, including the symbol “$”, are in respect of Canadian currency.

 

  4 .

 

 

(d) Exhibits and Schedules

 

The following Schedules are a part of and are integral to this Agreement:

 

Schedule “1” - Ehave Companion Solution Specifications
Schedule “2” - Development and Implementation Plan
Schedule “3” - Support Procedures
Schedule “4” - Service Level Commitments
Schedule “5” - Security Requirements
Schedule “6” - Royalties and Early Termination Fee
Schedule “7” - Source Code Escrow

 

(e) Entire Agreement

 

This Agreement, together with any other documents to be delivered pursuant hereto, constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, negotiations, discussions and understandings, written or oral, between the Parties. Except as expressly provided in this Agreement, there are no representations, warranties, conditions other agreements or acknowledgements, whether direct or collateral, express or implied, that form part of or affect this Agreement. The execution of this Agreement has not been induced by, nor do either of the Parties rely upon or regard as material, any representations, warranties, conditions, other agreements or acknowledgements not expressly made in this Agreement or in the other documents to be delivered pursuant hereto.

 

(f) Governing Law:

 

This Agreement shall be governed by, and construed and enforced in accordance with, the laws in force in the Province of Ontario (excluding any conflict of laws rule or principle which might refer such construction to the laws of another jurisdiction). The Parties hereto agree to submit to the exclusive jurisdiction of the courts of the Province of Ontario and waive any objection relating to improper venue or forum non conveniens to the conduct of any proceeding in any such court.

 

(g) Severability:

 

In the event that any provision (or any portion of a provision) of this Agreement shall for any reason be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality or unenforceability shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or portion of a provision) had never been contained herein in regards to that particular jurisdiction.

 

2. APPOINTMENT AND LICENSE GRANT

 

(a) Exclusive Appointment

 

Ehave hereby appoints CHT, and CHT hereby accepts the appointment, to act as Ehave’s reseller of the use of the Ehave Companion Solution within the Field of Use in the Territory for the duration of the Term solely in accordance with the terms and conditions of this Agreement. Subject to Section 2(e), the foregoing appointment is exclusive such that Ehave shall not appoint any other Person to, nor may Ehave itself, sell or resell the use of the Ehave Companion Solution within the Field of Use anywhere in the Territory.

 

  5 .

 

 

(b) Grant by Ehave

 

Subject to the terms and conditions of this Agreement commencing as of the Effective Date and for the duration of the Term and any Transition-out Period, Ehave hereby grants to CHT a non-transferable (except as permitted under Section 20(f)), right to:

 

(i) sub-license the use of the Ehave Companion Solution within the Field of Use in the Territory to End Users and their respective Authorized Users, including in operation or by interfacing with other software, hardware, systems, networks and services, in accordance with and subject to the provisions of CHT’s Subscription Agreement; and

 

(ii) use the Ehave Companion Solution to support its licensed End Users.

 

Subject to Section 2(e), the grant set out in Clause 2(b)(i) is exclusive such that Ehave shall not license any other Person to, nor may Ehave itself, license, sub-license the use of, or provide services similar to, the Ehave Companion Solution within the Field of Use anywhere in the Territory.

 

(c) Restrictions on Use

 

Any rights not granted herein are strictly reserved by Ehave. CHT shall not, and shall not permit others to, reverse engineer, decompile, disassemble or translate any software used by Ehave to provide the Ehave Companion Solution, or otherwise attempt to view, display or print such software, including its Source Code, except as permitted herein.

 

(d) Prohibition on Competitive Solutions

 

For so long as the appointment set out in Section 2(a) is exclusive, CHT shall not enter into an agreement (a “ Competitive Transaction ”) with any other Person related to the license, sub-license, sale, resale or provide service, solutions, goods or products, that are substantially similar to or competitive with the Ehave Companion Solution. For clarity, a Competitive Transaction shall not include an agreement for use, integration or interfacing, or co-marketing, of the Ehave Companion Solution with other services, solutions, devices, goods or products, where such other services, solutions, devices, goods or products do not contain the same or similar functionality of the Ehave Companion Solution, but provides for a complementary solution.

 

(e) Conversion to Non-Exclusive

 

Notwithstanding anything to the contrary contained herein, the exclusive appointment and license set out in Sections 2(a) and 2(b) shall become non-exclusive if:

 

(i) at any time during the Term hereof, CHT breaches Section 2(d) as determined by arbitration in accordance with Section 19(c) or by a final non-appealable judgment of a court of competent jurisdiction; or

 

(ii) at any time after November 1, 2010 CHT fails to achieve annual revenues of $500,000.

 

(f) No Franchise Agreement

 

The Parties to this Agreement are independent contractors and nothing in this Agreement shall be deemed or constructed as creating a joint venture, partnership, agency relationship, or franchise between Ehave and CHT. Neither Party, by virtue of this Agreement, will have any right, power or authority to act or create an obligation, express or implied, on behalf of the other Party. Each Party assumes responsibility for the actions of their personnel under this Agreement and will be solely responsible for their supervision, daily direction and control, wage rates, withholding income taxes, Canada Pension Plan contributions, employment insurance premiums, disability benefits, or the manner and means through which the work under this Agreement will be accomplished. Except as provided otherwise in this Agreement, CHT has the sole discretion to determine CHT's methods of operation, CHT's accounting practices, the types and amounts of insurance CHT carries, CHT's personnel practices, CHT's advertising and promotion, CHT's customers and CHT's service areas and methods. The relationship created hereby between the parties is solely that of supplier and reseller, and licensor and licensee.

 

  6 .

 

 

3. DEVELOPMENT AND IMPLEMENTATION OF THE COMPANION SOLUTION

 

(a) Specifications and Implementation

 

Attached hereto as Schedule “1” are the business requirements and technical specifications of the Ehave Companion Solution (the “ Specifications ”). Attached hereto as Schedule “2” is the development and implementation plan (the “ Implementation Plan ”), which sets out the procedures and obligations of each of the Parties and the key milestones and timelines in relation to the development and implementation of the Ehave Companion Solution. The Parties acknowledge that at the time of execution of this Agreement that the Specifications and Implementation Plan may not have been fully developed, but that the creation of the Specifications and development of the detailed Implementation Plan will be the first step in respect of the development and implementation of the Ehave Companion Solution, in which case, once approved by the Parties in writing, the Specifications and Implementation Plan so developed will be attached hereto and shall replace Schedules “1” and “2” respectively. Once finalized the Specifications and Implementation Plan may not be changed or modified by either Party, except in accordance with the procedures set out in Section 3(c).

 

(b) Obligations

 

Each of Ehave and CHT shall perform, at their own expense (or as otherwise set out in Schedule “6”), their respective obligations and responsibilities set out in the Implementation Plan as necessary to accomplish the development and implementation of the Ehave Companion Solution in accordance with the milestones and timelines set out therein. CHT acknowledges that the development and implementation of the Ehave Companion Solution requires decisions and input from CHT and for CHT to perform its obligations thereunder in a timely manner. In the event that CHT delays in providing such decisions, input or performance of its obligations, the development and implementation of the Ehave Companion Solution shall be correspondingly delayed. Subject to the foregoing, Ehave acknowledges that time is of the essence with respect to its obligations hereunder and that prompt and timely performance of all such obligations, including all development and implementation dates, timetables, project milestones and other requirements in this Agreement is strictly required. Once the implementation of the Ehave Companion Solution is completed, Ehave shall notify CHT of such completion and that the Ehave Companion Solution is ready for testing in accordance with Section 3(d).

 

  7 .

 

 

(c) Change Control Process

 

Either Party may request additions, deletions or amendments in respect of the development and implementation of the Ehave Companion Solution (“ Change ”). Changes shall be requested in writing signed by an authorized representative of the Party requesting the Change (“ Change Request ”). Ehave shall have no obligation to perform, and CHT shall have no obligation to pay for, services related to any proposed modification or change unless both Parties have agreed to the modifications or changes in writing in accordance with the procedures set forth herein. The Change Request shall include a reasonably detailed description of the scope and nature of the requested Change. If CHT desires a Change, Ehave shall evaluate the feasibility of such change as it relates to the proposed Field of Use. As soon as reasonably possible after receipt of CHT’s request, Ehave agrees to provide CHT with a written estimate of the cost, if any, of and the timing to implement the requested Changes as well as any additional terms and conditions related to such Changes. The costs, if any, associated with the development of such estimate shall be borne by CHT. Upon CHT’s approval in writing of the cost estimate and any additional terms and conditions related to such Changes, including delivery dates and payment terms provided by Ehave, the Parties shall revise the Specifications and Implementation Plan and shall replace the Specifications and Implementation Plan attached hereto as Schedules “1” and “2”, and Ehave shall develop and implement the Change as so agreed. Changes shall be subject to acceptance testing by CHT prior to being deployed into production in accordance with procedures described in Section 3(d) or as otherwise agreed by the parties in writing. Ehave shall not refuse to accept a CHT Change request unless it is unable to make the Change requested using commercially reasonable efforts, in which event Ehave will provide an explanation to CHT; or Ehave and CHT fail to agree on the terms and conditions related to the performance of such Change, including the costs, if any. If a mutually acceptable resolution is not reached in respect of a CHT Change request, the Parties may submit the issue to mediation pursuant to Section 19(b).

 

(d) Acceptance

 

The criteria (“ Acceptance Criteria ”) which the Ehave Companion Solution is to meet and the procedures by which such criteria are to be tested (“ Acceptance Procedures ”) shall be set out in the Implementation Plan and shall follow the requirements set out in this Section 3(d). Once notified by Ehave that the Ehave Companion Solution is ready for acceptance testing, CHT shall perform the tests as set out in the Acceptance Procedures. Unless otherwise set out in the Acceptance Procedures, CHT shall have ten (10) Business Days to perform the acceptance tests as set out in the Acceptance Procedures and to provide Ehave written notice of acceptance or non-acceptance of the Ehave Companion Solution (the “ Acceptance Period ”). CHT shall not refuse to accept the Ehave Companion Solution unless all or one or more portions of the Solution fail to perform, in any material respect, in accordance with the Acceptance Criteria. Any notice of non-acceptance shall describe the material failure of the Ehave Companion Solution in reasonable detail and CHT shall provide Ehave with reasonably detailed documentation and explanations, together with underlying data, to substantiate the failure and to reasonably assist Ehave in its efforts to diagnose and correct the failure. If CHT gives notice to Ehave of non-acceptance of the Ehave Companion Solution then Ehave shall investigate the reported failure in good faith and correct same, and if the engagement is on a fixed fee basis at no additional cost to CHT, within fifteen (15) Business Days unless an extension is granted by CHT. If, within such fifteen (15) Business day period (or extended period, as applicable), Ehave corrects the failure, then Ehave shall give written notice to CHT certifying that the failure has been corrected, and another Acceptance Period of the same duration as the initial Acceptance Period shall begin and shall be governed by the provisions of this Section 3(d) upon delivery of the corrected Ehave Companion Solution to CHT. If the Acceptance Procedures were conducted three (3) times in respect of the initial implementation of the Ehave Companion Solution, and the eHAve Companion Solution failed to pass the Acceptance Criteria on the third (3rd) try, then, at the discretion of either Party, Ehave may continue to fix the problem, or terminate this Agreement in which case, CHT shall promptly return to Ehave all copies of the Ehave Companion Solution, including the Specifications and any other items delivered to CHT by Ehave thereunder and Ehave shall promptly refund to CHT any monies paid by CHT in respect of the initial development and implementation of the Ehave Companion Solution. If the Acceptance Procedures were conducted three (3) times in respect of a Change, and the Change failed to pass the Acceptance Criteria on the third (3rd) try, then, at the discretion of CHT, Ehave may continue to fix the problem, or terminate the performance of the development of the Change, in which case CHT shall promptly return to Ehave all copies of the Change, including the Specifications thereto and Ehave shall promptly refund to CHT any monies paid by CHT in respect of the development and implementation of the Change.

 

  8 .

 

 

(e) Deployment

 

Once CHT provides Ehave written notice of acceptance, Ehave will deploy the Ehave Companion Solution or Change, as applicable, by putting the Ehave Companion Solution or Change into production in accordance with, and within the timelines set out, in the Implementation Plan or Change Request, as the case may be.

 

(f) Branding

 

The Ehave Companion Solution may, in the sole discretion of CHT, be branded, marketed, advertised, promoted and sublicensed under CHT Marks. For such purpose, CHT hereby grants to Ehave a non-exclusive, royalty-free, revocable, limited license during the Term and Transition-out Period and within the Territory to use, reproduce, publish and display the CHT Marks solely in connection with the operation of the Ehave Companion Solution for and on behalf of CHT and End Users. Ehave agrees that its use of any CHT Marks will comply with CHT’s branding guidelines to the extent made available by CHT to Ehave from time to time and will enure to the benefit of CHT. The CHT Marks are proprietary to CHT and nothing in this Agreement constitutes the grant of a general license for their use. Other than as expressly set forth herein, Ehave does not acquire any right, title or interest in or to any CHT Marks or the goodwill associated therewith. CHT reserves any and all rights in and to the CHT Marks not expressly granted herein.

 

4. CHT DEVELOPMENTS

 

(a) Development

 

From time to time, CHT may request Ehave to develop functionality that is separate from, but interfaces with the Ehave Companion Solution (the “ CHT Developments ”). Any such development effort shall be subject to a separate services agreement between the Parties which will set out the respective obligations of the Parties regarding the development and deployment of any CHT Developments, including without limitation assignment or transfer of any rights that Ehave may have in such CHT Developments.

 

(b) APIs

 

If CHT desires a third party to develop any CHT Developments, Ehave shall provide to CHT the specifications of the application program interfaces to permit CHT or such other third party to develop the CHT Developments so that it may inter-operate with the Ehave Companion Solution.

 

(c) License

 

If CHT requires Ehave to host the CHT Developments, then CHT hereby grants to Ehave a royalty-free, non-exclusive, non-transferable, limited right and licence during the Term hereof to use the CHT Developments solely for the purpose of enabling its operation for CHT and its End Users’ purposes.

 

5. GENERAL PERFORMANCE OBLIGATIONS

 

(a) Marketing

 

CHT shall, in good faith and at its own expense:

 

(i) market, advertise, promote and re-license the use of the Ehave Companion Solution to End Users located in the Territory consistent with good business practice, provided that CHT shall have full discretion as to where in the Territory it chooses to do so at any time and from time to time;

 

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(ii) develop and execute a marketing plan sufficient to fulfil its obligations under this Agreement;

 

(iii) have sufficient knowledge of the industry and solutions competitive with the Ehave Companion Solution (including specifications, features and benefits) so as to be able to explain in detail to the End Users:

 

A. the material differences between the Ehave Companion Solution and competing solutions; and

 

B. information on standard protocols and features of the Ehave Companion Solution;

 

(iv) market, advertise, promote and provide the Ehave Companion Solution and conduct business in a manner that at all times reflects favourably on the Ehave Companion Solution and, subject to Section 3(f), the good name, goodwill and reputation of Ehave; and

 

(v) maintain books, records and accounts of all transactions and activities covered by this Agreement and permit reasonable examination thereof by Ehave and its representatives in accordance with this Agreement.

 

(b) Provision to End Users

 

CHT shall require each End User to enter into and execute a subscription agreement in a form and substance satisfactory to Ehave and CHT, acting reasonably, and which contains provisions similar to Ehave’s collaboration agreement for the use of the Ehave solution (the “ Subscription Agreement ”). Ehave shall be a third party beneficiary hereunder, but shall not have any obligations to the End User thereunder.

 

(c) End User Data

 

Pursuant to the Subscription Agreement, CHT shall obtain from each End User the right to and hereby grants, effective upon the execution and delivery of such End User’s Subscription Agreement, to Ehave:

 

(i) a royalty-free, non-exclusive, non-transferable, limited right and licence during the term of such Subscription Agreement to use, copy, store and display the End User Data solely for the purpose of enabling Ehave to operate the Ehave Companion Solution for such End User and as may be necessary for the purpose of enabling Ehave to provide support services in accordance with this Agreement; and

 

(ii) a royalty-free, non-exclusive, limited, perpetual right and license to use, copy, store and display End User Data on an aggregated and anonymous basis and so as not to permit the identification of any End User or individual for the sole purpose of improving or developing enhancements to the Ehave Companion Solution , provided that Ehave shall not have any right to use, commercialize or exploit such End User Data in any other manner or for any other purpose.

 

Except for the limited license expressly provided in Section 5(c), nothing contained in this Agreement shall be construed as granting to Ehave or any third party any right, title, or interest in or to any End User Data. Without limiting the foregoing, Ehave agrees that it shall not (i) modify, alter or commercially exploit any End User Data; or (ii) distribute or sell, rent, lease, license or otherwise make any End User Data available to any third party (other than the particular End User to whom the End User Data pertains and its Authorized Users).

 

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(d) Authority to Perform Under this Agreement

 

Each Party shall, at its own expense, obtain and maintain required certifications, credentials, licences and permits necessary to conduct business in accordance with this Agreement. CHT shall obtain all necessary licenses, permits, certifications and credentials to conduct its business.

 

(e) End User Support

 

On and after the launch of the Ehave Companion Solution, CHT shall, at its own expense, ensure that an adequate number of trained, capable and qualified technical personnel with sufficient knowledge of the Ehave Companion Solution are available to provide first line support to assist End Users. If CHT’s support personnel are unable to resolve any trouble tickets from an End User, CHT may escalate the trouble ticket to Ehave in accordance with the support procedures set out in Schedule “3”.

 

On and after the launch of the Ehave Companion Solution, Ehave shall ensure that an adequate number of trained, capable and qualified technical personnel with sufficient knowledge of the Ehave Companion Solution are available to provide support in accordance with the support procedures set out in Schedule “3”.

 

(f) Government Approval

 

If, at any time during the Term, any notification, registration or approval is required to give legal effect in any applicable jurisdiction to this Agreement or the transactions contemplated under this Agreement, CHT shall:

 

(i) immediately take whatever steps may be necessary to properly notify, register or obtain approval;

 

(ii) be responsible for any charges incurred in connection with notifying, registering or obtaining this approval; and

 

(iii) keep Ehave currently informed of its efforts regarding this Section 5(f).

 

Ehave is not obligated to provide access to the Ehave Companion Solution in a particular jurisdiction under this Agreement until CHT has provided Ehave with satisfactory evidence that: (i) this approval, notification or registration is not required or that (ii) it has been obtained. At CHT’s cost and expense, Ehave shall provide reasonable assistance and cooperation to CHT as CHT may reasonably request in its efforts to obtain or provide any such approval, notification or registration, provided that, CHT shall at all times retain full discretion as to where in the Territory it chooses to market, promote, advertise and/or sublicense the Ehave Companion Solution.

 

(g) Prohibited Acts

 

Notwithstanding anything to the contrary in this Agreement, neither CHT nor CHT personnel shall:

 

(i) make any representations, conditions, warranties, guarantees, indemnities, similar claims or other commitments:

 

A. actually, apparently or ostensibly on behalf of Ehave, or

 

B. to any End User regarding the Ehave Companion Solution,

 

which representations, conditions, warranties, guarantees, indemnities, similar claims or other commitments are additional to or inconsistent with any then-existing representations, conditions, warranties, guarantees, indemnities, similar claims or other commitments in this Agreement or any written or electronic documentation provided by Ehave to CHT; or

 

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(ii) engage in any unfair, competitive, misleading or deceptive practices respecting Ehave, Ehave's Trade-marks or the Ehave Companion Solution, including any product disparagement or "bait-and-switch" practices.

 

6. EHAVE COMPANION SOLUTION

 

(a) Provision and Access to Ehave Companion Solution

 

Once deployed, Ehave shall operate, support and maintain the Ehave Companion Solution in accordance with the terms of this Agreement, including the Support Procedures set out in Schedule “3”, the Service Level Commitments set out in Schedule “4” and the Security Requirements set out in Schedule “5”. Access to the Ehave Companion Solution may be through a secure connection with the public Internet. CHT acknowledges and agrees that Ehave is not responsible or liable for any communication over the public Internet.

 

(b) Security Requirements

 

Ehave shall implement and maintain those safeguards and controls set out in Schedule “5” to deter and for the detection, prevention and correction of any unauthorized intrusion, access or use of the Ehave Companion Solution, as well as to protect against any loss, theft or unauthorized access, use, disclosure, copying, or modification of End User Data. CHT acknowledges and agrees, and shall obtain such acknowledgement and agreement from its End Users, that notwithstanding the Security Requirements, such methods and procedures may not prevent unauthorized electronic intruders to access the Ehave Companion Solution through the Internet or through other form of electronic communication. If such unauthorized electronic intruders are able to bypass Ehave’s security protocols, firewall and safeguards, such unauthorized electronic intruder may change, delete or otherwise corrupt the contents and data contained in the Ehave Server, including any End User Data. Except for the maintenance of appropriate firewall and safeguards in compliance with the Security Requirements, which are designed to frustrate access from unauthorized electronic intruders, Ehave shall not be liable to CHT or to any of its End users, and hereby disclaims responsibility, with respect to any action, destructive or otherwise, by any unauthorized electronic intruder.

 

(c) Maintenance

 

From time to time, it will be necessary for Ehave to perform maintenance on the Ehave Companion Solution. Such maintenance includes routine maintenance to ensure the continued provision of the Ehave Companion Solution or upgrading, updating or enhancing the Ehave Companion Solution. Ehave shall use its commercially reasonable efforts to perform such maintenance at such times within the designated maintenance windows set forth in Schedule “3” to minimize the impact of any downtime of the Ehave Platform to CHT and its End Users. To the extent Ehave is able, Ehave shall notify CHT at least 48 hours in advance of any scheduled maintenance by sending an email to the designated CHT Service Manager of the scheduled maintenance time and the anticipated duration of such maintenance.

 

(d) Changes to Service

 

Ehave may, at any time, with or without written notice (except in cases where such change may affect the manner in which the Services are delivered, in which case, Ehave shall use reasonable efforts to provide advance written notice, but in any event as soon as reasonably possible thereafter) to CHT (i) make changes to the Ehave Companion Solution that are necessary to comply with applicable safety, security or other statutory requirements or orders from applicable Governmental Authorities; (ii) supplement or make changes to its user documentation and to its rules of operations, access procedures, security and privacy procedures and policies, provided such changes do not materially adversely affect CHT or its End Users; and (iii) change the components, type and location of the Ehave Platform, provided that such changes do not adversely affect the performance, features, functionality or security of the Ehave Companion Solution.

 

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(e) Authentication IDs

 

CHT shall, and shall require its End Users to, control and maintain the security of all Authentication IDs. As between CHT and Ehave, CHT shall be solely responsible for all instructions, commitments and other actions or communications taken under any of CHT’s Authentication IDs. CHT shall promptly report to Ehave any errors or irregularities in the Ehave Companion Solution or the Ehave Platform or any unauthorized use of any part thereof that come to CHT’s attention and inform Ehave immediately if CHT becomes aware that any Authentication ID becomes known to any third person who is not authorized to possess such password.

 

(f) End User Data

 

CHT acknowledges and agrees that Ehave: (i) will not be responsible for the accuracy, completeness or adequacy of any End User Data or the results generated from any End User Data uploaded to and processed by the Ehave Companion Solution in accordance with the Specifications; (ii) has no control over any End User Data or the results therefrom; (iii) does not purport to monitor End User Data; and (iv) shall not be responsible to back up or maintain any back up of the End User Data or portion thereof.

 

(g) Viruses

 

If Ehave, in its absolute discretion, forms the view that any End User Data or any other information or files uploaded by CHT or any of its End User and their Authorized Users contains or includes a Virus or is reasonably considered Objectionable Content, Ehave may remove such End User Data, information or file from the Ehave Companion Solution and take such other action as Ehave deems necessary to protect the integrity and operation of the Ehave Companion Solution. Any reasonable costs associated with such removal may be charged by Ehave to CHT. Ehave shall notify CHT of its actions under this Section 6(g) as soon as reasonably possible.

 

7. ROYALTIES AND PAYMENT

 

(a) Royalties

 

The Royalties and payment terms are as set out in Schedule “6”. The Royalties do not include applicable taxes. CHT agrees to pay the Royalties and applicable taxes in accordance with the payment terms as set out in Schedule “6”.

 

(b) Taxes:

 

CHT shall pay any and all applicable taxes, however designated or incurred, which are payable by it pursuant to Applicable Law as a result of or otherwise in connection with the transactions contemplated in this Agreement including, without limitation, federal, provincial and local, excise, sales, use, goods and services, harmonized, value added and any similar taxes, except for any taxes based on Ehave’s net income.

 

(c) Interest on Late Payments:

 

Where CHT fails to pay any amount in accordance with the payment terms set out in Schedule “6”, Ehave shall have the right, in addition to any other rights or remedies available to it, to charge, and CHT shall pay, interest on such overdue amounts at the rate of 1% per month calculated daily, compounded monthly (12.68% per annum) both before and after any court judgement in respect of the same from the date such payment was due.

 

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8. AUDIT RIGHTS

 

(a) Ehave Right to Audit

 

CHT will provide Ehave and its representatives, auditors and inspectors (" Auditors ") upon ten (10) Business Days prior written notice with reasonable access, during business hours, to all facilities, systems and assets used by CHT, to CHT personnel and subcontractors and to all relevant CHT books and records, in each case, to the extent relevant to this Agreement, in order to conduct appropriate audits, examinations and inspections (" Audits ") to:

 

(i) verify compliance with the requirements set out in this Agreement; and

 

(ii) verify the Royalty calculations.

 

(b) Principles Regarding Audits

 

CHT shall provide to Ehave and its Auditors any assistance they may reasonably require to conduct such Audits. Audits may be conducted once a calendar year, provided that the foregoing limit shall not apply where an audit discovered an overcharge of 5% or more, in which case, Ehave may conduct another audit sooner. No period shall be audited more than once. Costs incurred by Ehave in connection with any audit or inspection conducted shall be borne by Ehave. Notwithstanding the foregoing, if an Audit reveals that CHT underpaid Ehave for any Royalties hereunder, by more than five percent (5%) of the total Royalties paid during the period being audited, CHT shall promptly reimburse Ehave for all reasonable third party expenses incurred by Ehave in connection with such Audit. In all cases CHT shall promptly pay Ehave in full for any underpayments revealed by an Audit. All information obtained by Ehave and its Auditors during any such Audit shall be kept confidential and shall be considered CHT’s Confidential Information. Ehave shall impose confidentiality obligations on its Auditors that are substantially similar to those under Section 13 and shall be responsible for any breach of confidentiality by its Auditors.

 

(c) Records

 

CHT shall keep detailed records and books of account with supporting vouchers, invoices and other documentation showing all expenditures, charges and related calculations of whatsoever nature made by it in the performance of its obligations under this Agreement. CHT shall retain such records for the greater of: (i) three (3) years; or (ii) the period required by Applicable Laws.

 

(d) Security Audit

 

On an annual basis, Ehave shall conduct and provide CHT the results of an audit conducted in accordance with the Statement on Standards for Attestation Engagements (SSAE) No. 18, Service Organization Control (SOC) 2 Report type audit or similar audits in respect of its operations. Ehave shall also provide CHT written notice and detail of any deficiencies that Ehave’s auditors (whether internal or external) found through the conduct of such audits and the remediation efforts that Ehave shall undergo to rectify such deficiencies. Ehave shall promptly rectify any deficiencies identified that may materially and adversely impact the Ehave Companion Solution or End User Data, and shall provide CHT with such information as CHT may reasonably request from time to time with respect to its security controls including any remediation efforts undertaken to rectify any deficiencies.

 

9. TERM

 

This term of this Agreement and the rights and obligations of the Parties hereto shall commence as of the Effective Date and shall continue in perpetuity (the “ Term ”), unless terminated earlier in accordance with the provisions contained herein.

 

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10. SUSPENSION AND TERMINATION

 

(a) Suspension of Services:

 

Subject to the provisions of this Section, in the event that CHT does not pay the Royalties or any portion thereof, when due, Ehave may immediately suspend CHT’s and each of its End Users’ right to access and use the Ehave Companion Solution. However, Ehave shall not suspend CHT’s or its End Users’ right to access and use the Ehave Companion Solution or any End User Data by reason of CHT’s good faith withholding of any payment or amount, or in the event of any payment dispute between the parties arising under or concerning this Agreement, in each case, unless and until such dispute is resolved pursuant to Section 19, provided that CHT shall have a period of five (5) Business Days to pay any amount agreed to in settlement or determined by arbitration pursuant to Section 19 to be payable by it.

 

(b) CHT’s Right to Terminate:

 

Subject to Sections 10(e) and 10(g), CHT may terminate this Agreement and the rights granted hereunder, in whole or in part, without prejudice to enforcement of any other legal right or remedy (including any express termination right set forth elsewhere in this Agreement), immediately upon giving written notice of such termination if Ehave:

 

(i) breaches any material provision of this Agreement and such breach continues for a period of twenty (20) Business Days after delivery of a written notice by CHT requiring Ehave to correct such failure; or

 

(ii) becomes or is adjudicated insolvent or bankrupt, admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or Ehave applies for or consents to the appointment of any receiver, trustee or similar officer for it or for all or any substantial part of its property; or such receiver, trustee or similar officer is appointed without the consent of Ehave; or Ehave institutes any bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment or debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding is instituted against Ehave and is not dismissed within sixty (60) Business Days; or any judgment, writ, warrant or attachment or execution of similar process is issued or levied against a substantial part of Ehave’s property and remains unsatisfied for sixty (60) Business Days.

 

In addition, CHT may terminate this Agreement and the rights granted hereunder, in whole or in part, and without prejudice to enforcement of any other legal right or remedy (including any express termination right set forth elsewhere in this Agreement), at any time without cause, by providing at least thirty (30) Business Days prior written notice to Ehave, but subject to payment of a termination fee equal to an amount set out in Schedule 6.

 

(c) Ehave’s Right to Terminate:

 

Subject to Sections 10(e) and 10(g), Ehave may terminate this Agreement and the rights granted hereunder without prejudice to enforcement of any other legal right or remedy, immediately upon giving written notice of such termination if CHT:

 

(i) fails to pay in full any sum owing by it under this Agreement by the due date thereof (other than any sum the payment of which is disputed by CHT in good faith and withheld pending resolution of such dispute in accordance with Section 19) and such failure continues for a period of ten (10) Business Days after delivery of a written notice by Ehave requiring CHT to correct such failure;

 

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(ii) breaches any other material provision of this Agreement and such breach continues for a period of twenty (20) Business Days after delivery of a written notice by Ehave requiring CHT to correct such failure; or

 

(iii) becomes or is adjudicated insolvent or bankrupt, admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or CHT applies for or consents to the appointment of any receiver, trustee or similar officer for it or for all or any substantial part of its property; or such receiver, trustee or similar officer is appointed without the consent of CHT; or CHT institutes any bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment or debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding is instituted against CHT and is not dismissed within sixty (60) Business Days; or any judgment, writ, warrant or attachment or execution of similar process is issued or levied against a substantial part of CHT’s property and remains unsatisfied for sixty (60) Business Days.

 

(d) Waiver:

 

The waiver by either Party of a breach or default of any provision of this Agreement by the other Party shall not be effective unless in writing and shall not be construed as a waiver of any succeeding breach of the same or of any other provision. Nor shall any delay or omission on the part of either Party to exercise or avail itself of any right, power or privilege by such Party shall constitute a waiver.

 

(e) Effect of Termination:

 

Upon the termination of this Agreement for any reason, subject to and without limiting the provisions of Section 12:

 

(i) the Parties shall implement the Transition-Out Services pursuant to Section 10(f);

 

(ii) at the end of the Transition-out Period (or earlier upon CHT’s request) Ehave shall terminate and invalidate any Authentication IDs associated with CHT and any of its End Users;

 

(iii) Ehave shall, but not earlier than twenty (20) Business Days after the later of termination or expiration of this Agreement or the Transition-out Period, destroy any copies of the End User Data contained in the Ehave Companion Solution and certify in writing to CHT that it has done so;

 

(iv) CHT shall pay to Ehave the full amount of all Royalties payable hereunder as of the date of termination, if any, whether already invoiced or not (including any amounts due as late payment charges), and any other monies owing to Ehave hereunder; and

 

(v) each Party will return to the other Party, or at the other Party’s written request, destroy, in a secure manner all Confidential Information of the other Party which is then in its possession or control and certify in writing that it has done so.

 

CHT acknowledges and agrees if any End User fails to download its End User Data from the Ehave Companion Solution in a timely manner (i.e. on or before the later of termination or expiry of this Agreement and the Transition-out Period), it may not have access to such information or such information may be destroyed by Ehave in accordance with the terms of this Section 10(e). Subject to Section 10(f), it is CHT's and each End User’s responsibility to download and obtain all the End User Data on or prior to the termination of this Agreement or expiry of the Transition-out Period (whichever is later). Ehave shall have no responsibility for maintaining or providing to CHT or to any of its End Users the End User Data or any portion thereof, or any liability to CHT or any End User for destroying End User Data, in either case, from and after the twentieth (20th) Business Day after the termination or expiration of this Agreement or the Transition-out Period, whichever later.

 

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(f) Transition Assistance:

 

Without limiting the provisions of Section 11, commencing on the delivery of any notice of termination of this Agreement, and continuing through the effective date of termination and for a period of sixty (60) Business Days thereafter (the “ Transition-out Period ”), Ehave will, to the extent requested by CHT, provide to CHT (or at CHT's request to CHT's End User) such reasonable cooperation, assistance and services to facilitate the orderly wind down, transition and migration and transfer of the End User Data from Ehave to CHT (the “ Transition-out Services ”).

 

(g) Survival of Covenants:

 

Notwithstanding the termination or expiration of this Agreement for any reason, the covenants set out in this Section 10(g) and in Sections 7(c), 10(e), 10(f), 11, 12, 13, 14(c), 15, 16, 17, 19, 20(a) and those provisions set out in Section 1 as necessary to interpret the foregoing provisions, of this Agreement shall survive any such termination or expiration.

 

11. OWNERSHIP

 

(a) Ehave’s Ownership

 

CHT acknowledges and agrees that, as between CHT and Ehave, Ehave owns all worldwide right, title and interest, including all Intellectual Property Rights, in and to the Ehave Companion Solution, including any developments, enhancements or customizations made as a result of Section 3 and any modifications, enhancements, upgrades, updates or Customization subsequent to the development and implementation in accordance with Section 3, excluding, however, any CHT Developments. CHT does not acquire any rights, title or ownership interests of any kind whatsoever, express or implied, in any of the foregoing other than the licenses granted herein.

 

(b) CHT’s Ownership

 

Ehave acknowledges and agrees that, as between Ehave and CHT, CHT owns all worldwide right, title and interest, including all Intellectual Property Rights, in and to the CHT Developments. Ehave does not acquire any rights, title or ownership interests of any kind whatsoever, express or implied, in any of the foregoing other than the licenses granted herein. Further, as between CHT and Ehave, (i) CHT (or its End User) is and will remain the sole and exclusive owner of all right, title, and interest in and to End User Data, including all Intellectual Property Rights therein and/or relating thereto, subject only to the limited license granted in Section 5(c), and (ii) End User Data and CHT Developments are and will be the Confidential Information of CHT. CHT and End Users shall at all times, including in the event of termination of this Agreement and for a period thereafter as set out in Section 10(e), have access to their respective End User Data and the ability to download and/or export their End User Data out of the Ehave Companion Solution.

 

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12. ESCROW

 

(a) Escrow Agreement

 

(i) Concurrently with execution of this Agreement or, at CHT’s option, as soon as practicable after the Effective Date but in no event later than CHT’s acceptance of and the launch of the Ehave Companion Solution, CHT and Ehave shall enter into a Source Code Escrow Agreement with a reputable software escrow agent mutually acceptable to the Parties (“ Escrow Agent ”), in or substantially in the form attached hereto as Schedule “7”, or otherwise in a form acceptable to the Parties, acting reasonably, and to the Escrow Agent (the “ Escrow Agreement ”), providing for the release of the Source Code for the Software, as modified pursuant to Section 3 and all necessary programming documentation, utilities and tools used by Ehave to maintain the Software and to compile the source code into object code (excluding third party utilities and tools licensed by Ehave for which Ehave has not been granted the right to sublicense or otherwise make available such utilities and tools to third parties without additional charge, but including such information as necessary for CHT to obtain licenses to and obtain such third party utilities and tools), all in its then-existing form, to CHT, in the certain circumstances expressly stated in Section 12(b). The Escrow Agreement shall provide that the Software, including the Source Code and object code, Specifications and related documentation are and shall be deemed to be "intellectual property" and the rights under the Escrow Agreement and the license granted under Section 12(a)(iii) are deemed to be "rights to use intellectual property" for purposes of section 65.11(7) of the BIA and section 32(6) of the CCAA.

 

(ii) Upon release of the Source Code by the Escrow Agent to CHT pursuant to the terms and conditions of the Escrow Agreement, Ehave hereby warrants that such Source Code and other materials are and will be the then current version of the Software as used by CHT in its provision to End Users of the eEhave Companion Solution under the Subscription Agreements and that Ehave shall throughout the Term keep the Source Code so deposited with the Escrow Agent current by periodically submitting material updates to the Escrow Agent from time to time, as necessary. Save and except for express warranties specified in this Agreement and the Escrow Agreement, Ehave specifically disclaims all other warranties, express or implied, including, without limitation, any warranty of merchantability and fitness for a particular purpose.

 

(iii) In connection with the exercise of CHT’s rights under the Escrow Agreement, Ehave hereby grants to CHT a non-exclusive, non-transferable (except as set forth in Section 20(f)), right and license to use and copy the materials deposited with the Escrow Agent, including the Source Code, its Specifications and documentation, and any resulting corrections, repairs, translations, enhancements, and other derivative works and improvements made by CHT, for the sole purposes of providing to CHT the ability to operate, support and maintain, the Ehave Companion Solution for its End Users from time to time, until such time that CHT is able to migrate off the Ehave Companion Solution, but in any event not exceeding twelve months from the date of release of the materials from escrow. CHT may use third parties to perform its foregoing rights, provided that any such third parties are not competitors of Ehave and shall be subject to confidentiality obligations. CHT expressly agrees, however, that CHT shall not exercise any of the foregoing right and license unless and until CHT obtains such Source Code from the Escrow Agent. CHT’s obligations with respect to confidentiality and use of the Source Code shall be equivalent to CHT’s obligations set forth in Section 13 of this Agreement. Notwithstanding any release of the Source Code pursuant to the provisions hereof, Ehave shall retain sole ownership of and other proprietary rights with respect to the Source Code (including any Source Code relating to any modifications made by CHT to the Source Code, all of which shall be owned by Ehave). CHT shall be responsible for all of the Escrow Agent’s fees and charges under the Escrow Agreement.

 

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(b) Release Conditions

 

The parties acknowledge and agree that a “Release Condition” for purposes of the Escrow Agreement shall be deemed to mean any one or more of the following listed events (in addition to any other event specified as a release condition under the Escrow Agreement):

 

(i) Ehave makes a general assignment for the benefit of creditors;

 

(ii) Ehave voluntarily institutes any bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment or debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding is instituted against Ehave and is not dismissed within sixty (60) Business Days; or any judgment, writ, warrant or attachment or execution of similar process is issued or levied against a substantial part of Ehave’s property and remains unsatisfied for sixty (60) Business Days; or Ehave applies for or consents to the appointment of any receiver, trustee or similar officer for it or for all or any substantial part of its property; or such receiver, trustee or similar officer is appointed without the consent of Ehave;

 

(iii) Ehave consents to the filing of a petition of bankruptcy against it;

 

(iv) a petition of bankruptcy is filed against Ehave which is not discharged within sixty (60) days;

 

(v) Ehave becomes or is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent or admits in writing its inability to pay its debts as they mature; Ehave ceases doing business as a going concern;

 

(vi) Ehave undergoes a change of control or is a party to a merger or amalgamation;

 

(vii) Ehave takes steps to dissolve, liquidate, wind up or otherwise terminate its existence;

 

(viii) Ehave has terminated its provision of or ceased to provide the Ehave Companion Solution or support services for a continuing period of fifteen (15) Business Days or more, except pursuant to the termination of this Agreement by Ehave in accordance with its rights contained hrein.

 

(c) Effect of Bankruptcy

 

All of the Software, including the Source Code and object code, the Specifications and related documentation, and all other escrow deposit materials constitute "intellectual property" and all rights and licenses granted by Ehave to CHT under this Agreement or the Escrow Agreement (which is supplementary to this Agreement) are and shall be deemed to be licenses and "rights to use intellectual property" by CHT for the purposes of and as such terms are used and interpreted under section 65.11(7) of the BIA and section 32(6) of the CCAA. CHT shall have the right to exercise all rights and elections under the BIA and CCAA and all other applicable bankruptcy, insolvency and similar laws with respect to this Agreement, the Escrow Agreement and the subject matter hereof and thereof. Without limiting the generality of the foregoing, if Ehave or its estate becomes subject to any bankruptcy or similar proceeding subject to CHT's rights of election, all rights and licenses granted to CHT under this Agreement and the Escrow Agreement will continue subject to the respective terms and conditions hereof and thereof, and will not be affected, even by Ehave's rejection of this Agreement or the Escrow Agreement.

 

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13. CONFIDENTIALITY

 

(a) Obligation:

 

Each Party acknowledges that all Confidential Information consists of confidential and proprietary information of the disclosing Party. Each Party shall, and shall cause its employees, agents and contractors to hold Confidential Information of the other Party in confidence, and shall use the same degree of care by instruction, agreement or otherwise, to maintain the confidentiality of the other Party’s Confidential Information that it uses to maintain the confidentiality of its own Confidential Information, but with at least a reasonable degree of care commensurate with the nature and importance of such Confidential Information. Each Party agrees not to make use of Confidential Information other than for the exercise of rights or the performance of obligations under this Agreement (and the Source Code Escrow Agreement), and not to release, disclose, communicate it or make it available to any third person other than employees, agents and contractors of the Party who reasonably need to know it in connection with the exercise of rights or the performance of obligations by such Party under this Agreement (and the Source Code Escrow Agreement) and who are bound by confidentiality and restricted use obligations at least as protective of the Confidential Information as those set forth herein. Each Party agrees to notify the other Party in writing promptly of any loss or unauthorized disclosure or use of such other Party's Confidential Information and cooperate with such other Party to protect the confidentiality and ownership of all Intellectual Property Rights and other rights therein.

 

(b) Subpoena:

 

In the event that any Party receives a request to disclose all or any part of the Confidential Information of the other Party under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction or by a Governmental Authority, such Party agrees to (i) immediately notify the other Party of the existence, terms and circumstances surrounding such a request; (ii) consult with the other Party on the advisability of taking legally available steps to resist or narrow such request; and (iii) if disclosure of such Confidential Information is required, exercise its commercially reasonable efforts to obtain, and/or assist the other Party to obtain, at the other Party’s expense, an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed Confidential Information which the other Party so designates.

 

(c) Injunctive Relief:

 

Each Party acknowledges and agrees that any unauthorized use or disclosure by it of any of the other Party's Confidential Information, in whole or part, will cause irreparable damage to the disclosing Party, that monetary damages would be an inadequate remedy and that the amount of such damages would be extremely difficult to measure. The receiving Party agrees that the disclosing Party shall be entitled to seek temporary and permanent injunctive relief to restrain the receiving Party from any unauthorized disclosure or use. Nothing in this Agreement shall be construed as preventing the disclosing Party from pursuing any and all remedies available to it for a breach or threatened breach of a covenant made in this Section 13, including the recovery of monetary damages from the receiving Party.

 

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14. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS

 

(a) Mutual Representations of the Parties:

 

Each Party represents to the other that:

 

(i) it is a company duly organized, validly existing and in good standing under the laws of its incorporation and it has full power and authority to enter into this Agreement and to perform each and every covenant and agreement herein contained;

 

(ii) this Agreement has been duly authorized, executed and delivered by it and constitutes a valid, binding and legally enforceable agreement of it;

 

(iii) the execution and delivery of this Agreement, and the performance of the covenants and agreements herein contained, are not, in any manner or to any extent, limited or restricted by, and are not in conflict with, any commercial arrangements, obligations, contract, agreement or instrument to which it is either bound or subject; and

 

(iv) the execution and delivery of this Agreement and the performance of its covenants and agreements herein contained shall comply in all respects with all laws and regulations to which it or its business is subject.

 

(b) Additional representations of Ehave:

 

Ehave represents to CHT that Ehave possesses the knowledge, skill and experience necessary for the provision and completion of the Ehave Companion Solution in accordance with the terms of this Agreement.

 

(c) Warranties

 

Ehave warrants that for the duration of the Term,

 

(i) the Ehave Companion Solution will substantially conform to and operate in accordance with, and have the functions and features set out in, the Specifications, and any related documentation provided by Ehave, and any such documentation shall be complete and accurate in all material respects; and the Ehave Companion Solution will not contain any material undocumented feature;

 

(ii) Ehave has implemented and will maintain industry standard protection for the detection, protection and removal of Viruses;

 

(iii) Ehave will perform all services under this Agreement in a timely, professional and workmanlike manner using personnel of required skill, experience and qualifications, and will devote adequate resources to meet its obligations (including the Service Level Commitments and its support obligations) hereunder;

 

(iv) it has or will have all necessary right, power and authority, including all licenses and Intellectual Property Rights required, to provide and operate the Ehave Companion Solution and to grant all rights and licenses granted or required to be granted by it under this Agreement; and

 

(v) Ehave is not aware of any infringement or misappropriation claims by any third party in relation to the Ehave Companion Solution.

 

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(d) Exclusion of Other Warranties:

 

Except as otherwise expressly stated in this Agreement, there are no express or implied warranties or conditions in relation to the Ehave Companion Solution that are the subject matter of this Agreement, including implied warranties or conditions of merchantable quality, fitness for a particular purpose, or non-infringement, or that the Ehave Companion Solution will meet CHT’s or any End Users’ needs or will be available for use at any particular time or will be error free. Under no circumstances will Ehave be liable for the results of CHT or any of its End Users’ misuse of the Ehave Companion Solution, including any use contrary to Applicable Law.

 

15. INSURANCE

 

(a) Required Insurance:

 

Both Parties shall, at all times during the currency of this Agreement and for a period of one (1) year after the termination or expiration of this Agreement, maintain the following policies of insurance in effect:

 

(i) a comprehensive general liability insurance policy, with minimum coverage of $1,000,000 per occurrence and in the annual aggregate for product liability and completed operations, covering bodily and personal injury, including death, and property damage, including loss of use; and

 

(ii) an information and network technology blended liability insurance policy with an insured limit of at least $1,000,000 in the aggregate.

 

(b) Evidence of Insurance:

 

Upon the execution of this Agreement or at any time at a Party’s request during the term of this Agreement, the other Party shall provide the requesting Party with evidence of the aforementioned insurance coverage in the form of a certificate of insurance acceptable to the requesting Party. In the event of any material change or cancellation of the required insurance policies, the applicable Party will provide the other Party with thirty (30) calendar days' prior written notice and will promptly replace such insurance policy in accordance with this Section 15, without lapse in coverage.

 

16. INDEMNITIES

 

(a) Intellectual Property Indemnity

 

Ehave shall defend at its own expense any claim, proceeding or suit (a “ Claim ”) brought against CHT and/or any of its directors, officers, employees, agents, subcontractors, affiliates and/or End Users (collectively, the “ CHT Indemnified Parties ”) to the extent such Claim alleges that the Ehave Companion Solution furnished hereunder or the use thereof by CHT or its End Users as authorized hereunder or in any Subscription Agreement infringes any copyright, Canadian patent, or registered trademark of a third person, and will indemnify and hold harmless the CHT Indemnified Parties from and against any and all related liabilities, costs, losses, damages and expenses (including reasonable legal fees) arising out of or in connection with or relating to any such Claim, provided that:

 

(i) Ehave is given prompt written notice of the Claim or of any allegations or circumstances known to CHT which could reasonably result in a Claim;

 

(ii) Ehave is given all reasonable information and assistance from CHT, at Ehave’s expense, which Ehave may require to defend the Claim;

 

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(iii) Ehave is given sole control of the defence of the Claim, and all negotiations for the settlement or compromise thereof, provided that Ehave shall promptly engage competent counsel and initiate defence in a professional manner and CHT may observe or participate in such proceedings with its own counsel at its own expense; and

 

(iv) the alleged infringement does not result from any non-permitted uses, alterations, modifications or enhancements carried out by CHT, any End User or on its or their behalf by a third person (other than any Ehave personnel or contractors).

 

If such Claim has occurred, or in Ehave’s opinion is likely to occur, without limiting Ehave’s obligation to defend and indemnify the CHT Indemnified Parties as aforesaid, Ehave may, at its option and expense, either procure for CHT the right to continue using the Ehave Companion Solution in accordance with this Agreement or modify or replace the same so that it becomes non-infringing without loss of functionality, or if none of the foregoing alternatives is reasonably available and at Ehave’s discretion, discontinue the use of the Ehave Companion Solution on not less than sixty (60) Business Days’ prior written notice to CHT and its End Users. The foregoing states the entire obligations of Ehave with respect to any infringement of Intellectual Property Rights of any third Person.

 

(b) CHT' Indemnity

 

CHT shall defend at its own expense any Claim brought against Ehave, its affiliates, directors, officers, employees and agents, to the extent such Claim: (i) alleges, directly or indirectly, that any End User Data infringes any Canadian copyright, patent or registered trademark of a third person; alleges, directly or indirectly, that the End User Data contains any Objectionable Content; (ii) arises through a breach by CHT of its obligations set out in Section 5(g); or (iii) is in relation to any of its End Users’ use of the Ehave Companion Solution, including contrary to Applicable Law, except however to the extent as Ehave has indemnified CHT pursuant to Section 16(a); provided that CHT is given:

 

(i) prompt written notice of the Claim or of any allegations or circumstances known to Ehave which could result in a Claim;

 

(ii) all reasonable information and assistance from Ehave, at CHT's expense, which CHT may require to defend the Claim; and

 

(iii) sole control of the defence of the Claim, and all negotiations for its settlement or compromise thereof.

 

17. LIMITATION OF LIABILITY

 

(a) Consequential Damages

 

Subject to Section 17(c), in no event shall either Party be liable to the other for any consequential, incidental, exemplary or punitive damages even if advised in advance of the possibility of such damages. Further, subject to Section 17(c), neither Party shall not be liable to the other Party for any lost revenue, lost profit or lost savings.

 

(b) Limitation of Direct Damages

 

Subject to Section 17(c), in no event shall either Party's liability under this Agreement exceed the aggregate of all amounts paid under this Agreement and amounts that have accrued but not yet been paid in the twelve (12) months preceding the event giving rise to the claim.

 

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(c) Exceptions to Limitations

 

Notwithstanding Sections 17(a) and 17(b), neither Party excludes or limits any liability for:

 

(i) personal injury or death to the extent that such injury or death results from the negligence or wilful misconduct of a Party or its employees or subcontractors;

 

(ii) fraud, fraudulent misrepresentation or fraudulent concealment;

 

(iii) the Party’s obligations set out in Sections 2(c), 5(b), 5(c), 6(b), 11, 13 or 16;

 

(iv) CHT’s payment obligations under Section 7; or

 

(v) willful misconduct or gross negligence.

 

(d) Application of Limitations and Exclusions

 

The limitations and exclusions set out in this Section shall apply whether a claim, demand or action is based in contract, tort (including negligence), or otherwise.

 

18. FORCE MAJEURE

 

Except for any obligation to make payments, any delay or failure of either Party to perform its obligations under this Agreement or under any Schedule attached hereto shall be excused if, and to the extent, that the delay or failure is caused by an event or occurrence beyond the reasonable control of the Party and without its fault or negligence and that could not have been prevented or avoided by the exercise of reasonable due diligence, such as, by way of example and not by way of limitation, acts of God, action by any Governmental Authority (whether valid or invalid), fires, flood, wind storms, explosions, riots, natural disasters, wars, terrorist acts, sabotage, labour problems (including lock-outs, strikes and slow downs, except for any labour problems of the Party claiming a force majeure event), or court order or injunction; provided that written notice of delay (including anticipated duration of the delay) shall be given by the affected Party to the other Party within two (2) Business Days of the affected Party first becoming aware of such event and the affected Party shall use diligent efforts to end the failure or delay and minimize the effects of such force majeure event. In the event that the force majeure event lasts for fifteen (15) Business Days or longer, either Party shall have the option to terminate this Agreement upon written notice to the other without liability.

 

19. DISPUTE RESOLUTION

 

(a) Discussions:

 

Each Party agrees to utilize all reasonable efforts to resolve any dispute, whether arising during the term of this Agreement or at any time after the expiration of termination of this Agreement, which touches upon the validity, construction, meaning, performance or effect of this Agreement or the rights and liabilities of the Parties or any matter arising out of or connected with this Agreement, promptly and in an amicable and good faith manner by negotiations between the Parties.

 

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(b) Mediation:

 

Either Party may submit a dispute to mediation by providing written notice to the other Party. In the mediation process, the Parties will try to resolve their differences voluntarily with the aid of a single, impartial mediator, who shall attempt to facilitate negotiations. The mediator shall be selected by agreement of the Parties. If the Parties cannot otherwise agree on a mediator within five (5) Business Days, a single mediator shall be designated by the ADR Institute of Canada, Inc. or any successor organization (“ ADR ”) at the request of a Party. Any mediator so designated must not have a conflict of interest with respect to any Party. The mediation shall be conducted as specified by the mediator and agreed upon by the Parties. The Parties agree to discuss their differences in good faith and to attempt, with the assistance of the mediator, to reach an amicable resolution of the dispute. The mediation shall be treated as a settlement discussion and therefore shall be confidential. The mediator may not testify for either Party in any later proceeding relating to the dispute. No recording or transcript shall be made of the mediation proceedings. Each Party shall bear its own costs and legal fees in the mediation. The Parties shall share the fees and expenses of the mediator equally.

 

(c) Arbitration:

 

Subject to Section 19(d), any dispute that has proceeded through mediation established in Section 19(b) without resolution may be submitted to arbitration. Any arbitration conducted pursuant to this Agreement shall take place in the City of Toronto, Ontario. The costs of the arbitration shall be borne equally by the Parties or as may be specified in the arbitrator's decision. The provisions of the Arbitration Act of Ontario, as amended, except as otherwise provided in this Agreement shall govern the arbitration process. The Parties agree to exclude the appeal provisions of the Arbitration Act, as may be amended from time to time, and in particular, section 45 thereof. The determination arising out of the arbitration process shall be final and binding upon the Parties to the arbitration.

 

(d) Exceptions to Arbitration:

 

The following matters shall be excluded from arbitration under this Agreement:

 

(i) any disputes involving third Persons;

 

(ii) breach of confidentiality by either Party; and

 

(iii) intellectual property claims, whether initiated by third Persons or by one of the Parties to this Agreement.

 

20. MISCELLANEOUS

 

(a) Notice:

 

Every notice or other communication hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the Party for whom it is intended, if delivered by registered or certified mail, return receipt requested, or by a national courier service, or if sent by fax (receipt of which is confirmed) to the Person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such Person:

 

To: Ehave To: CHT
   
277 Lakeshore Road E 1 Scarsdale Road
Suite 203  
Oakville, Ontario Toronto, Ontario
Canada Canada
L6J 6J3 M3B 2R2

 

Attention: Prateek Dwivedi, President & CEO Attention: Scott Woodrow, CEO

 

Any such notification shall be deemed delivered (a) upon receipt, if delivered personally, (b) on the next Business Day, if sent by national courier service for next Business Day delivery or if sent by fax. Any correctly addressed notice or last known address of the other Party that is relied on herein that is refused, unclaimed, or undeliverable because of an act or omission of the Party to be notified as provided herein shall be deemed effective as of the first date that said notice was refused, unclaimed, or deemed undeliverable by the postal authorities by mail, through messenger or commercial express delivery services.

 

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(b) Modifications:

 

The Parties may modify this Agreement only upon written agreement.

 

(c) Further Assurances:

 

Each Party shall take such action (including, but not limited to, the execution, acknowledgement and delivery of documents) as may reasonably be requested by the other Party for the implementation or continuing performance of this Agreement.

 

(d) Relationship:

 

The Parties are independent contractors and no other relationship is intended. Nothing herein shall be deemed to constitute either Party as an agent, representative or employee of the other Party, or both Parties as joint venturers or partners for any purpose. Neither Party shall act in a manner that expresses or implies a relationship other than that of independent contractor. Each Party shall act solely as an independent contractor and shall not be responsible for the acts or omissions of the other Party. Neither Party will have the authority or right to represent nor obligate the other Party in any way except as expressly authorized by this Agreement.

 

(e) Enurement:

 

This Agreement shall enure to the benefit of and be binding upon each of the Parties hereto and their permitted successors and assigns.

 

(f) No Assignment:

 

Neither this Agreement nor any rights or obligations hereunder shall be assignable by a Party without the prior written consent of the other Party, provided that either Party shall have the right, on notice to but without the other Party’s consent, to assign this Agreement and its rights and obligations contained herein, to an affiliate or to a third party who is not a competitor of the other Party in connection with a sale of all or substantially all of the assigning Party’s business or assets relating to this Agreement.

 

(g) Counterparts and Facsimile Execution and Delivery:

 

This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument. To evidence its execution of an original counterpart of this Agreement, a Party may send a copy of its original signature on the execution page hereof to the other Party by facsimile transmission or email and such transmission shall constitute delivery of an executed copy of this Agreement to the receiving Party as of the date of receipt thereof by the receiving Party or such other date as may be specified by the sending Party as part of such transmission.

 

(h) Language:

 

It is the Parties desire and agreement that this Agreement and all Exhibits and associated documentation be drafted in English. Les Parties conviennent que la présente convention et tous les documents s’y rattachant, soient rédigés en anglais.

 

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IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be duly executed as of the date first written above by an officer authorized in that behalf.

 

EHAVE, INC.   COMPANION HEALTHCARE TECHNOLOGIES CORP
         
per: /s/ Prateek Dwivedi   per: /s/ Scott Woodrow
Name: Prateek Dwivedi   Name: Scott Woodrow
Title: Chief Executive Officer   Title: Chief Executive Officer

  

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Exhibit 4.45

 

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 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. 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 ISSUE PRICE OF THIS NOTE IS $_________

THE ORIGINAL ISSUE DISCOUNT IS $________

 

Principal Amount: $_________ Issue Date: November 29, 2018
Purchase Price: $___________  

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED , EHAVE, INC. , a Canadian corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ______________. , a ____________ corporation, or registered assigns (the “Holder”) the sum of $__________ together with any interest as set forth herein, on November 29, 2019 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (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. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $no par value per share (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. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 

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.

 

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 during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding principal amount of this Note 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 4.99% 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 (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder . 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 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 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 before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. 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 rates provided in this Note 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) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.

 

1.2             Conversion Price . The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments 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 73% multiplied by the Market Price (as defined herein) (representing a discount rate of 27%). “Market Price” means the average of the lowest two (2) Trading Prices (as defined below) for the Common Stock during the twenty (20) 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 closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. 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 Borrower and the holders of a majority in interest of the Notes 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 tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

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1.3             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 issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved six times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note in effect from time to time initially 79,649,766 )(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations hereunder. 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 the Notes 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 the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for 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 executing stock certificates to execute and issue the necessary certificates for 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 under Section 3.2 of the Note.

 

1.4          Method of Conversion .

 

(a)           Mechanics of Conversion . As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, 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, e-mail 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 (upon payment in full of any amounts owed hereunder).

 

(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.

 

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(c)           Delivery of Common Stock Upon Conversion . Upon receipt by the Borrower 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 Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. 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 hereunder, 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.

 

(d)           Delivery of Common Stock by Electronic Transfer . In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit and Withdrawal at Custodian (“DWAC”) system.

 

(e)           Failure to Deliver Common Stock Prior to Deadline . 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 by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.

 

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1.5         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 (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) 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).

 

Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) 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 an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

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, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, 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 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). “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 the 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 affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) 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 Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

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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 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.

 

1.7          Prepayment . Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. 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 not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which shall direction to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by 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 Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the “Optional Prepayment Amount”). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7.

 

Prepayment Period   Prepayment Percentage  
1.    The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date.     103 %
2.    The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date.     108 %
3.    The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date.     113 %
4.    The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date.     118 %
5.    The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date.     123 %
6.    The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date.     128 %

 

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After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.

 

Article II. CERTAIN COVENANTS

 

2.1            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 to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

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 and Interest . The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.

 

3.2            Conversion and the Shares . The Borrower fails to issue shares of Common Stock 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, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, 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 shares of Common Stock to be issued 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 shares of Common Stock 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 three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its 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 paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.

 

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3.3            Breach of Covenants . The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.

 

3.4            Breach of Representations and Warranties . Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), 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            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.

 

3.7            Delisting of Common Stock . The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

 

3.8            Failure to Comply with the Exchange Act . The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange 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.

 

3.11          Financial Statement Restatement . The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

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3.12         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.

 

3.13          Cross-Default .  Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), 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 Default Amount (as defined herein).  UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, 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: (Y) THE DEFAULT AMOUNT (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.7, 3.8, 3.10, 3.11, 3.12, 3.13, and/or 3.14 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), 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 150% times 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 (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. 

 

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

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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 . 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, 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 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:

 

EHAVE, INC.

203-277 Lakeshore Road East

Oakville, Ontario, Canada L6J 6J3

Attn: Prateek Dwivedi, Chief Executive Officer

Fax:

Email: teek@ehave.com

 

If to the Holder:

 

_______________

 

With a copy by fax only to (which copy shall not constitute notice):

 

_______________

 

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 (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

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4.4            Most Favored Nation . During the period where any monies are owed to the Holder pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower will provide the Holder with written notice (the “MFN Notice”) thereof promptly but in no event less than 10 days prior to closing any financing transactions. Third party investors shall not include existing convertible debt holders of the Borrower. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent investment. Notwithstanding the foregoing, this Section 4.4 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock. “Exempt Issuance ” means the issuance of: (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Borrower pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of this Note and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

4.5            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 Securities and Exchange Commission). 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; and may be assigned by the Holder without the consent of the Borrower.

 

4.6            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.

 

4.7            Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the Eastern District of New York. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note 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 Note, any agreement or any other document delivered in connection with this Note 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.

 

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4.8            Purchase Agreement . By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

4.9            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.

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on November 29, 2018

 

EHAVE, INC.

 

By:    
  Prateek Dwivedi  
  Chief Executive Officer  

 

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Exhibit 4.46

 

PROMISSARY NOTE

 

Borrower: Ehave, Inc. of 277 Lakeshore Road East, Suite 203, Oakville, ON L6J 6J3 (the “Company”)
   
Lender: _____________ of ___________ (the “Lender”)

 

Principal Amount: _________ USD

 

1. FOR VALUE RECEIVED, The Borrower promise to pay the Lender at such address as may be provided in writing to the Borrower, the principal sum of ________ USD, with 25% interest payable ($_______). This note shall rank senior to all other debt of the Company. This Note is due on December 31, 2018.
2. Any time while not in default under this Note, the Borrower may repay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.
3. This Note will be construed in accordance with and governed by the laws of the State of New York.
4. This Note will endure to the benefit of and be binding upon the representative heirs, executors, administrators, successors and assigns of the Borrower and the Lender.

 

IN WITNESS WHEREOF the parties have duly affixed their signatures under seal on this 31 day of October, 2018.

 

SIGNED, SEALED AND DELIVERED Ehave, Inc.
   
October  31, 2018  
   
  Per ______________________
   
SIGNED, SEALED AND DELIVERED _________________
   
October 31, 2018  
   
  Per _ _____________________

 

 

 

 

Exhibit 4.47

 

TERM LOAN AGREEMENT

 

THIS AGREEMENT is dated for reference Jan 21, 2019.

 

BETWEEN: EHAVE, INC. , a corporation duly incorporated under the Business Corporations Act (Ontario), having its principal place of business at 277 Lakeshore Road East, Suite 203, City of Oakville, Province of Ontario, L6J 6J3, Canada, herein acting and represented by Prateek Dwivedi , duly authorized for the purpose as he so declares,

 

(the “ Borrower ”)

 

AND: Jay Friedman , at 55 Hillmount Avenue, City of Toronto, Province of Ontario, M6V 1X4, ,

 

( the “ Lender ”)

 

THE PARTIES AGREE AS FOLLOWS:

 

1. FINANCING

 

1.1. In consideration of the expenses estimated by the Borrower for the purposes of its interactive digital media products for its fiscals years ending on December 31, 2016, December 31, 2017 and December 31, 2018 (collectively, the “ Fiscal Year ”), subject to Section 1.2, the Lender grants the Borrower a term loan, at a fixed rate, in a principal amount not to exceed three hundred and fifty thousand dollars ($350,000.00) (the “ Loan ”).

 

1.2. The principal amount of the Loan shall not exceed eighty per cent (80%) of the refundable portion of Borrower’s investment tax credit claimed under the Ontario Innovation Tax Credit program and the Ontario Interactive Digital Media Tax Credit (OIDMTC) program ( the “ Tax Credits ”) program with respect to Borrower’s Fiscal Year.

 

2. DISBURSEMENT

 

2.1. The Loan shall be disbursed in one (1) installments, as follows:

 

2.1.1. Conditional to receipt by the Lender of a proof of receipt by the competent authorities the Borrower's application for a certificate of eligibility under the Ontario Interactive Digital Media Tax Credit (OIDMTC) program, the disbursement on or around January 21, 2019 for an amount of $350,000.00 (or such earlier or later date as may be agreed upon by the Lender and the Borrower, the “ Closing Date ”);

 

Notwithstanding the above, no disbursement shall be made if an Event of Default occurs, including an Event of Default under Section 10.1.3.

 

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2.2. The Loan shall be evidenced by a promissory note (in form as prescribed by the Lender, the “ Promissory Note ”) issued by the Borrower in favour of the Lender in the amount of the principal amount of the Loan.

 

3. INTEREST

 

3.1. The Loan and all amounts due under this Agreement will accrue interest a yearly rate of twenty and seven one-thousands percent (20.007%) compounded monthly, calculated daily, from the Closing Date until full and complete repayment of the principal of the Loan, interest thereon and all other amounts payable under this Agreement. All due and unpaid interest shall in turn accrue interest at the abovementioned rate and in the same manner as on the principal.

 

3.2. Notwithstanding the foregoing Section 3.1, if the Borrower repays the outstanding balance of the Loan at any time within five (5) months after the Closing Date, then the Loan shall accrue interest for an amount that is equal to the interest that would otherwise have accrued on the Loan for the five (5) months’ period after the Closing Date pursuant to Section 3.1.

 

4. REPAYMENT

 

4.1. The outstanding balance of the Loan, together any accrued interest thereon and all other amounts payable under this Agreement, shall become due and payable to the Lender on the earliest of the following dates:

 

4.1.1. The date that is sixteen (16) months after the Closing Date and without penalty only if such reimbursement occurs after five (5) months from the initial disbursement (the “Initial Term”); representing a repayment with interest of four hundred and fifty-six thousand dollars ($456,000.00) (the “Minimum Repayment”).

 

4.1.2. The date that is two business days after the date of receipt by the Borrower or its agent of the TAX CREDITS Claim refund from Government of Canada (or any agency of the Government of Canada) or the Ministry of Finance of Ontario, current targets for repayment are December 2019 for one hundred and fifty thousand dollars ($150,000) and May 2020 for three hundred and six thousand dollars ($306,000) of the Minimum Repayment; and

 

4.1.3. The date on which an Event of Default (as defined in Section 10) under this Agreement has occurred.

 

4.2. The Lender will receive an additional payment of the difference between the Tax Credits Claim refund minus any filing fees from BDO above the Minimum Repayment.

 

4.3. The Borrower may repay, in whole or in part, the outstanding balance of the Loan, together with any accrued but unpaid interest thereon and all other amounts payable under this Agreement, at any time and from time to time, provided that any payment so made will be applied first to any fees and reimbursements that are payable by the Borrower hereunder, second to any interest accrued on the Loan, and any balance thereof, to the outstanding principal of the Loan.

  

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4.4. Provided that there is no Event of Default outstanding, the Lender may, at its sole discretion, agree to extend the term of the Loan for an additional period of the same duration as the Initial Term. As of the last day of the Initial Term, the Term Loan shall be automatically extended for such additional period, under the same terms and conditions and the definition of “Repayment Date” shall automatically be deemed to be modified to reflect such extension.

 

5. MANAGEMENT AND DISBURSEMENT FEES

 

5.1.1. No additional management and disbursement fees

 

6. Security

 

6.1. The indebtedness and the obligations of the Borrower under this Agreement shall be secured as follows (collectively, the “ Lender’s Security ”):

 

6.1.1. a general security agreement in the form prescribed by the Lender, with such amendments, modifications or supplements as the Lender may require from time to time, whereby the Borrower will grant to the Lender a security interest in all of the Borrower’s present and after-acquired personal property;

 

6.1.2. a priority agreement among the Lender and KW CAPITAL PARTNERS LTD., ROCFRIM INC. , PLAZACORP INVESTMENTS LIMITED and 698734 ONTARIO INC. in form and content satisfactory to the Lender;

 

6.1.3. a priority agreement among the Lender and KW CAPITAL PARTNERS LTD., ROCFRIM INC. and PLAZACORP INVESTMENTS LIMITED in form and content satisfactory to the Lender;

 

6.1.4. an irrevocable authorization and proxy appointing Mr. Jay Friedman, or any other person duly authorized by the Lender, as an agent and attorney of the Borrower to cash and/or endorse, if applicable, the refund cheque for any TAX CREDITS Claim of the Borrower or other tax credits due to the Borrower issued by the Ministry of Finance of Ontario or the Canada Revenue Agency, for deposit to the account of the Lender, for the benefit of the Lender, and to return any residual amount to the Borrower, after repayment of all amounts due by the Borrower under this Agreement.

 

7. REPRESENTATIONS AND WARRANTIES

 

7.1. The Borrower represents and warrants to the Lender as of the Closing Date, which representations and warranties will survive the execution and delivery of this Agreement:

 

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7.1.1. The Borrower is duly incorporated and it is in good standing under the laws of Canada;

 

7.1.2. The Borrower’s place of business or, if there is more than one place of business, chief executive office (for the purpose of section 7(1) of the Personal Property Security Act (Ontario) is in the Province of Ontario;

 

7.1.3. The Borrower is a Canadian Controlled Private Corporation as defined under the Income Tax Act (Canada);

 

7.1.4. The Borrower has carried on its business in a manner that is consistent with the provisions under the Income Tax Act (Canada) and other applicable legislation and the regulations thereto, including, without limitations, such provisions that could bear upon or materially affect the eligibility of the TAX CREDITS Claim, and all obligations or accounts owing to the Ministry of Finance of Ontario or to the Canada Revenue Agency are current and in good standing;

 

7.1.5. The Borrower has deducted, paid, and/or remitted all taxes, premiums, contributions, levies, fees and other amounts which the Borrower is required to deduct at source, pay and/or remit by or on behalf of the Borrower or otherwise under the Income Tax Act (Canada), Excise Tax Act (Canada), Canada Pension Plan , Employment Insurance Act (Canada), Income Tax Act (Ontario), Workers’ Compensation Act (Ontario) or any regulations to the foregoing or under any other applicable legislation, rule or order, to any taxing authority having jurisdiction, and there are no liens for taxes payable by the Borrower;

 

7.1.6. All information and other facts that have been or will be disclosed to the Lender by or on behalf of the Borrower or its principal(s) in connection with this Agreement and the Loan, including, without limitation, those disclosed in the preliminary due diligence process conducted by or for the Lender, are, or will be, when furnished, complete and correct, and they do not, or will not, when furnished, contain any untrue statement or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are, or will be, made;

 

7.1.7. The borrowing and the granting of security contemplated herein, and the execution, delivery and performance by the Borrower of this Agreement and all other documents to be delivered pursuant hereto have been duly authorized by all necessary corporate proceedings of the Borrower, and will not cause a breach of or constitute a default under the Borrower’s constating documents or any agreement or instrument to which the Borrower is a party;

 

7.1.8. There are no known or probable instances of non-compliance by the Borrower with the requirements of any regulatory and governmental authorities that are applicable to the Borrower, its assets, its subsidiaries (if any) or their assets; and

 

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7.1.9. There are no actions, suits or proceedings, by or on behalf of any government authority or otherwise, pending or threatened against or affecting, or which could affect, the Borrower, its assets, its subsidiaries (if any) or their assets.

 

8. CONDITIONS PRECEDENT TO DISBURSEMENT

 

8.1. The Lender shall not be obliged to make any disbursement of the Loan unless and until the following conditions shall have been satisfied as of the Closing Date (or waived by the Lender):

 

8.1.1. The Lender shall have obtained all information and documents deemed necessary in connection with the granting of the Loan and the TAX CREDITS Claim, to its entire satisfaction;

 

8.1.2. The Borrower shall have demonstrated, to the Lender’s entire satisfaction, the viability of the TAX CREDITS Claim and other tax credits to be claimed by the Borrower;

 

8.1.3. The Lender shall have received:

 

(a) this Agreement and the Lender’s Security, duly executed, delivered to the Lender;

 

(b) all authorizations, including, without limitation, the Business Consent Form (RC-59), signed by the Borrower appointing the Lender as its agent to deal with the Ministry of Finance of Ontario, the Canada Revenue Agency and any other applicable tax authority on behalf of the Borrower; and

 

(c) an acknowledgement and consent to the Loan and the Lender’s Security by any and all secured or unsecured lenders to the Borrower, in form and content satisfactory to the Lender;

 

8.1.4. The Lender’s Security shall have been perfected by registration at the Personal Property Registry of Ontario and other applicable public registry in any applicable jurisdictions;

 

8.1.5. The Borrower shall have demonstrated and certified to the Lender that all tax payments and remittances, tax returns and deductions at source are up to date as of the date of the execution of this Agreement and of each disbursement, and that the Borrower is not party to any litigation before a court of law, tribunal, arbitration body or any other type of panel of a government agency;

 

8.1.6. There shall not have occurred any material change to the Borrower or its business that may be deemed by the Lender, at its sole discretion, to be unfavourable in the nature of the risks of the Borrower or the Loan;

 

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8.1.7. The Lender shall have received all necessary acknowledgement and consent to the Loan from all secured or unsecured lenders to the Borrower.

 

8.1.8. No Event of Default (as defined in Section 10) or event that with notice, passage of time or both would result in an Event of Default shall have occurred, and all representations and warranties made by the Borrower herein or in connection hereto remains true and correct.

  

9. BORROWER’S COVENANTS

 

9.1. For the entire duration of this Agreement and until complete payment of any sum which may be due to the Lender, the Borrower covenants as follows:

 

9.1.1. Immediately notify the Lender of any refund received regarding past tax credits and the TAX CREDITS Claim, upon receipt of the same or as soon as Borrower is informed of any setoff at source made by the Ministry of Finance of Ontario or the Canada Revenue Agency ;

 

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9.1.2. Immediately notify the Lender of an Event of Default (as defined in Section 10), or any event that with notice, passage of time or both would constitute an Event of Default, upon becoming aware of such event;

 

9.1.3. Implement and maintain an accounting system identifying by project the eligible expenses regarding the TAX CREDITS Claim;

 

9.1.4. Maintain a documentation system, acceptable to the tax authorities, for all projects and activities related to the TAX CREDITS Claim;

 

9.1.5. Maintain adequate records and books of account reflecting all financial transactions in conformity with generally accepted accounting principles and, when requested, immediately make available for inspection by duly authorized representatives of the Lender any of its books and records and furnish the Lender with any information regarding its business affairs and financial condition

 

9.1.6. Provide the Lender, upon production or receipt, with copies of all tax returns, notices of assessment and other correspondence regarding past tax credits and/or the TAX CREDITS Claim;

 

9.1.7. Keep any and all tax obligations of the Borrower with the Ministry of Finance of Ontario and the Canada Revenue Agency and any other applicable tax authority current and in good standing

 

9.1.8. Promptly endorse in favour of the Lender of any cheque or other payment instrument, or pay to the Lender any amount received, in connection with any past tax credits and the TAX CREDITS Claim refund for the repayment of the Loan;

 

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9.1.9. Produce and file with the competent tax authorities, within the statutory deadlines, all returns and other documentation required in order to receive any past tax credits and the TAX CREDITS Claim refund;

 

9.1.10. Make such filings that are required by or under, and deduct, pay, and/or remit all taxes, premiums, contributions, levies, fees and other amounts which the Borrower is required to deduct at source, pay and/or remit by or on behalf of the Borrower by or under, the legislation and regulations set out in Section 7.1.5 above or under any other applicable legislation, regulations, rule or order, to any applicable authority having jurisdiction.

 

In addition, the Borrower authorizes the Lender and its agents, immediately and for the duration of the Loan, to obtain from all applicable tax authorities, including but not limited to the Ministry of Finance of Ontario and to the Canada Revenue Agency, all information regarding the payments and remittances by the Borrower. The Borrower agrees to execute all forms necessary to give effect to the foregoing;

 

9.1.11. Produce and file, in a professional and diligent manner and in full compliance with the requirements and provisions of the Income Tax Act (Canada) and other applicable legislation and the regulations thereto, the tax return with the competent tax authorities within ninety (90) days after the end of the Fiscal Year, along with all prescribed forms and documentation necessary to obtain the TAX CREDITS Claim refund;

  

9.1.12. Provide the Lender within ninety (90) days after the end of the Fiscal Year with copies of its financial statements, together with at minimum a Review Engagement Report regarding those financial statements prepared by an independent chartered accountant and tax return with any and all explanatory notes;
 

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9.1.13. Provide the Lender on a quarterly basis with a copy of its in-house quarterly financial statements duly certified by the Borrower’s authorized representative, no later than the twentieth (20 th ) day of the quarter immediately following the quarter on which those quarterly financial statements report;

 

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9.1.14. Provide the Lender on a monthly basis, no later than the twentieth (20 th ) day following the end of each month, with copy of all its latest payments, deductions and other remittances to the government required under any provincial or federal law legislation and regulations thereto, duly certified by the Borrower’s authorized representative;

 

9.1.15. Provide the Lender with the name of the person designated to prepare the technical report. The person so identified must be the person who will work on preparing the technical report, and the Borrower will not change such designation without prior approval by the Lender;

 

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9.1.16. Give the Lender or any its agent access to its premises and all documents deemed useful or necessary for the purposes of auditing all payment, deductions and remittances to the applicable government authorities, on a monthly or quarterly basis, at the Lender’s convenience;

 

9.1.17. Respond promptly and fully to any request received from the Ministry of Finance of Ontario, the Canada Revenue Agency and any other applicable tax authority;

 

9.1.18. If the Borrower’s TAX CREDITS Claim is being audited or otherwise denied by the Ministry of Finance of Ontario or the Canada Revenue Agency, immediately inform the Lender of such audit or denial and engage an independent SR&ED consulting organization (the “ SRED Consultant ”) acceptable to the Lender, in its sole discretion acting reasonably, to assist in respect of the TAX CREDITS Claim;

 

9.1.19. Continue to disclose to the Lender all material information or facts that could materially affect or bear upon the eligibility of the TAX CREDITS Claim;

 

9.1.20. Carry on its business in a manner that is consistent with the provisions under the Income Tax Act (Canada) and other applicable legislation and the regulations thereto, including, without limitations, such provisions that could bear upon or materially affect the eligibility of the TAX CREDITS Claim; and

 

9.1.21. Do all acts and execute all instruments that are necessary to facilitate the filing, processing, receipt and disbursement of the refund of the TAX CREDITS Claim.

 

9.2. For the entire duration of this Agreement and until complete payment of any sum which may be due to the Lender, the Borrower shall not undertake any of the following without prior written approval from the Lender:

 

9.2.1. Cause a Change of Control or Ultimate Control of the Borrower;

 

Control ” means the holding of shares in the capital of the Borrower with enough voting rights to elect the majority of the directors of the Borrower. “ Ultimate Control ” means the holding of shares in the capital of the Borrower by an individual either directly or indirectly through that individual’s Control of one or more intermediate entities which are shareholders of one another or of the Borrower.

 

In case of the passing of a shareholder of the Borrower, the transmission of the shares of the deceased shareholder to his or her estate or heirs will not be deemed to constitute a change of Ultimate Control of the Borrower;

 

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9.2.2. Increase any compensation to its directors and/or shareholders, including, without limitation, any salary, commission or dividend, by more than ten per cent (10%) from the level as known to the Lender as at the Closing Date;

 

9.2.3. Grant, assume or suffer to exist any mortgage, charge, lien, pledge, security interest or other encumbrance affecting any of its assets, other than the Lender’s Security and any other encumbrances expressly permitted in writing by the Lender; provided that if the Lender provides consent to any of the forgoing, it hereby agrees to enter into priority agreements on terms that are substantially similar to the priority agreements contemplated in sections 6.1.2 and 6.1.3;

 

9.2.4. Guarantee or otherwise provide for, on a direct, indirect or contingent basis, the payment of any monies or performance of any obligations by any other person;

 

9.2.5. Advance any monies by way of a loan to any shareholders, directors, officers, key executives or affiliates of the Borrower.

 

10. Events of Default

 

10.1. Each of the following events shall constitute an “ Event of Default ” under this Agreement unless the Lender agrees to waive such default pursuant to Section 10.5:

 

10.1.1. If the Borrower fails to repay the Loan or to pay an interest thereon or any amounts payable hereunder when due in the manner provided herein;

 

10.1.2. If the Borrower delays, omits or refuses to make any payment regarding provincial and/or federal government withholdings and remittances, including but not limited to taxes, deductions at source and/or any other tax debts;

 

10.1.3. If the Borrower fails to comply with the reporting requirements under Sections 9.1.12 and 9.1.13;

 

10.1.4. If the Borrower fails to fulfill any of the terms and conditions of this Agreement or any other agreement with the Lender;

 

10.1.5. If the Borrower fails to execute or comply with any of its covenants under this Agreement or any obligation imposed by the Lender’s Security;

 

10.1.6. If any of the Lender’s Security becomes invalid or unperfected;

 

10.1.7. If the Borrower or the Guarantor ceases to operate its business or gives notice of its intention to make a proposal to its creditors, or makes an assignment for the benefit of its creditors, or becomes insolvent or bankrupt, or if proceedings are brought against Borrower or if notice is given in order to render Borrower or have Borrower declared insolvent or bankrupt;

 

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10.1.8. If any measures is taken or notice given, by or against the Borrower or Guarantor for the purpose of liquidation, restructuring, arrangement with or protection from Borrower’s creditors pursuant to the Bankruptcy and Insolvency Act (Canada), Companies’ Creditors Arrangement Act (Canada) or any other similar legislation;

 

10.1.9. If the Borrower merges, amalgamates, or otherwise enters into any form of business combination with any other person;

 

10.1.10. If any of the creditors of the Borrower or the Guarantor institutes legal proceedings against the Borrower or the Guarantor, as the case may be, or give notice to the Borrower or the Guarantor for the purpose of exercising their rights or seek remedy regarding the assets that are charged or encumbered by the Lender’s Security, including but not limited to, by seizure, notice of intent, notice of termination, possession or otherwise, or if a receiver or liquidator is appointed in respect of those assets.

 

10.1.11. If any of the representations and warranties made herein is incorrect in any material respect when made, or the Borrower has failed to disclose any material information or facts relating to the eligibility of its TAX CREDITS Claim;

 

10.2. Upon the occurrence of an Event of Default, the Lender may do any or all of the following:

 

10.2.1. declare immediately due and payable the outstanding balance of the Loan, any interest thereon and all other amount payable hereunder without presentment of any notes evidencing the same, and without demand, protest or other notices of any kind, all of which are hereby expressly waived;

 

10.2.2. exercise any and all rights, powers, remedies and recourses available to the Lender under this Agreement, under the Lender’s Security, at law, in equity or otherwise.

 

10.3. Upon an Event of Default, the Lender may charge the Borrower a default fee (the “ Default Fee ”) of up to ten per cent (10%) of the principal amount of the Loan, plus any applicable taxes. The Lender will notify the Borrower in writing if it has charged such fee and the amount thereof, and the Borrower will pay such fee upon demand and, until paid, such fee will be added to the principal of the Loan. The Borrower acknowledges and agrees that the Default Fee is a genuine pre-estimate of the liquidated damages suffered by the Lender as a result of an Event of Default, and not a penalty.

 

10.4. The Borrower will pay the Lender a fee of five hundred dollars ($500.00) in every case where the Lender sends a written notice to the Borrower for any Event of Default or any non-compliance with the provisions of Section 10. The fee is payable upon the Lender’s demand and, until paid, will be added to the principal of the Loan.

 

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10.5. The Lender may by written instrument in its absolute discretion at any time and from time to time waive any Event of Default or any breach by the Borrower of any of the covenants herein, provided that any such waiver shall not be a continuing waiver and shall not constitute a waiver of any other term or provision hereof.

 

No failure or delay on the part of the Lender in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which the Lender would otherwise have. The acceptance by the Lender of any payment of or on account of the Loan after a default or of any payment on account of any partial default shall not be construed to be a waiver of any right in relation to any future default or any past default not completely cured thereby. The Lender may exercise any and all rights, powers, remedies and recourses available to it under this Agreement, or any other remedy available to it, concurrently or individually without the necessity of an election.

 

10.6. As a conservatory measure in case of an Event of Default, the Lender may incur and pay all expenses made necessary by such Event of Default or by the realization of any security and/or obligations, whether said expenses are disbursements, professional fees (accountant, preparer, etc.) or agency fees, and Lender may deduct such expenses from the proceeds of the realization of the said security. All expenses incurred as a result of such Event of Default or the realization of any security shall be added to the balance owing on the principal of the Loan and shall accrue interest from the time such expenses are incurred in the manner provided in Section 3.1.

  

10.7. Should the Borrower cease its business activities or become bankrupt, or should the Borrower fail to fulfill its obligations under Sections 0, 9.1.11, 9.1.12 and 9.1.14, the Borrower hereby appoints Jay Friedman or any representative of the Lender (such person, the “ Appointee ”). as its irrevocable agent and attorney for and in the name of the Borrower, with powers of substitution, to perform any act and execute any document necessary or useful to the production and submission of the tax return to the competent tax authorities along with all prescribed forms and documents necessary to obtain the TAX CREDITS Claim refund or other tax credits claimed or claimable by the Borrower, and to transmit to the tax authorities all documentation necessary for the processing of the file by the competent tax authorities. The Appointee shall therefore act as agent and attorney for and in the name of the Borrower to sign, endorse or execute under seal or otherwise any deeds, documents, transfers, cheques, instruments, demands, assignments, assurances or consents that the Borrower is obliged to sign, endorse or execute. In exercising its authority as agent and attorney of the Borrower, the Appointee shall act upon consultation with and on the direction of the Lender, provided that notwithstanding the foregoing, all of the Appointee’s actions pursuant hereto will be taken in its capacity as agent and attorney of the Borrower, and the Lender shall not be in any way responsible for any misconduct, negligence or failure to act on the part of the Appointee. All costs necessary to the preparation and production of said documents shall be repaid directly from the tax refunds due to the Borrower, provided that any excess amount of the cost that is not satisfied by such refunds will be payable by the Borrower.

 

  Initials  

Initials

 

  11 -  

 

 

11. INTEREST ADJUSTMENT

 

In this Section 11, the terms “interest”, “criminal rate” and “credit advanced” have the meanings ascribed to them in s. 347 of the Criminal Code (Canada) as amended from time to time.

 

The Borrower and the Lender agree that, notwithstanding any agreement to the contrary, no interest on the credit advanced by the Lender under this Agreement will be payable in excess of the maximum amount that otherwise be permitted under the laws of Canada. If the effective rate of interest, calculated in accordance with generally accepted actuarial practices and principles, would exceed the criminal rate on the credit advanced hereunder, then:

 

(a) the elements of return which fall within the term “interest” shall be reduced to the extent necessary to eliminate such excess;

 

(b) any remaining excess that has been paid will be credited towards prepayment of the Principal; and

 

(c) any overpayment that may remain after such crediting will be returned forthwith to the Borrower upon demand,

 

and, in the event of dispute, a Fellow of the Canadian Institute of Actuaries appointed by the Lender shall perform the relevant calculations and determine the reductions, modifications and credits necessary to effect the foregoing and the same will be conclusive and binding on the parties.

 

12. INTERPRETATIVE CLAUSES

 

12.1. This Agreement constitutes the full and complete agreement between the parties as to the matters herein dealt with and supersedes any prior agreement, oral or written, which may have taken place between them, and the parties formally waive the right to avail themselves of any discussions held prior to the execution of this Agreement.

 

12.2. This Agreement may be modified from time to time by mutual agreement between the Lender and Borrower by written instrument executed by all parties to the original agreement.

 

13. LEGAL FEES AND COSTS

 

The Borrower will pay all reasonable legal and other fees and disbursements incurred by the Lender in respect of the Loan including the preparation, execution of this Agreement and the Lender’s Security and the performance and enforcement by the Lender thereunder.

 

  Initials  

Initials

 

  12 -  

 

 

14. Loan as Collateral

 

The Borrower acknowledges and agrees that the Lender may assign, set over and give this Agreement and the debt due to the Lender in accordance herewith as a security in favour of their choosing, of any additional deed of hypothec.

 

15. ACKNOWLEDGEMENT

 

The parties acknowledge that the provisions of this Agreement were discussed freely among them, read and clearly understood.

 

16. Governing Law

 

This Agreement shall in all respects be governed by and be construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, and the courts of Ontario shall have exclusive jurisdiction to hear and determine all disputes arising hereunder or in relation hereto.

 

17. Counterparts

 

This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument.

  

IN WITNESS WHEREOF, the parties sign the present document this January 21, 2019.  

 

« The Borrower  »  

EHAVE, INC.  

     
  By : /s/ Prateek Dwivedi
    Prateek Dwivedi

  

« The Lender  »  

Jay FriedMAN 

     
  By : /s/ Jay Friedman
    Jay Friedman

 

  Initials  

Initials

 

  13 -  

 

Exhibit 4.48

 

PROMISSARY NOTE

 

Borrower: Ehave, Inc. of 277 Lakeshore Road East, Suite 203, Oakville, ON L6J 6J3 (the “Company”)
   
Lender: ____________of ___________ (the “Lender”)

 

Principal Amount: $________CDN

 

1. FOR VALUE RECEIVED, The Borrower promise to pay the Lender at such address as may be provided in writing to the Borrower, the principal sum of $__________ . This note shall rank senior to all other debt of the Company. This Note is due on April 5, 2019.
2. Any time while not in default under this Note, the Borrower may repay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.
3. This Note will be construed in accordance with and governed by the laws of the Province of Ontario.
4. This Note will endure to the benefit of and be binding upon the representative heirs, executors, administrators, successors and assigns of the Borrower and the Lender.

 

IN WITNESS WHEREOF the parties have duly affixed their signatures under seal on this 28 day of January, 2019.

 

SIGNED, SEALED AND DELIVERED Ehave, Inc.
   
January 28, 2019  
   
  Per ______________________
   
SIGNED, SEALED AND DELIVERED __________________
   
January 28, 2019  
   
  Per _ _____________________

 

 

 

 

Exhibit 4.49

 

PROMISSARY NOTE

 

Borrower: Ehave, Inc. of 277 Lakeshore Road East, Suite 203, Oakville, ON L6J 6J3 (the “Company”)
   
Lender: ____________of ___________ (the “Lender”)

 

Principal Amount: $________CDN

 

1. FOR VALUE RECEIVED, The Borrower promise to pay the Lender at such address as may be provided in writing to the Borrower, the principal sum of $__________ . This note shall rank senior to all other debt of the Company. This Note is due on April 5, 2019.
2. Any time while not in default under this Note, the Borrower may repay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.
3. This Note will be construed in accordance with and governed by the laws of the Province of Ontario.
4. This Note will endure to the benefit of and be binding upon the representative heirs, executors, administrators, successors and assigns of the Borrower and the Lender.

 

IN WITNESS WHEREOF the parties have duly affixed their signatures under seal on this 28 day of January, 2019.

 

SIGNED, SEALED AND DELIVERED Ehave, Inc.
   
January 28, 2019  
   
  Per ______________________
   
SIGNED, SEALED AND DELIVERED __________________
   
January 28, 2019  
   
  Per _ _____________________

 

 

 

 

Exhibit 4.50

 

WARRANT CANCELLATION AGREEMENT

 

This LETTER AGREEMENT (this “ Agreement ”), dated as of February 27, 2019, is entered into by and among EHAVE, INC., an Ontario corporation (the “ Company ”), and ____________(the “ Holder ”).

 

WHEREAS, the Company has previously issued to the Holder certain warrants exercisable to acquire an aggregate of __________ common shares of the Company (collectively, the “ Warrants ”), as set forth on Schedule I to this Agreement;

 

WHEREAS, the Company has informed the Holder that the Company intends to enter into agreements with holders of the Company’s notes and warrants, pursuant to which certain outstanding notes and warrants shall be converted into common shares of the Company (the “ Recapitalization ”);

 

WHEREAS, upon completion of the Recapitalization, the Company and the Holder agreed to cancel the Warrants in exchange for issuance ___________common shares (the “ Shares ”);

 

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

 

1. Cancellation of the Warrants . In exchange for cancellation of the Holder’s Warrants, upon closing of the Recapitalization, the Holder shall receive the Shares. The Holder shall surrender its Warrant Certificate, duly endorsed (or a notice to the effect that the original Warrant Certificate has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with the Warrant Certificate), at the office of the Company. The Company shall, as soon as practicable thereafter, issue and deliver to the Holder a certificate or agreement representing the Shares pursuant to this Agreement (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company).The cancellation of the Holder’s Warrants pursuant to this Agreement shall be deemed to have been made at the closing of the Recapitalization and on and after such date the Holder entitled to receive the securities issuable upon exercise of the Warrants shall be treated for all purposes as the record holder of such securities and the Holder’s Warrants, and all obligations of the Company thereunder, shall be deemed to have been indefeasibly satisfied in full.

 

2. Representations and Warranties . The Holder hereby represents and warrants to the Company, and the Company hereby represents and warrants to the Holder, that (i) it has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder and the Warrants as amended by this Agreement, and (ii) the execution of this Agreement by the individual whose signature is set forth at the end of this Agreement on behalf of such party, and the delivery of this Agreement by such party, have been duly authorized by all necessary action on the part of such party; and (iii) this Agreement has been executed and delivered by such party and constitutes the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws and equitable principles related to or affecting creditors' rights generally or the effect of general principles of equity. In addition, the Holder further represents and warrants that it is the sole record and beneficial owner of the Warrants and that it has not transferred or assigned any of the Warrants, or any interest therein, to any other person prior to the date hereof.

 

  1  

 

 

2A. Holding Period. The Holder represents that it has held the Warrants continuously for the prior 12 months and the purchase price for the Warrants has been fully paid for such 12-month period. For the purposes of Rule 144 promulgated under the U.S Securities Act of 1933, as amended (the “Securities Act”), the Company acknowledges that the holding period of the Shares may be tacked onto the holding period of the Warrants and the Company agrees not to take a position to the contrary. In addition, the parties intend for the transactions contemplated hereby to meet the requirements of Section 3(a)(9) of the Securities Act.  In connection with the foregoing, if required by the transfer agent to effect removal of a restrictive legend on the certificates or a notation on the book-entry evidencing the Shares to be sold under Rule 144, the Company shall cause its counsel to issue a legal opinion to the transfer agent to the effect that the holding period of the Shares may be tacked onto the holding period of the Warrants and that the transfer of Shares pursuant to Rule 144 does not require registration of such transferred Shares under the Securities Act, provided that the Holder executes and delivers appropriate representations and documentation the Company’s counsel may reasonably request for such purpose.

 

2B. Post-Recapitalization Percentage Ownership . Immediately after the issuance of the Shares, the Shares shall consist of ______% of the Company’s capital stock on a fully diluted basis. At the time of the issuance of the Shares to the Holder, the Company will not have outstanding any debt or securities that give any rights of anti-dilution or similar adjustments.

 

3. Release . By execution of this Agreement, upon issuance of the Shares, Holder hereby acknowledges and agrees that Holder forever releases and discharges the Company from any and all liability arising under the Warrants.

 

4. Counterparts; Execution . This Agreement may be executed in several identical counterparts all of which shall constitute one and the same instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5. Choice of Law; Forum . This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such action or proceeding is improper or is an inconvenient venue for such proceeding.

 

6. Further Assurances . Each of the parties hereto shall execute and deliver, at the reasonable request of the other party hereto, such additional documents, instruments, conveyances and assurances and take such further actions as such other party may reasonably request to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year written above.

 

THE COMPANY:   HOLDER:
     
EHAVE, INC.   _____________
         
By:     By:  
  Name: Prateek Dwivedi     Name:
  Title:  Chief Executive Officer     Title:

 

 

 

 

Exhibit 4.51

 

Memorandum of Understanding

 

THIS MEMORANDUM OF UNDERSTANDING (this “ Agreement ”) is dated effective as of February 28, 2019 (the “ Effective Date ”).

 

BETWEEN:

EHAVE, INC. ,

a corporation formed under the laws of the Province of Ontario

(“ Ehave ”);

 

- and –

 

DAVID GOYETTE ,

an individual residing in the Province of [Ontario]

(the “ Executive ”);

 

(collectively, the “ Parties ”)

 

RECITALS:

 

1. Ehave and the Executive entered into an executive employment agreement pursuant to which Ehave engaged the Executive in the position of Chief Technology Officer (the “ Employment Agreement ”).

 

2. Ehave intends to enter into an asset purchase agreement with ZYUS Life Sciences Inc. (“ Zyus ”) (the “ Asset Purchase Agreement ”), pursuant to which, among other things, Ehave will sell a substantial portion of its assets to Zyus (the “ Asset Sale ”).

 

3. Ehave anticipates having insufficient funds, in the near future, with which to pay the Executive’s annual salary under the Employment Agreement.

 

4. Section 3.06 of the Employment Agreement provides that the Executive is entitled to terminate the Employment Agreement for whatever reason upon providing two months’ written notice to Ehave and that Ehave is entitled, in its sole direction, to instead pay the Executive the applicable salary and bonus during such two month period (the “ Severance Payment ”).

 

5. Section 2.03 of the Employment Agreement provides that, among other things, Ehave will grant the Executive 365,000 common shares of Ehave upon signing the Employment Agreement and may, in its sole discretion, grant further shares to the Executive (the “ Equity Awards ”).

 

6. Ehave and the Executive desire to memorialize the terms under which the Executive will release Ehave from the obligation to pay the Severance Payment and the Equity Awards.

 

NOW THEREFORE , in consideration of the premises and the mutual agreements herein, and of other consideration (the receipt and sufficiency of which are acknowledged by each Party), the Parties agree as follows:

 

1. RECITALS

 

The foregoing recitals are incorporated into this Agreement as if separately restated herein.

 

2. SEVERANCE TERMS

 

(a) Upon the Effective Date, Ehave shall

 

 

 

 

(i) issue 50,730,997 common shares in the capital of Ehave to the Executive (the “ Consideration Shares ”); and

 

(ii) not have outstanding any debt or other securities that give any rights of anti-dilution or similar adjustments to the holders thereof.

 

(b) Upon the Effective Date, the Executive shall:

 

(i) release any and all rights he may have with respect to any and all stock options or other awards that have been granted to him by Ehave, including, without limitation, by cancelling the 724,415 options of Ehave that are held by the Executive; and

 

(ii) release Ehave from any and all rights he may have under the Employment Agreement pursuant solely to Sections 2.03 and 3.06, but, for greater certainty, without derogating from the Executive’s other rights under the Employment Agreement.

 

(c) If the Asset Sale has closed, pay to the Executive from the proceeds thereof, the remainder of his bonus for the year ended December 31, 2017, being $50,000, less applicable withholdings and deductions.

 

3. AMENDMENTS TO EMPLOYMENT AGREEMENT

 

(a) Sections 2.03 and 2.06 of the Employment Agreement are hereby deleted in their entirety.

 

(b) Section 3.06 of the Employment Agreement is hereby deleted in its entirety, and replaced and restated as follows:

 

3.06 Resignation by Executive . The Executive shall be entitled to terminate this Agreement and his employment with the Company, at any time and for whatever reason. The Company shall be entitled, in its sole discretion, to accept such resignation effective immediately, following which, the Company shall have no other obligations to the Executive other than as expressly provided for in this Agreement.

 

4. REPRESENTATIONS AND WARRANTIES

 

The Executive represents, warrants and acknowledges, to Ehave as follows, and acknowledges that Ehave is relying upon these representations, warranties and acknowledgments in connection with the purchase of the Consideration Shares:

 

(a) the Executive has properly completed, executed the applicable Exhibits attached hereto, and the information contained therein is true and correct;

 

(b) if the Executive is acting as agent for a principal (a “ Disclosed Beneficial Purchaser ”), (i) the Executive is duly and validly authorized to enter into this agreement and all other necessary documentation on behalf of such Disclosed Beneficial Purchaser and (ii) this Agreement has been duly and validly authorized, executed and delivered on behalf of, and constitutes a valid and legally binding obligation of such Disclosed Beneficial Purchaser, enforceable in accordance with its terms, subject to customary limitations with respect to bankruptcy, insolvency or other laws affecting creditors' rights generally and to the availability of equitable remedies;

 

(c) the Executive (or, if applicable, the Disclosed Beneficial Purchaser) is an “accredited investor” as defined under applicable Canadian securities laws and has certified its eligibility to purchase pursuant to such exemption by completing Exhibit “B”;

 

 

 

 

(d) if the Executive is relying on paragraphs (j), (k) or (l) of the definition of “accredited investor”, the Executive has also completed, signed and delivered a Form for Individual Accredited Investors in the form attached as Exhibit “C” and in so doing, the Executive represents and acknowledges that Sections 1, 5 and 6 of such form were completed, as applicable, before the Executive completed and signed such form;

 

(e) the Executive is purchasing the Consideration Shares as principal for its own account, not for the benefit of any other person, for investment only and not with a view to resale in the course of or incidental to a distribution of all or any of the Consideration Shares;

 

(f) the Executive acknowledges and confirms that any certificates representing the Consideration Shares will carry the legend stating substantially the following, as may be revised by Ehave to comply with applicable securities laws:

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) FEBRUARY 27, 2019, AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

(g) the Executive will provide such additional information and documents as may be requested in order for Ehave to determine whether the Executive or the Disclosed Beneficial Purchaser, as applicable, satisfies the indicated category of accredited investor, including in particular those based on income or assets; and

 

(h) the Executive acknowledges and agrees that: (a) Ehave is required to disclose to the applicable securities regulatory authorities or regulators (the “ Securities Authorities ”) certain information pertaining to the Executive, including the Executive's name, residential address, telephone number, number of Consideration Shares purchased, purchase price therefor, statutory exemption relied on and date of distribution (collectively “ personal informatio n”), that is required to be disclosed in Schedule I of Form 45-106F1 under Canadian Securities Administrators' National Instrument 45-106 – Prospectus Exemptions (“ NI 45-106 ”), which Form 45-106F1 is required to be filed by Ehave under NI 45-106; (b) the personal information will be delivered to the applicable Securities Authorities under the authority granted in applicable securities legislation; (c) such personal information is being collected indirectly by the applicable Securities Authorities under the authority granted to it in securities legislation; (d) such personal information is being collected for the purposes of the administration and enforcement of the securities legislation of the local jurisdiction; and (e) the title, business address and business telephone number of the public official in the local jurisdiction who can answer questions about the Securities Authority's indirect collection of such personal information is indicated in Exhibit “D” hereto. By executing this Agreement, the Executive hereby authorizes the indirect collection of such personal information by the applicable Securities Authorities.

 

5. Miscellaneous

 

a) This Agreement and each of the documents contemplated by or delivered under or in connection with this Agreement are governed by and are to be construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and treated in all respects as an Ontario contract. The Parties hereby irrevocably and unconditionally attorn to the exclusive jurisdiction of the courts of the Province of Ontario and all courts competent to hear appeals therefrom.

 

b) This Agreement shall be binding upon and enure solely to the benefit of the Parties and their respective heirs, executors, personal legal representatives, successors and permitted assigns

 

 

 

 

c) If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to a Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible.

 

d) This Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the Parties with respect to the subject matter hereof.

 

e) This Agreement may not be assigned by any Party.

 

f) This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

 

g) The Executive acknowledges that Ehave has advised the Executive to obtain independent legal advice with respect to the entry into this Agreement and confirms that he/she has either done so or has knowingly waived his/her right to do so. The Executive further acknowledges that this Agreement has been entered into by him/her freely and voluntarily and without duress.

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first written above.

 

EHAVE, INC.    
       
Per: /s/ Binyomin Posen   /s/ David Goyette
  Authorized Signing Officer   David Goyette

 

 

 

Exhibit 4.52

 

Memorandum of Understanding

 

THIS MEMORANDUM OF UNDERSTANDING (this “ Agreement ”) is dated effective as of February 27, 2019 (the “ Effective Date ”).

 

BETWEEN:

 

EHAVE, INC. ,

a corporation formed under the laws of the Province of Ontario

(“ Ehave ”);

 

- and –

 

PRATEEK DWIVEDI ,

an individual residing in the Province of Ontario

(the “ Executive ”);

 

(collectively, the “ Parties ”)

 

RECITALS:

 

1. Ehave and the Executive entered into an executive employment agreement pursuant to which Ehave engaged the Executive in the position of Chief Executive Officer (the “ Employment Agreement ”).

 

2. Ehave intends to enter into an asset purchase agreement with ZYUS Life Sciences Inc. (“ Zyus ”) (the “ Asset Purchase Agreement ”), pursuant to which, among other things, Ehave will sell a substantial portion of its assets to Zyus (the “ Asset Sale ”).

 

3. Ehave anticipates having insufficient funds, in the near future, with which to pay the Executive’s annual salary under the Employment Agreement.

 

4. Section 3.09 of the Employment Agreement provides that, upon the occurrence of a Resignation for Good Reason (as defined in the Employment Agreement), which, pursuant to Section 3.10(iii) of the Employment Agreement, includes a material reduction in compensation, the Executive is entitled to payment in lieu of notice pursuant to Section 3.04 thereof, and to a discretionary bonus pursuant to Section 3.06 thereof (the “ Severance Payments ”).

 

5. Section 2.03 of the Employment Agreement provides that, among other things, Ehave shall grant the Executive an Adjustment Equity Award (as defined in the Employment Agreement) sufficient to maintain the Executive’s 5% share of Ehave’s issued and outstanding common shares, which adjustment equity award is still required to be paid upon a Resignation for Good Reason (the “ Equity Adjustment Award ”).

 

6. Ehave and the Executive desire to memorialize the terms under which the Executive will release Ehave from the obligation to pay the Severance Payments and the Equity Adjustment Award.

 

NOW THEREFORE , in consideration of the premises and the mutual agreements herein, and of other consideration (the receipt and sufficiency of which are acknowledged by each Party), the Parties agree as follows:

 

 

 

 

1. RECITALS

 

The foregoing recitals are incorporated into this Agreement as if separately restated herein.

 

2. SEVERANCE TERMS

 

(a) Upon the Effective Date, Ehave shall

 

(i) issue 253,654,987 common shares in the capital of Ehave to the Executive (the “ Consideration Shares ”), which will constitute 10% of the issued and outstanding common shares in the capital of Ehave; and

 

(ii) not have outstanding any debt or other securities that give any rights of anti-dilution or similar adjustments to the holders thereof.

 

(b) Upon the Effective Date, the Executive shall:

 

(i) release any and all rights he may have with respect to any and all stock options or other awards that have been granted to him by Ehave, including, without limitation, by cancelling the 7,327,376 options of Ehave that are held by the Executive; and

 

(ii) release Ehave from any and all rights he may have under the Employment Agreement pursuant solely to Sections 2.03, 3.04, 3.05, 3.06, 3.09 and 3.10, but, for greater certainty, without derogating from the Executive’s other rights under the Employment Agreement, including, without limitation, Sections 2.01, 2.04, 2.05 and 2.06.

 

(c) If the Asset Sale has closed, pay to the Executive from the proceeds thereof, the remainder of his bonus for the year ended December 31, 2017, being $97,500, less applicable withholdings and deductions.

 

3. AMENDMENTS TO EMPLOYMENT AGREEMENT

 

(a) Section 3.04 of the Employment Agreement is hereby deleted in its entirety, and replaced and restated as follows:

 

3.04 Termination without Cause . The Company may terminate this Agreement without cause at any time, by providing the Executive with the minimum notice of termination (or pay in lieu of notice), benefits and, severance pay (if any) to which the Executive is entitled under the Employment Standards Act, 2000 or any amended or replacement legislation, plus any other additional minimum entitlements to which the Executive is entitled thereunder at such time, and the provision of such notice or pay in lieu of notice, severance pay (if any), and any additional minimum entitlements (if any), shall constitute full and final satisfaction of all rights or entitlements which the Executive may have arising from or related to the termination of the Executive’s employment (including notice, pay in lieu of notice, severance pay, etc.), whether pursuant to contract, common law, statute or otherwise.

 

Notwithstanding the foregoing, in addition to the notice and/or pay in lieu of notice described in this Article 3.04, the Company will provide the Executive with benefit continuation for the period required pursuant to the Employment Standards Act, 2000 .

 

The Executive specifically agrees that the notice provided by this Article 3.04 is reasonable and that by entering into this Agreement, the Executive is waiving and giving up any right to any further or additional notice, pay in lieu of notice or severance pay, except as required by the Employment Standards Act, 2000 . The Company shall also pay the Executive’s final wages to the date of termination of employment as well as any accrued and unpaid vacation pay owing to the Executive. Notwithstanding anything else in this Agreement, the Company guarantees that the Executive shall receive his minimum entitlements under the Employment Standards Act, 2000 upon the termination of his employment.

 

 

 

 

(b) Section 2.03, Section 3.05, Section 3.06, Section 3.09 and Section 3.10 of the Employment Agreement are hereby deleted in their entirety.

 

(c) Section 3.08 of the Employment Agreement is hereby deleted in its entirety, and replaced and restated as follows:

 

3.08 Resignation by Executive . The Executive shall be entitled to terminate this Agreement and his employment with the Company, at any time and for whatever reason. The Company shall be entitled, in its sole discretion, to accept such resignation effective immediately, following which, the Company shall have no other obligations to the Executive other than as expressly provided for in this Agreement.

 

4. REPRESENTATIONS AND WARRANTIES

 

The Executive represents, warrants and acknowledges, to Ehave as follows, and acknowledges that Ehave is relying upon these representations, warranties and acknowledgments in connection with the purchase of the Consideration Shares:

 

(a) the Executive has properly completed, executed the applicable Exhibits attached hereto, and the information contained therein is true and correct;

 

(b) if the Executive is acting as agent for a principal (a “ Disclosed Beneficial Purchaser ”), (i) the Executive is duly and validly authorized to enter into this agreement and all other necessary documentation on behalf of such Disclosed Beneficial Purchaser and (ii) this Agreement has been duly and validly authorized, executed and delivered on behalf of, and constitutes a valid and legally binding obligation of such Disclosed Beneficial Purchaser, enforceable in accordance with its terms, subject to customary limitations with respect to bankruptcy, insolvency or other laws affecting creditors' rights generally and to the availability of equitable remedies;

 

(c) the Executive (or, if applicable, the Disclosed Beneficial Purchaser) is an “accredited investor” as defined under applicable Canadian securities laws and has certified its eligibility to purchase pursuant to such exemption by completing Exhibit “B”;

 

(d) if the Executive is relying on paragraphs (j), (k) or (l) of the definition of “accredited investor”, the Executive has also completed, signed and delivered a Form for Individual Accredited Investors in the form attached as Exhibit “C” and in so doing, the Executive represents and acknowledges that Sections 1, 5 and 6 of such form were completed, as applicable, before the Executive completed and signed such form;

 

(e) the Executive is purchasing the Consideration Shares as principal for its own account, not for the benefit of any other person, for investment only and not with a view to resale in the course of or incidental to a distribution of all or any of the Consideration Shares;

 

(f) the Executive acknowledges and confirms that any certificates representing the Consideration Shares will carry the legend stating substantially the following, as may be revised by Ehave to comply with applicable securities laws:

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) FEBRUARY 27, 2019, AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

 

 

 

(g) the Executive will provide such additional information and documents as may be requested in order for Ehave to determine whether the Executive or the Disclosed Beneficial Purchaser, as applicable, satisfies the indicated category of accredited investor, including in particular those based on income or assets; and

 

(h) the Executive acknowledges and agrees that: (a) Ehave is required to disclose to the applicable securities regulatory authorities or regulators (the “ Securities Authorities ”) certain information pertaining to the Executive, including the Executive's name, residential address, telephone number, number of Consideration Shares purchased, purchase price therefor, statutory exemption relied on and date of distribution (collectively “ personal informatio n”), that is required to be disclosed in Schedule I of Form 45-106F1 under Canadian Securities Administrators' National Instrument 45-106 – Prospectus Exemptions (“ NI 45-106 ”), which Form 45-106F1 is required to be filed by Ehave under NI 45-106; (b) the personal information will be delivered to the applicable Securities Authorities under the authority granted in applicable securities legislation; (c) such personal information is being collected indirectly by the applicable Securities Authorities under the authority granted to it in securities legislation; (d) such personal information is being collected for the purposes of the administration and enforcement of the securities legislation of the local jurisdiction; and (e) the title, business address and business telephone number of the public official in the local jurisdiction who can answer questions about the Securities Authority's indirect collection of such personal information is indicated in Exhibit “D” hereto. By executing this Agreement, the Executive hereby authorizes the indirect collection of such personal information by the applicable Securities Authorities.

 

5. Miscellaneous

 

a) This Agreement and each of the documents contemplated by or delivered under or in connection with this Agreement are governed by and are to be construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and treated in all respects as an Ontario contract. The Parties hereby irrevocably and unconditionally attorn to the exclusive jurisdiction of the courts of the Province of Ontario and all courts competent to hear appeals therefrom.

 

b) This Agreement shall be binding upon and enure solely to the benefit of the Parties and their respective heirs, executors, personal legal representatives, successors and permitted assigns

 

c) If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to a Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible.

 

d) This Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the Parties with respect to the subject matter hereof.

 

e) This Agreement may not be assigned by any Party.

 

f) This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

 

g) The Executive acknowledges that Ehave has advised the Executive to obtain independent legal advice with respect to the entry into this Agreement and confirms that he/she has either done so or has knowingly waived his/her right to do so. The Executive further acknowledges that this Agreement has been entered into by him/her freely and voluntarily and without duress. Ehave shall reimburse the Executive for any independent legal advice obtained, up to a maximum of $3,000 plus applicable HST.

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first written above.

 

EHAVE, INC.

 

Per: /s/ Binyomin Posen   /s/ Prateek Dwivedi
  Authorized Signing Officer   Prateek Dwivedi

 

 

 

 

Exhibit 4.53

 

BRIDGE LOAN AGREEMENT

 

THIS BRIDGE LOAN AGREEMENT (this “ Agreement ”), dated as of February 27, 2019, is entered into by and between Ehave, Inc., an Ontario corporation (the “ Company ”), and each individual or entity named on an executed counterpart of a signature page hereto (each such signatory is referred to as a “ Buyer ” and collectively such signatories are referred to as the “ Buyers ”).

 

WITNESSETH:

 

WHEREAS, the Company is seeking to borrow up to $500,000 on the terms contemplated in this Agreement and in the other Transaction Agreements (as defined below);

 

WHEREAS, the Company and the Buyers are executing and delivering this Agreement in accordance with and in reliance upon the exemption from registration for offers and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation D (“ Regulation D ”), as promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the Securities Act of 1933, as amended (the “ 1933 Act ”), and/or Section 4(a)(2) of the 1933 Act;

 

WHEREAS, each Buyer wishes to lend funds in the amount of such Buyer’s Purchase Price (as defined below) to the Company, subject to and upon the terms and conditions of this Agreement and acceptance of this Agreement by the Company, which shall be evidenced by a Promissory Note, substantially in the form attached hereto as Annex I (the “ Note ”), on the terms and conditions referred to herein and therein; and

 

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.           Certain Definitions . As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

 

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

 

Affiliate ” means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled by or is under common control with such specified Person.

 

Articles of Incorporation ” means the articles of incorporation (or similar charter document) of the Company, as amended to date.

 

Business Day ” means any weekday, except such days on which the New York Stock Exchange shall not be open for business.

 

By-laws ” means the by-laws of the Company (howsoever denominated), as amended to date.

 

 

 

 

Closing ” means a closing of the purchase and sale of the Notes and issuance of the Shares pursuant to Section 2.

 

Closing Date ” means a Business Day when all of the Transaction Agreements deliverable upon Closing have been executed and delivered by the Company and each of the Buyers purchasing Notes and Shares at the relevant Closing, and all conditions precedent to (i) the Buyers’ obligations to pay the Purchase Price for the Notes being purchased and the Shares being issued and (ii) the Company’s obligations to deliver the Notes being purchased and the Shares being issued have been satisfied or waived.

 

Common Shares ” means the common shares of the Company, and any other class of securities into which such common shares may hereafter be reclassified or changed.

 

Common Share Equivalents ” means any securities of the Company or any Subsidiary which would entitle the holder thereof to acquire at any time Common Shares, 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 Shares.

 

Conversion Securities ” shall have the meaning given to such term in the Notes.

 

Disclosure Annex ” means Annex II to this Agreement. The Disclosure Annex shall be arranged in sections corresponding to the identified Sections of this Agreement, but the disclosure in any such section of the Disclosure Annex shall be deemed disclosure with respect to all applicable sections.

 

Existing Company Agreement ” means any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party, which has not expired or been terminated or by which it or any of its properties or assets are bound, and which would be required to be filed by the Company as an exhibit to a Registration Statement on Form F-1 pursuant to Item 601 of Regulation S-K.

 

Holder ” means the holder of a Note.

 

Majority in Interest of the Holders ” means, as of the relevant date, one or more Holders whose respective Outstanding Note Principal collectively represent more than fifty percent (50%) of the aggregate Outstanding Note Principal of all Notes held by all Holders as of such date.

 

Material Adverse Effect ” means an event or combination of events, which individually or in the aggregate, would reasonably be expected to (x) adversely affect the legality, validity or enforceability of any of the Transaction Agreements, (y) have or result in a material adverse effect on the results of operations, assets, or financial condition of the Company and its subsidiaries, taken as a whole, or (z) adversely impair the Company’s ability to perform fully on a timely basis its material obligations under any of the Transaction Agreements or the transactions contemplated thereby.

 

  - 2 -  

 

 

Outstanding Note Principal ” means, as of any relevant date, the outstanding principal of the Notes held by a Holder.

 

Permitted Indebtedness means any one or more of: (a) the indebtedness, if any, of the Company existing on the Closing Date and set forth in the Disclosure Annex, (b) indebtedness to trade creditors incurred in the ordinary course of business, (c) other current liabilities incurred in the ordinary course of business and not incurred through the borrowing of money or the obtaining of credit, (d) indebtedness secured by Permitted Liens, (e) indebtedness incurred to finance the cost of tangible personal property (which was acquired after the date hereof), (f) obligations under long-term real property leases incurred in the ordinary course of business, (g) short-term lease obligations, (h) other indebtedness in an amount not to exceed $100,000 in the aggregate, (i) any indebtedness consented to by the prior written consent of a Majority in Interest of the Holders, which consent shall be binding upon each Holder, (j) indebtedness incurred in connection with a Qualified Equity Financing (as defined in the Notes) and (k) extensions, refinancings and renewals of any items of Permitted Indebtedness described in clauses (a) through (i) above.

 

Permitted Lien means any one or more of (a) liens for taxes, assessments and other governmental charges or levies which are either not yet due or are being contested in good faith and by appropriate proceedings (which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such lien) or for which adequate reserves (in the good faith judgment of the board of directors of the Company) have been established in accordance with generally accepted accounting principals, which liens do not, individually or in the aggregate, materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company; (b) carriers’, warehousemen’s and mechanics’ liens, statutory landlords’ liens, and other similar liens arising in the ordinary course of business; (c) liens created with respect to the financing of the purchase of new property in the ordinary course of the Company’s business up to the amount of the purchase price of such property; (d) liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; (e) any existing liens disclosed in the Disclosure Annex and (f) liens consented to by the prior written consent of a Majority in Interest of the Holders, which consent shall be binding upon each Holder.

 

Person ” means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.

 

Purchase Price ” means, as to each Buyer, the aggregate amount to be paid for the Notes and Shares purchased hereunder, as specified on such Buyer’s signature page to this Agreement.

 

Rule 144 ” means, as may be in effect from time to time, (i) Rule 144 promulgated under the 1933 Act or (ii) any other similar rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration under the 1933 Act.

 

Securities ” means the Notes, the Conversion Securities and the Shares.

 

  - 3 -  

 

 

Shares ” shall have meaning the meaning given to such term under Section 1(c).

 

Subsidiary ” means any entity which would be a subsidiary of the Company, whether now existing or hereafter acquired or created.

 

Transaction Agreements ” means this Agreement, the Notes, the Disclosure Annex and includes all ancillary documents referred to in those agreements.

 

Wire Instructions ” means the Purchase Price Wire Instructions provided to each Purchaser by the Company.

 

2.            Purchase and Sale .

 

(a)           Closing .

 

(i)          On the initial Closing Date (the “ Initial Closing Date ”), upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement, the Company agrees to sell, and each Buyer purchasing Notes and Shares at the initial Closing (the “ Initial Closing ”), severally and not jointly, agrees to purchase, Notes and Shares for the respective Buyer’s Purchase Price. Upon satisfaction of the conditions set forth in Sections 6 and 7, the Initial Closing shall occur at the offices of the Company or such other location as the parties shall mutually agree. Thereafter, on any subsequent Closing Date (each, a “ Subsequent Closing Date ”), upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the Buyers purchasing Notes and Shares on such Subsequent Closing Date, the Company agrees to sell, and each Buyer purchasing Notes and Shares at such subsequent Closing (each, a “ Subsequent Closing ”), severally and not jointly, agrees to purchase, the Notes and Shares for the respective Buyer’s Purchase Price (provided, however, that in no event shall the aggregate Purchase Price of all Buyers for the Subsequent Closing, when added to the Purchase Price for all Buyers at all previous Closings exceed $500,000). Notwithstanding anything herein to the contrary, each Closing Date shall occur on or before March 31, 2019 (such outside date, the “ Termination Date ”).

 

(b)           Notes . On or prior to each Closing Date, the Company shall deliver or cause to be delivered to each Buyer purchasing Notes on such Closing Date one or more Notes. The Company acknowledges that at closing, each Note will be purchased by each such Buyer with a non-refundable discount of 10% of the principal balance of the each such Note.

 

(c)           Shares . On or prior to each Closing Date, the Company shall deliver or cause to be delivered to each Buyer purchasing Notes on such Closing Date, Common Share certificates for the number of Common Shares equal to (A) the Buyer’s Purchase Price divided by (B) $0.5 (the “ Shares ”). Shares may also be issued in book-entry form at the Company’s option.

 

(d)           Form of Payment . On or prior to each Closing Date, each Buyer purchasing Notes and Shares on such Closing Date shall deliver or cause to be delivered to the Company such Buyer’s Purchase Price by wire transfer to the account as specified in the Wire Instructions or by surrender of outstanding debt of the Company held by such Purchaser, to be held by the Company pending the Closing.

 

  - 4 -  

 

 

3.            Buyer Representations, Warranties, etc . Each Buyer, severally, represents and warrants to the Company, as of the date of the execution and delivery hereof and as of such Buyer’s Closing Date, that:

 

(a)          Without limiting such Buyer’s right to sell the Securities pursuant to an effective registration statement, if any, or otherwise in compliance with the 1933 Act, such Buyer is purchasing the Securities for its own account for investment only and not with a view towards the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof.

 

(b)          Such Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of Rule 501(a), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its Affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and to evaluate the merits and risks of an investment in the Securities, and (iv) able to afford the entire loss of its investment in the Securities.

 

(c)          All subsequent offers and sales of the Securities by such Buyer shall be made either pursuant to registration of the relevant Securities under the 1933 Act or pursuant to an exemption from registration.

 

(d)          Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the 1933 Act and state securities laws and that the Company is relying upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

 

(e)          Such Buyer and its advisors, if any, have been furnished with or have been given access to 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, including those set forth on in any annex attached hereto. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management and have received complete and satisfactory answers to any such inquiries.

 

(f)          Such Buyer understands that its investment in the Securities involves a high degree of risk.

 

(g)          If such Buyer is an individual, then such Buyer resides in the state or province identified in the address of such Buyer set forth on such Buyer’s signature page to this Agreement or the jurisdiction otherwise identified as such Buyer’s residence on such signature page. If such Buyer is a partnership, corporation, limited liability company or other entity, then the office or offices of such Buyer in which its principal place of business is the address or addresses of such Buyer set forth on such Buyer’s signature page to this Agreement or the jurisdiction otherwise identified as such Buyer’s principal place of business on such signature page.

 

  - 5 -  

 

 

(h)          Such Buyer hereby represents that, in connection with such Buyer’s investment or such Buyer’s decision to acquire the Securities, such Buyer has not relied on any statement or representation of any Person, including any such statement or representation by the Company or any of its controlling Persons, officers, directors, partners, agents and employees or any of their respective attorneys, except as specifically set forth herein. In furtherance of the foregoing, and not in limitation thereof, such Buyer acknowledges that such Buyer is not relying upon any Person, other than the Company and its controlling Persons, officers and directors, as and to the extent specifically set forth herein, in making such investment. Such Buyer agrees that none of (i) any other Buyer, (ii) any controlling Persons, officers, directors, partners, agents, or employees of each respective other Buyer or (iii) any of their respective attorneys shall be liable to such Buyer for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the acquisition of the Securities or in connection with the Securities. Each other Buyer and each of their respective controlling Persons, officers, directors, partners, agents and employees and each of their respective attorneys is a third party beneficiary of this provision.

 

(i)          Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities.

 

(j)          This Agreement and each of the other Transaction Agreements to which such Buyer is a party, and the transactions contemplated hereby and thereby, have been duly and validly authorized by such Buyer. This Agreement has been executed and delivered by such Buyer, and this Agreement is, and each of the other Transaction Agreements to which such Buyer is a party, if any, when executed and delivered by such Buyer, will be valid and binding obligations of such Buyer, enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

 

(k)          Such Buyer understands that if there is more than one Closing Date, other Buyers did or will have the opportunity to enter into this Agreement on the same terms as those applicable to such Buyer’s Closing Date (such as, but not necessarily limited to, the Stated Maturity Date, the interest rate and the conversion terms of the Notes). Such terms from such Buyer’s Closing Date will apply to the transactions of other Buyers consummated on other Closing Dates, whether such other Closing Dates were before or will be after such Buyer’s Closing Date, despite the fact that certain events occurred or will occur or other information became or will become known in the interim and despite the fact that certain facts, such as, but not necessarily limited to, activity with respect to the Company or in general, and the financial condition of the Company, may vary from those applicable to such Buyer’s Closing Date.

 

  - 6 -  

 

 

4.            Company Representations, Warranties, etc . Except as set forth in the Disclosure Annex and each periodic and current report filed by the Company under the 1934 Act after the date hereof (the “ SEC Reports ”) and, with respect to each Subsequent Closing, subject to the proviso to clause (y) of Section 7(c) below, the Company represents and warrants to the Buyers, as of the date of the execution and delivery hereof and as of each relevant Closing Date, that:

 

(a)           Rights of Others Affecting the Transactions . There are no preemptive rights of any stockholder of the Company, as such, to acquire the Notes or Shares. No party has a currently exercisable right of first refusal which would be applicable to any or all of the transactions contemplated by the Transaction Agreements.

 

(b)           Status . The Company is a corporation duly organized, validly existing and in good standing under the laws of the province of Ontario and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not reasonably be expected to have a Material Adverse Effect.

 

(c)           Capitalization; No Subsidiaries .

 

(i)          The capitalization of the Company is as set forth in the Disclosure Annex. Except as disclosed in the Disclosure Annex, the Company has not issued any capital stock since the Company’s most recently filed periodic or current report under the 1934 Act, as the case may be, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of Common Shares to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Share Equivalents outstanding as of the date of this Agreement. Except as a result of the purchase and sale of the Notes and Shares or as set forth in the Disclosure Annex, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Common Shares or Common Share Equivalents, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional Common Shares or Common Share Equivalents.

 

(ii)         Except as set forth in the Disclosure Annex, all issued and outstanding Common Shares have been duly authorized and validly issued and are fully paid and non-assessable.

 

(iii)        The Company has no beneficial interest in any entity that would be deemed to be a Subsidiary of the Company.

 

  - 7 -  

 

 

(d)           Transaction Agreements and Stock . This Agreement and each of the other Transaction Agreements, and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Company. This Agreement has been duly executed and delivered by the Company and this Agreement is, and each of the Notes and the other Transaction Agreements, if any, when executed and delivered by the Company, will be, valid and binding obligations of the Company enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally. The Shares have been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company against payment therefor pursuant to this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of any pledge, mortgage, hypothecation, lien, encumbrance, security interest or other claim, including any statutory or contractual preemptive rights, resale rights, rights of first refusal or other similar rights, and will be registered pursuant to Section 12 of the 1934 Act. The Conversion Securities when issued, paid for and delivered upon due conversion of the Notes, shall have been duly authorized for issuance and sale pursuant to the Notes, and, when issued and delivered by the Company against payment therefor pursuant to the Notes, will be duly and validly issued, fully paid and nonassessable, free and clear of any pledge, mortgage, hypothecation, lien, encumbrance, security interest or other claim, including any statutory or contractual preemptive rights, resale rights, rights of first refusal or other similar rights, and will be registered pursuant to Section 12 of the 1934 Act.

 

(e)           Securities Law Matters; Approvals .

 

(i)          No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization or the stockholders of the Company is required to be obtained by the Company for the issuance and sale of the Securities to such Buyer as contemplated by this Agreement, except such authorizations, approvals and consents that have been obtained.

 

(ii)         Assuming the accuracy of the representations and warranties of the Buyers set forth in Section 3, the offer and sale by the Company of the Securities is exempt from (A) the registration and prospectus delivery requirements of the 1933 Act and the rules and regulations of the SEC thereunder and (B) the registration and/or qualification provisions of all applicable state securities “blue sky” laws.

 

(f)           Non-contravention . The execution and delivery of this Agreement and each of the other Transaction Agreements by the Company, the issuance of the Notes and the Shares in accordance with the terms hereof, and the consummation by the Company of the other transactions contemplated by this Agreement, the Notes and the other Transaction Agreements do not and will not:

 

(i)          conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under (A) the Articles of Incorporation, (B) the By-laws, (C) any Existing Company Agreement, or (D) to its knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company or any of its properties or assets, except, in each case, for such conflicts, breaches or defaults that would not reasonably be expected to have a Material Adverse Effect, and

 

(ii)         (A) result in the creation or imposition of any lien, charge or encumbrance upon the Notes or Shares or any of the assets of the Company or any of its Affiliates; or (B) result in (1) the activation of any anti-dilution rights or a reset or repricing of any debt or security instrument of any other creditor or equity holder of the Company, or (2) the acceleration of the due date of any obligation of the Company.

 

  - 8 -  

 

 

(g)           Absence of Events of Default . Except as set forth in the Disclosure Annex, the Company is not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material Existing Company Agreement. Except as set forth in the Disclosure Annex, no Event of Default (or its equivalent term), as defined in the respective Existing Company Agreement, and, except as set forth in the Disclosure Annex, no event which, with the giving of notice or the passage of time or both, would become an Event of Default (or its equivalent term) (as so defined in such Existing Company Agreement), has occurred and is continuing, which would reasonably be expected to have a Material Adverse Effect.

 

(h)           Licenses and Intellectual Property Rights . Except as set forth in the Disclosure Annex, the Company possesses all licenses, patents, trademarks, trade names, service marks, copyrights, and other intellectual property rights, free from burdensome restrictions, necessary to enable the Company to conduct its business, the absence of which would reasonably be expected to result in a Material Adverse Effect.

 

(i)           Absence of Litigation . There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would reasonably be expected to have a Material Adverse Effect. The Company is not aware of any valid basis for any such claim that (either individually or in the aggregate with all other such events and circumstances) could reasonably be expected to have a Material Adverse Effect. There are no outstanding or unsatisfied material judgments, orders, decrees, writs, injunctions or stipulations to which the Company is a party or by which it or any of its properties is bound, that involve the transaction contemplated herein or that, alone or in the aggregate, could reasonably be expect to have a Material Adverse Effect.

 

(j)           Fees to Brokers, Placement Agents and Others . The Company has taken no action that would give rise to any claim by any Person for brokerage commissions, finder’s fees or similar payments by a Buyer relating to this Agreement or the transactions contemplated hereby. Except for such fees arising as a result of any agreement or arrangement entered into by the Buyers without the knowledge of the Company (a “ Buyer’s Fee ”), the Buyers shall have no obligation with respect to such fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this paragraph that may be due in connection with the transactions contemplated hereby. The Company shall indemnify and hold harmless each of the Buyers, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney’s fees) and expenses suffered in respect of any such claimed or existing fees (other than a Buyer’s Fee).

 

  - 9 -  

 

 

(k)           No General Solicitation . Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Notes or Shares by any form of general solicitation or general advertising. The Company has offered the Notes and Shares for sale only to the Buyers and certain other Persons whom the Company believes to be “accredited investors” within the meaning of Rule 501 under the 1933 Act.

 

(l)           No Other Representations . Except for the representations and warranties contained in this Article 4 (subject to the qualifications set forth in the preamble to this Article 4), neither the Company nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of the Company with respect to the transactions contemplated hereby.

 

5.            Certain Covenants and Acknowledgments .

 

(a)           Transfer Restrictions . Each Buyer acknowledges that (i) the Securities have not been and are not being registered under the provisions of the 1933 Act and may not be transferred unless (A) subsequently registered thereunder or (B) such Buyer shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (ii) any sale of the 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 resale 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 used in the 1933 Act, will 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 the Securities under the 1933 Act or, except as specifically contemplated by the Transaction Agreements, to comply with the terms and conditions of any exemption thereunder.

 

(b)           Restrictive Legend . Each Buyer acknowledges and agrees that, until such time as the relevant Securities have been registered under the 1933 Act and may be sold in accordance with an effective registration statement, or until such Securities can otherwise be sold without restriction, whichever is earlier, the certificates and other instruments representing any of the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities):

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

(c)           Filings . The Company undertakes and agrees to make all filings required to be made by it in connection with the sale of the Notes and Shares to the Buyer under the 1933 Act or any United States state securities laws and regulations thereof applicable to the Company.

 

  - 10 -  

 

 

(d)           Use of Proceeds . The Company will use the net proceeds received hereunder for general corporate purposes, including, but not necessarily limited to, growth and capital initiatives, research and development, filing of patents to protect the intellectual property of the Company and expanding the human resources of the Company.

 

(e)           Negative Covenants . The Company agrees that until the Notes are paid, converted or otherwise satisfied in full, except as provided in this Section 5(e) or in the Disclosure Annex, the Company will not, directly or indirectly and whether effected in one or a series of related transactions, without the prior written consent in each instance of a Majority in Interest of the Holders,

 

(i)          other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any 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;

 

(ii)         except for Permitted Liens, create, incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, mortgage, security deed or deed of trust, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction) upon any of its property, whether now owned or hereafter acquired;

 

(iii)        amend its Articles of Incorporation, By-laws or any of its other charter documents so as to adversely affect any rights of the Buyers;

 

(iv)        make any dividend or distribution in respect of any of its Common Shares, preferred shares, or other equity securities other than to the extent permitted or required under the Transaction Agreements;

 

or

 

(v)         enter into any agreement with respect to any of the foregoing.

 

(f)           Certain Agreements . Any other provision of this Agreement or any of the other Transaction Agreements to the contrary notwithstanding, the Company shall not engage in any offers, sales or other transactions of its securities that would adversely affect the exemption from registration available for the transactions contemplated by the Transaction Agreements.

 

  - 11 -  

 

 

(g)           Independent Nature of Buyers’ Obligations and Rights . The obligations of each Buyer under the Transaction Agreements are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under any one or more of the Transaction Agreements. The decision of each Buyer to purchase the Notes and Shares pursuant to the Transaction Agreements has been made by such Buyer independently of any other Buyer and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of its Subsidiaries, if any, which may have been made or given by any other Buyer or any of their respective officers, directors, principals, employees, agents, counsel or representatives (collectively, including the Buyer, the “ Buyer Representatives ”). No Buyer Representative shall have any liability to any other Buyer or the Company relating to or arising from any such information, materials, statements or opinions, if any. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with making its investment hereunder and that no Buyer will be acting as agent of such other Buyer in connection with monitoring its investment in the Notes and Shares or enforcing its rights under the Transaction Agreements. Except as expressly set forth in the Notes, each Buyer shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Agreements, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose. The Company and each of the Buyers acknowledges that, for reasons of administrative convenience the Company has elected to provide each of the Buyers with the same Transaction Agreements for the purpose of closing a transaction with multiple Buyers and not because it was required or requested to do so by any Buyer. In furtherance of the foregoing, and not in limitation thereof, the Company acknowledges that nothing contained in this Agreement or in any Transaction Agreement, and no action taken by any Buyer pursuant thereto, shall be deemed to constitute any two or more Buyers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Buyers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Agreements.

 

(h)           Equal Treatment of Buyers . No consideration shall be offered or paid to any Buyer to amend or consent to a waiver or modification of any provision of any of the Transaction Agreements unless the same consideration is also offered to all of the Buyers.

 

(i)           Governmental Authorities . From the date of this Agreement and for as long as the Buyers hold any Securities, the Company shall duly observe and conform in all material respects to all valid requirements of governmental authorities relating to the conduct of its business or to its properties or assets.

 

(j)          The Company shall use its reasonable best efforts to obtain the approval from the Board of Directors and the shareholders of the Company as may be required by the laws of the province of Ontario and effect a reverse share split of the Common Shares in the ratio of 200 to 1 prior to November 30, 2018.

 

6.            Conditions to the Company’s Obligation to Sell . Each Buyer understands that the Company’s obligation to sell the Notes and Shares to such Buyer pursuant to this Agreement on each relevant Closing Date is conditioned upon that satisfaction or waiver of the following:

 

(a)          The execution and delivery of this Agreement by such Buyer;

 

(b)          The delivery by such Buyer to the Company of good funds as payment in full of an amount equal to such Buyer’s Purchase Price in accordance with this Agreement;

 

  - 12 -  

 

 

(c)          The accuracy on such Closing Date of the representations and warranties of such Buyer contained in this Agreement, each as if made on such date, and the performance by such Buyer on or before such date of all covenants and agreements of such Buyer required to be performed on or before such date;

 

(d)          There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained; and

 

(e)          With respect to the Initial Closing, the aggregate amount of funds from all Buyers purchasing Notes and Shares hereunder shall be at least $100,000.

 

7.            Conditions to the Buyers’ Obligation to Purchase . The Company understands that each Buyer’s obligation to purchase the Notes and Shares on each relevant Closing Date is conditioned upon the satisfaction or waiver by such Buyer of the following:

 

(a)          The execution and delivery of this Agreement and the other Transaction Agreements deliverable at Closing by the Company, and each of the Transaction Agreements executed by the Company on or before such date shall be in full force and effect and the Company shall not be in default thereunder;

 

(b)          The delivery by the Company to the Buyers of the Notes and the Shares in accordance with this Agreement;

 

(c)          The accuracy in all material respects on such Closing Date of the representations and warranties of the Company contained in this Agreement, each as if made on such date, and the performance by the Company on or before such date of all covenants and agreements of the Company required to be performed on or before such date, and with respect to each Subsequent Closing Date, there shall have been no Material Adverse Effect from the Initial Closing Date through and including such Subsequent Closing Date;

 

(d)          There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

 

8.            Notices . Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of:

 

(a)          the date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile transmission;

 

(b)          the fifth Business Day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or

 

(c)          the third Business Day after mailing by domestic or international express courier, with delivery costs and fees prepaid,

 

  - 13 -  

 

 

in each case, addressed to each of the other parties thereunto entitled at the relevant address set forth below (or at such other addresses as such party may designate by ten (10) days’ advance written notice similarly given to each of the other parties hereto):

 

(i) if to the Company, to:

 

EHAVE, INC.

277 Lakeshore Road East, Suite 203

Oakville, ON L6J 6J3

Canada

Attention: Chief Executive Officer

 

(ii) if to the Buyers, to the address set forth on the signature pages hereto.

 

9.            Governing Law .

 

(a)          This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of the County of New York or the state courts of the State of New York sitting in the County of New York in connection with any dispute arising under this Agreement or any of the other Transaction Agreements 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 or to any claim that such venue of the suit, action or proceeding is improper. To the extent determined by such court, the Company shall reimburse any Buyer for any reasonable legal fees and disbursements incurred by such Buyer in enforcement of or protection of any of its rights under any of the Transaction Agreements. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.

 

(b)          The Company acknowledges and agrees that irreparable damage would occur to the Buyers in the event that any provision of this Agreement or any of the other Transaction Agreements were not performed in accordance with its specific terms or were otherwise breached. The Company accordingly agrees that the Buyers shall be entitled to an injunction or injunctions, without the necessity to post a bond, to prevent or cure breaches of the provisions of this Agreement or such other Transaction Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which the Holder may be entitled by law or equity. This provision is deemed incorporated by reference into each of the Transaction Agreements as if set forth therein in full.

 

10.          Jury Trial Waiver . The Company and the Buyers hereby waive a trial by jury in any action, proceeding or counterclaim brought by any of the parties hereto in respect of any matter arising out or in connection with the Transaction Agreements.

 

11.          Miscellaneous .

 

(a)          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.

 

  - 14 -  

 

 

(b)          This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

 

(c)          All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

 

(d)          This Agreement may be signed in two or more counterparts, each of which shall be deemed an original.

 

(e)          A facsimile or other electronic transmission of this signed Agreement shall be legal and binding on all parties hereto.

 

(f)          The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

(g)          If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

 

(h)          This Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement thereof.

 

(i)          This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

 

(j)          All dollar amounts referred to or contemplated by this Agreement or any other Transaction Agreement shall be deemed to refer to Canadian Dollars, unless otherwise explicitly stated to the contrary.

 

(k)          All parties hereto have been represented by counsel, and no inference shall be drawn in favor of or against any party by virtue of the fact that such party’s counsel was or was not the principal draftsman of this Agreement. Each of the parties has been provided the opportunity to be represented by counsel of its choice and has been encouraged to seek separate representation to the extent that it deems such desirable, but the absence of such shall not be asserted as a basis for the enforceability or interpretation of any of the terms or provisions of this Agreement, or as a reason to seek disqualification of any counsel in any controversy or proceeding.

 

12.          Survival of Representations and Warranties . The Company’s and each Buyer’s representations and warranties herein shall survive the execution and delivery of this Agreement and the delivery of the Notes and Shares and the payment of the Purchase Price, for a period of one (1) year after the applicable Closing Date and shall inure to the benefit of the Buyers and the Company and their respective successors and assigns.

 

[Balance of page intentionally left blank]

 

  - 15 -  

 

 

[BRIDGE LOAN AGREEMENT SIGNATURE PAGE]

 

IN WITNESS WHEREOF, with respect to the Purchase Price specified below, each of the undersigned represents that the foregoing statements made by it above are true and correct and that it has caused this Agreement to be duly executed on its behalf (if an entity, by one of its officers thereunto duly authorized) as of the date first above written.

 

PURCHASE PRICE: $  

 

BUYER:
[please PRINT all information except signature]

 

     
Address   Printed Name of Buyer
     
     

 

    By:  

Telecopier/Fax No.     (Signature of Authorized Person)

 

     
Jurisdiction of Incorporation or Organization   Printed Name and Title

 

  Name:   e-mail address:
       
Contact person:      

 

If the above Notice Address is not the Residence (for individual Buyer) or Principal Place of Business (for Buyer which is not an individual), such Residence or Principal Place of Business is:

 

     
     
    Buyer’s Closing Date:  

 

COMPANY:

EHAVE, INC.

 

By:    
     
Title: CEO  

 

  Name:   e-mail address:
       
Contact person: Prateek Dwivedi   teek@ehave.com

 

 

 

Exhibit 4.54

 

ANNEX I
TO
BRIDGE LOAN AGREEMENT
 

FORM OF NOTE

 

THIS NOTE AND THE SECURITIES UNDERLYING THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT THIS NOTE AND THE SECURITIES UNDERLYING THIS NOTE MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

 

No. _______ 1

Original Issue Date: [ ], 2019

Face Amount: $[ ]

Purchase Price: $[ ] 2

 

EHAVE, INC.

 

15% ORIGINAL ISSUE DISCOUNT PROMISSORY NOTE

 

DUE [            ,2019 3 ]

 

THIS NOTE is one of a duly authorized issue of promissory notes of up to $[500,000] original principal amount in the aggregate of EHAVE, INC., a corporation organized and existing under the laws of the province of Ontario (the “ Company ”), designated as its 15% Original Issue Discount Promissory Notes.

 

FOR VALUE RECEIVED, the Company promises to pay to _____________________, the registered holder hereof (the “ Holder ”), the principal sum of $________________ 4 (as such amount may be reduced pursuant to any conversion or otherwise in accordance with the terms hereof, the “ Principal ”) and to pay interest on the outstanding Principal from time to time in arrears at the rate of 15% per annum, accruing from the Issue Date (as defined below) pursuant to the terms hereof.

 

 

1 Insert unique Note number for each issuance.

2 90% of Principal

3 180 days from the issuance date

4 See fn 2.

 

     

 

 

This Note was originally issued on [ ], 2019 5 (the “ Issue Date ”).

 

This Note is being issued pursuant to the terms of the Bridge Loan Agreement, dated as of [ ], 2019 (the “ Bridge Loan Agreement ”), to which the Company and the Holder (or the Holder’s predecessor in interest) are parties. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Bridge Loan Agreement.

 

This Note is subject to the following additional provisions:

 

1.          The Note will initially be issued in denominations determined by the Company, but are exchangeable for an equal aggregate Principal amount of Note of different denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange.

 

2.          Interest at the rate of 15% per cent per annum will accrue from the Issue Date until the Maturity Date (as defined below), and shall be computed on the basis of a 365-day year and the actual number of days elapsed.

 

3.          Unless earlier converted pursuant to Section 6, all unpaid Principal of this Note, together with then unpaid accrued interest, if any, and any other amounts due hereunder, shall be due and payable on [__, 2019] ( the “ Maturity Date ”). 6

 

4.          The Company shall be entitled to withhold from all payments of principal of, and, if applicable, interest on, this Note any amounts required to be withheld under the applicable provisions of the United States income tax laws or other applicable laws at the time of such payments, and the Holder shall execute and deliver all required documentation in connection therewith.

 

5.          This Note has been issued subject to investment representations of the original purchaser hereof set forth in the Bridge Loan Agreement and may be transferred or exchanged only in compliance with the 1933 Act, other applicable state and foreign securities laws and the terms of the Bridge Loan Agreement. In the event of any proposed transfer of this Note, the Company may require, prior to issuance of a new Note in the name of such other person, that it receive reasonable transfer documentation that is sufficient to evidence that such proposed transfer complies with the 1933 Act and other applicable state and foreign securities laws and the terms of the Bridge Loan Agreement. 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 Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

 

5 Insert the Closing Date.

6 180 days from the issuance date

 

  - 2 -  

 

 

6.            Conversion .

 

(a)           Upon the closing of a Subsequent Equity Financing, and provided that this Note remains outstanding on such day, the outstanding Principal balance, unpaid accrued interest thereon and all other amounts outstanding under this Note shall convert automatically, without any further consent or action of the Holder, into the equity securities sold in such Subsequent Equity Financing (the “ Conversion Securities ”) at a price per equity security equal to the lesser of (i) 75% (i.e., a 25% discount) of the price per equity security at which such securities are sold in such Subsequent Equity Financing, and (ii) $ 0.000909776 per share (the “ Conversion Price ”). The Holder covenants and agrees that it shall, in connection with the conversion of this Note pursuant to this Section 6(a), execute and deliver to the Company each agreement and other instrument executed by the investors in the Subsequent Equity Financing. The Company shall not be required to issue the Conversion Securities to the Holder unless and until the Holder executes such agreements and instruments pursuant to the immediately preceding sentence. For purposes hereof, “ Subsequent Equity Financing ” means the consummation by the Company of a financing transaction with aggregate gross proceeds to the Company of not less than $2,000,000, excluding any and all Notes which are converted into such financing transaction, pursuant to which the Company sells Common Shares, Common Share Equivalents or other capital stock of the Company for the purposes of raising capital, other than the at a Closing pursuant to the Bridge Loan Agreement.

 

(b)          If an Event of Default shall have occurred and is continuing, and in each and every such case, unless such Event of Default shall have been cured or waived in writing by a Majority in Interest of the Holders, the Conversion Price shall be 90% (i.e., a 10% discount) of the VWAP on the date of the applicable notice of conversion. “ VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing ) (the “ Trading Market ”), the daily volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the Trading Market on which the Common Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Shares are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Shares so reported, or (d) in all other cases, the fair market value of a Common Share as determined by an independent appraiser selected in good faith by the Majority in Interest of the Holders and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

7.          No fractional shares of Conversion Securities shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares of Conversion Securities to the Holder upon the conversion of this Note, the Company shall round down the number of Conversion Securities to be issued hereunder to the nearest whole number of Conversion Securities. Upon conversion of this Note pursuant to Section 6, the Company shall be forever released from all its obligations and liabilities under this Note and this Note shall be deemed of no further force or effect, whether or not the original of this Note has been delivered to the Company for cancellation.

 

  - 3 -  

 

 

8.           Subject to Section 7 hereto, any payment made to the Holder shall be applied in the following order of priority: (a) first, to any amounts due to the Holder hereunder or under any of the Transaction Agreements other than Principal and accrued interest, (b) second, to accrued and unpaid interest and (b) then, to Principal of this Note.

 

9.           The Company may, in its sole discretion, prepay all or any portion of this Note at any time prior to the Maturity Date or the conversion of this Note pursuant to Section 6.

 

10.          Subject to Section 6 and Section 7 hereto, all payments contemplated hereby are to be made “in cash” and shall be made in immediately available good funds of United States of America currency by wire transfer to an account designated in writing by the Holder to the Company (which account may be changed by notice similarly given) or certified check payable to the order of the Holder and sent by first class mail to the address of the Holder set forth in the Company’s Note Register. For purposes of this Note, the phrase “date of payment” means the date funds are received in the account designated by the notice which is then currently effective or the date that a certified check is deposited with the United States Postal Service, as applicable.

 

11.          Subject to the terms of the Bridge Loan Agreement and the terms of this Note, 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, if applicable, interest on, this Note at the time, place, and rate, and in the coin or currency or other consideration, as herein prescribed. This Note is a direct obligation of the Company.

 

12.          No recourse shall be had for the payment of the Principal of, or the interest on, this Note, or for any claim based hereon, or otherwise in respect hereof, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

 

13.          The Holder, by acceptance hereof, agrees that this Note is being acquired for investment and the Holder will not offer, sell or otherwise dispose of this Note or the Conversion Securities acquired upon conversion hereof, except under circumstances which will not result in a violation of the 1933 Act or any applicable state securities “blue sky” or foreign laws or similar laws relating to the sale of securities.

 

14.          Any notice required or permitted hereunder shall be given in the manner provided in the Section headed “NOTICES” in the Bridge Loan Agreement, the terms of which are incorporated herein by reference.

 

15.          This Note shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of the County of New York or the state courts of the State of New York sitting in the County of New York in connection with any dispute arising under this Note 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. To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Holder in enforcement of or protection of any of its rights under this Note.

 

  - 4 -  

 

 

16.          The Company and the Holder hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of such parties against the other in respect of any matter arising out of or in connection with this Note.

 

17.          Any one or more of the following shall constitute an “ Event of Default ”:

 

(a)          Any of the representations or warranties made by the Company herein, in the Bridge Loan Agreement or any of the other Transaction Agreements shall be false or misleading in any material respect at the time made; or

 

(b)          The Company shall fail to perform or observe, in any material respect, any covenant, term, provision, condition, agreement or obligation of any Note in this series and, if such failure is subject to cure, such failure shall continue uncured for a period of forty-five (45) days after the Company’s receipt of written notice thereof from the Holder (but if such failure is not subject to cure, then immediately on the Company’s receipt of such written notice); or

 

(c)          The Company shall fail to perform or observe, in any material respect, any covenant, term, provision, condition, agreement or obligation of the Company under any of the Transaction Agreements, and, if such failure is subject to cure, such failure shall continue uncured for a period of forty-five (45) days after the Company’s receipt of written notice thereof from the Holder (but if such failure is not subject to cure, then immediately on the Company’s receipt of such written notice); or

 

(d)          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 ninety (90) days after such appointment; or

 

(e)          Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company and shall not be dismissed within ninety (90) days thereafter; or

 

(f)          Any final money judgment, writ or warrant of attachment, or similar process in excess of Five Hundred Thousand ($500,000) Dollars 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 ninety (90) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

 

(g)          Bankruptcy, reorganization, insolvency 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 Company and, if instituted against the Company, shall not be dismissed within ninety (90) days after such institution or the Company shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit the material allegations of, or default in answering a petition filed in any such proceeding.

 

  - 5 -  

 

 

If an Event of Default shall have occurred and is continuing, then, or at any time thereafter, and in each and every such case, unless such Event of Default shall have been cured or waived in writing by a Majority in Interest of the Holders (which waiver shall not be deemed to be a waiver of any subsequent default), at the option of a Majority in Interest of Holders and in the Majority in Interest of Holders’ sole discretion, and upon the written notice by a Majority in Interest of Holders, this Note shall immediately become due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Majority in Interest of Holders may immediately enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law, including, but not necessarily limited to, the equitable remedy of specific performance and injunctive relief.

 

18.          Any provision of this Note may be amended, waived or modified upon the written consent of the Company and a Majority in Interest of Holders; provided , however , that no such amendment, waiver or consent shall: (i) reduce the Principal amount of this Note without Holder’s written consent, or (ii) reduce the rate of interest of this Note without Holder’s written consent.

 

19.          In the event for any reason, any payment by or act of the Company or the Holder shall result in payment of interest which would exceed the limit authorized by or be in violation of the law of the jurisdiction applicable to this Note, then ipso facto the obligation of the Company to pay interest or perform such act or requirement shall be reduced to the limit authorized under such law, so that in no event shall the Company be obligated to pay any such interest, perform any such act or be bound by any requirement which would result in the payment of interest in excess of the limit so authorized. In the event any payment by or act of the Company shall result in the extraction of a rate of interest in excess of a sum which is lawfully collectible as interest, then such amount (to the extent of such excess not returned to the Company) shall, without further agreement or notice between or by the Company or the Holder, be deemed applied to the payment of Principal, if any, hereunder immediately upon receipt of such excess funds by the Holder, with the same force and effect as though the Company had specifically designated such sums to be so applied to Principal and the Holder had agreed to accept such sums as an interest-free prepayment of this Note. If any part of such excess remains after the Principal has been paid in full, whether by the provisions of the preceding sentences of this Section or otherwise, such excess shall be deemed to be an interest-free loan from the Company to the Holder, which loan shall be payable immediately upon demand by the Company. The provisions of this Section shall control every other provision of this Note.

 

[ Signature Page Follows ]

 

  - 6 -  

 

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized.

 

Dated: [__], 2019    
     
  EHAVE, INC.
     
  By:  
     
   
  (Print Name)
   
  (Title)

 

15% Senior Convertible Promissory Note

 

     

 

Exhibit 4.55

 

AGREEMENT

 

 

 

THIS AGREEMENT (the “ Agreement ”) is made and entered into as of February 27, 2019, by and between Ehave, Inc. (the “ Company ”), and Bezaelel Partners, LLC (the “ Grantee ”), a shareholder of the Company.

 

WITNESSETH:

 

WHEREAS , the Grantee owns 3,798,781common shares (“ Old Shares ”) issued on July 2, 2018, which the Grantee was unable to deposit with Alpine Securities Corporation due to lack of supporting documentation.

 

WHEREAS , the Company is entering into agreements with holders of the Company’s notes and warrants, pursuant to which certain outstanding notes and warrants shall be converted into common shares of the Company (the “ Recapitalization ”);

 

WHEREAS , the Grantee has introduced the Company to potential partners for one or more strategic transactions, including mergers or acquisitions (the “ Services ”).

 

WHEREAS , upon completion of the Recapitalization, the Company desires to issue 47,564,189 common shares of the Company (the “ Shares ”) (i) for the Grantee’s Services and (ii) in exchange for the Old Shares, upon and subject to the terms and conditions set forth herein.

 

NOW, THEREFORE , in consideration of the promises and the mutual covenants and agreements of the parties herein contained, the Company and the Grantee hereby agree as follows:

 

1.           Recitals . The foregoing recitals are hereby incorporated herein by reference and acknowledged as true and correct by the parties hereto.

 

2.           Issuance of Shares .

 

2.1           The Company hereby agrees to issue to the Grantee, the Shares, upon completion of the Recapitalization and deliver to Grantee a certificate representing the Shares in the name of the Grantee (the “ Certificate ”).

 

2.2            The Grantee hereby acknowledges that the Shares are being issued to the Grantee (i) for the Grantee’s Services and (ii) in exchange for the Old Shares. The Grantee shall surrender its certificate for the Old Shares, duly endorsed (or a notice to the effect that the original share certificate has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with the share certificate), at the office of the Company. The Company shall, as soon as practicable thereafter, issue and deliver to the Grantee a Certificate representing the Shares pursuant to this Agreement (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company).

 

3.           Representations and Warranties of the Company . The Company hereby represents and warrants to the Grantee as follows:

 

  1  

 

 

3.1            Authorization . The Company has all requisite power, legal capacity and authority to enter into this Agreement and to assume and perform its obligations hereunder. This Agreement, when duly executed and delivered by the Company, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

 

3.2            Approvals and Consents . No action, approval, consent or authorization, including but not limited to, any action, approval, consent or authorization by any governmental or quasi-governmental agency, commission, board, bureau or instrumentality is necessary or required as to the Company in order to constitute this Agreement as a valid, binding and enforceable obligation of the Company in accordance with its terms.

 

4.           Representations and Warranties of the Grantee . The Grantee hereby represents and warrants to the Company as follows:

 

4.1            Authorization . The Grantee has all requisite power, legal capacity and authority to enter into this Agreement and to assume and perform its obligations hereunder. This Agreement, when duly executed and delivered by such Grantee, will constitute a legal, valid and binding obligation of such Grantee, enforceable against the Grantee in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

 

4.2            Approvals and Consents . No action, approval, consent or authorization, including, but not limited to, any action, approval, consent or authorization by any governmental or quasi-governmental agency, commission, board, bureau or instrumentality is necessary or required as to the Grantee in order to constitute this Agreement as a valid, binding and enforceable obligation of the Grantee in accordance with its terms.

 

4.3            Accredited Investor . The Grantee is an “accredited investor,” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”), and such Grantee is able to bear the economic risk of an investment in the Shares.

 

4.4            Restricted Stock/Control Securities . The Shares are being acquired for the Grantee’s own account, for investment and not with a view to the distribution thereof. The Grantee understands that such Shares have not been registered under the Securities Act and may not be resold unless a subsequent disposition thereof is registered under the Securities Act or is exempt from registration under the Securities Act.

 

4.5            No General Solicitation . The Grantee is not receiving the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

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4.6            Legend . The Grantee understands and agrees that the Certificates shall bear substantially the following legend until (a) such Shares shall have been registered under the Securities Act and effectively disposed of in accordance with a registration statement that has been declared effective or (b) in the opinion of counsel for the Company, such Shares may be sold without registration under the Securities Act, as well as any applicable “blue sky” or state securities laws:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

5.           General Provisions .

 

5.1            Entire Agreement; Amendment and Waiver . Except as set forth herein, no representations or warranties have been made to the Grantee by the Company, and in receiving the Shares, the Grantee is not relying upon any representations other then those specifically contained herein. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter contained herein and supersedes all prior oral or written agreements, if any, between the parties hereto with respect to such subject matter and, except as otherwise expressly provided herein, is not intended to confer upon any other person any rights or remedies hereunder. Any amendments hereto or modifications hereof must be made in writing and executed by each of the parties hereto. Any failure by the Company or the Grantee to enforce any rights hereunder shall not be deemed a waiver of such rights.

 

5.2            Consideration for the Shares . The Grantee and the Company hereby acknowledge, as evidenced by their signatures hereto, that (a) the consideration for the Shares is fair, equitable and valid; and (b) the Company’s common shares are subject to market forces which will result in variances in the value thereof, which variances may be significant.

 

5.3            Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to conflict of laws principles.

 

5.4            Binding Effect; Assignment . This Agreement and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the Company and the Grantee and their respective heirs, successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be transferred or assigned (by operation of law or otherwise) by any of the parties hereto without the prior written consent of the other party hereto. Any transfer or assignment of any of the rights, interests or obligations hereunder in violation of the terms hereof shall be void and of no force or effect.

 

5.5            Survival of Representations and Warranties . All representations and warranties made by the parties to this Agreement shall survive the execution and delivery of this Agreement.

 

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5.6            Counterparts . This Agreement may be executed in any number of counterparts and each of such counterparts shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument and shall bind all parties signing such counterpart.

 

5.7            Additional Documents . The Company and the Grantee agree to execute any additional documents reasonably required to affect the issuance of the Shares to the Grantee.

 

[Signature Page Follows]  

 

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

 

  EHAVE, INC. :
     
  By: /s/ Prateek Dwivedi
  Name: Prateek Dwivedi
  Title: CEO
     
  Bezalel Partners LLC:
     
  By: /s/ David Stefanksy
  Name: David Stefanksy
  Title:

 

 

 

Exhibit 4.56

 

AGREEMENT

 

 

 

THIS AGREEMENT (the “ Agreement ”) is made and entered into as of February 27, 2019, by and between Ehave, Inc. (the “ Company ”), and KW Capital Partners Ltd. (the “ Grantee ”), a shareholder of the Company.

 

WITNESSETH:

 

WHEREAS , the Company is entering into agreements with holders of the Company’s notes and warrants, pursuant to which certain outstanding notes and warrants shall be converted into common shares of the Company (the “ Recapitalization ”);

 

WHEREAS , the Grantee has introduced the Company to potential partners for one or more strategic transactions, including mergers or acquisitions (the “ Services ”);

 

WHEREAS , upon completion of the Recapitalization, the Company desires to issue 31,70,460 common shares of the Company (the “ Shares ”) for the Grantee’s Services, upon and subject to the terms and conditions set forth herein.

 

NOW, THEREFORE , in consideration of the promises and the mutual covenants and agreements of the parties herein contained, the Company and the Grantee hereby agree as follows:

 

1.           Recitals . The foregoing recitals are hereby incorporated herein by reference and acknowledged as true and correct by the parties hereto.

 

2.           Issuance of Shares .

 

2.1           The Company hereby agrees to issue to the Grantee, the Shares, upon completion of the Recapitalization, and deliver to Grantee a certificate representing the Shares in the name of the Grantee (the “ Certificate ”).

 

2.2           The Grantee hereby acknowledges that the Shares are being issued to the Grantee for the Grantee’s Services.

 

3.           Representations and Warranties of the Company . The Company hereby represents and warrants to the Grantee as follows:

 

3.1            Authorization . The Company has all requisite power, legal capacity and authority to enter into this Agreement and to assume and perform its obligations hereunder. This Agreement, when duly executed and delivered by the Company, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

 

3.2            Approvals and Consents . No action, approval, consent or authorization, including but not limited to, any action, approval, consent or authorization by any governmental or quasi-governmental agency, commission, board, bureau or instrumentality is necessary or required as to the Company in order to constitute this Agreement as a valid, binding and enforceable obligation of the Company in accordance with its terms.

 

  1  

 

 

4.           Representations and Warranties of the Grantee . The Grantee hereby represents, warrants and acknowledges to the Company as follows, and acknowledges that the Company is relying upon these representations and, warranties and acknowledgments in connection with the issuance of the Shares:

 

4.1            Authorization . The Grantee has all requisite power, legal capacity and authority to enter into this Agreement and to assume and perform its obligations hereunder. This Agreement, when duly executed and delivered by such Grantee, will constitute a legal, valid and binding obligation of such Grantee, enforceable against the Grantee in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

 

4.2            Approvals and Consents . No action, approval, consent or authorization, including, but not limited to, any action, approval, consent or authorization by any governmental or quasi-governmental agency, commission, board, bureau or instrumentality is necessary or required as to the Grantee in order to constitute this Agreement as a valid, binding and enforceable obligation of the Grantee in accordance with its terms.

 

4.3            Accredited Investor . The Grantee is an “accredited investor,” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”), and such Grantee is able to bear the economic risk of an investment in the Shares.

 

4.4            Restricted Stock/Control Securities . The Shares are being acquired for the Grantee’s own account, for investment and not with a view to the distribution thereof. The Grantee understands that such Shares have not been registered under the Securities Act and may not be resold unless a subsequent disposition thereof is registered under the Securities Act or is exempt from registration under the Securities Act.

 

4.5            No General Solicitation . The Grantee is not receiving the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

4.6            Legend . The Grantee understands and agrees that the Certificate shall bear substantially the following legend until (a) such Shares shall have been registered under the Securities Act and effectively disposed of in accordance with a registration statement that has been declared effective or (b) in the opinion of counsel for the Company, such Shares may be sold without registration under the Securities Act, as well as any applicable “blue sky” or state securities laws:

 

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

4.7            The Grantee has properly completed, executed the applicable Exhibits and Appendices attached hereto, and the information contained therein is true and correct.

 

4.8           The Grantee is not a U.S. Person (as such term is defined in Rule 902(k) of Regulation S under the Securities Act of 1933.

 

4.9           If the Grantee is acting as agent for a principal (a “ Disclosed Beneficial Purchaser ”), (i) the Grantee is duly and validly authorized to enter into this Agreement and all other necessary documentation on behalf of such Disclosed Beneficial Purchaser and (ii) this Agreement has been duly and validly authorized, executed and delivered on behalf of, and constitutes a valid and legally binding obligation of such Disclosed Beneficial Purchaser, enforceable in accordance with its terms, subject to customary limitations with respect to bankruptcy, insolvency or other laws affecting creditors' rights generally and to the availability of equitable remedies.

 

4.10         The entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Grantee or of any agreement, written or oral, to which the Grantee may be a party or by which the Grantee is or may be bound.

 

4.11         The Grantee (or, if applicable, the Disclosed Beneficial Purchaser) is an “ accredited investor ”, as such term is defined in National Instrument 45-106 Prospectus Exemptions of the Canadian Securities Administrators (“ NI 45-106 ”) or Section 73.3 of the Securities Act (Ontario), as applicable, and reproduced in Appendix B hereto.

 

4.12         The Grantee (or, if applicable, the Disclosed Beneficial Purchaser) was not created or used solely to purchase or hold securities as an accredited investor as described in paragraph (m) of the definition of “accredited investor” in Appendix B hereto.

 

4.13         The Grantee has initialed Appendix B hereto, indicating that the Grantee satisfies one of the categories of “accredited investor” set forth in such definition.

 

4.14         If the Grantee is relying on paragraphs (j), (k) or (l) of the definition of “accredited investor”, the Grantee has also completed, signed and delivered a Form for Individual Accredited Investors in the form attached as Appendix C hereto, and in so doing, the Grantee represents and acknowledges that Sections 1, 5 and 6 of such form were completed, as applicable, before the Grantee completed and signed such form.

 

4.15         The Grantee is purchasing the Shares as principal for its own account, not for the benefit of any other person, for investment only and not with a view to resale in the course of or incidental to a distribution of all or any of the Shares.

 

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4.16         If the Grantee is resident in or otherwise subject to the laws of a jurisdiction of Canada, the Grantee acknowledges and confirms that any certificates representing the Shares will carry the legend stating substantially the following, as may be revised by the Company to comply with applicable securities laws:

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT THE DISTRIBUTION DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

4.17         The Grantee will provide such additional information and documents as may be requested in order for the Company to determine whether the Grantee or the Disclosed Beneficial Purchaser, as applicable, satisfies the indicated category of accredited investor, including in particular those based on income or assets.

 

4.18         The Grantee acknowledges and agrees that: (a) the Grantee is required to disclose to the applicable securities regulatory authorities or regulators (the “ Securities Authorities ”) certain information pertaining to the Grantee, including the Grantee's name, residential address, telephone number, number of Shares purchased, purchase price therefor, statutory exemption relied on and date of distribution (collectively “ personal informatio n”), that is required to be disclosed in Schedule I of Form 45-106F1 under Canadian Securities Administrators' National Instrument 45-106 – Prospectus Exemptions (“ NI 45-106 ”), which Form 45-106F1 is required to be filed by the Company under NI 45-106; (b) the personal information will be delivered to the applicable Securities Authorities under the authority granted in applicable securities legislation; (c) such personal information is being collected indirectly by the applicable Securities Authorities under the authority granted to it in securities legislation; (d) such personal information is being collected for the purposes of the administration and enforcement of the securities legislation of the local jurisdiction; and (e) the title, business address and business telephone number of the public official in the local jurisdiction who can answer questions about the Securities Authority's indirect collection of such personal information is indicated in Appendix A hereto. By executing this Agreement, each Grantee hereby authorizes the indirect collection of such personal information by the applicable Securities Authorities.

 

5.           General Provisions .

 

5.1            Entire Agreement; Amendment and Waiver . Except as set forth herein, no representations or warranties have been made to the Grantee by the Company, and in receiving the Shares, the Grantee is not relying upon any representations other then those specifically contained herein. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter contained herein and supersedes all prior oral or written agreements, if any, between the parties hereto with respect to such subject matter and, except as otherwise expressly provided herein, is not intended to confer upon any other person any rights or remedies hereunder. Any amendments hereto or modifications hereof must be made in writing and executed by each of the parties hereto. Any failure by the Company or the Grantee to enforce any rights hereunder shall not be deemed a waiver of such rights.

 

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5.2            Consideration for the Shares . The Grantee and the Company hereby acknowledge, as evidenced by their signatures hereto, that (a) the consideration for the Shares is fair, equitable and valid; and (b) the Company’s common shares are subject to market forces which will result in variances in the value thereof, which variances may be significant.

 

5.3            Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario without giving effect to conflict of laws principles.

 

5.4            Binding Effect; Assignment . This Agreement and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the Company and the Grantee and their respective heirs, successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be transferred or assigned (by operation of law or otherwise) by any of the parties hereto without the prior written consent of the other party hereto. Any transfer or assignment of any of the rights, interests or obligations hereunder in violation of the terms hereof shall be void and of no force or effect.

 

5.5            Survival of Representations and Warranties . All representations and warranties made by the parties to this Agreement shall survive the execution and delivery of this Agreement.

 

5.6            Counterparts . This Agreement may be executed in any number of counterparts and each of such counterparts shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument and shall bind all parties signing such counterpart.

 

5.7            Additional Documents . The Company and the Grantee agree to execute any additional documents reasonably required to affect the issuance of the Shares to the Grantee.

 

[Signature Page Follows]  

 

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

 

  EHAVE, INC. :
     
  By: /s/ Prateek Dwivedi
  Name: Prateek Dwivedi
  Title: CEO
     
  KW CAPITAL PARTNERS LTD.:
     
  By: /s/ Sruli Weinreb
  Name: Sruli Weinreb
  Title: Managing Partner

 

 

 

Exhibit 4.57

 

AGREEMENT

 

 

 

THIS AGREEMENT (the “ Agreement ”) is made and entered into as of February 27, 2019, by and between Ehave, Inc. (the “ Company ”), and Scott Woodrow (the “ Grantee ”), the Company’s founder and a member of the board of directors of the Company.

 

WITNESSETH:

 

WHEREAS , each director who was not a salaried employee of the Company for the year ended December 31, 2017, earned a fee of $33,000, which amount the Grantee was to receive in 2018 but have not yet received.

 

WHEREAS , each director who was not a salaried employee of the Company for the year ended December 31, 2018, earned a fee of $33,000, which amount the Grantee has not yet received.

 

WHEREAS , the Company is entering into agreements with holders of the Company’s notes and warrants, pursuant to which certain outstanding notes and warrants shall be converted into common shares of the Company (the “ Recapitalization ”);

 

WHEREAS , upon completion of the Recapitalization, the Company desires to issue 47,564,189 common shares of the Company (the “ Shares ”) (i) in lieu of the cash compensation for the years 2017 and 2018, upon and subject to the terms and conditions set forth herein, and (ii) for the Grantee’s services in assisting one or more of strategic transactions, including mergers or acquisitions (collectively, the “ Grantee Consideration ”)

 

NOW, THEREFORE , in consideration of the promises and the mutual covenants and agreements of the parties herein contained, the Company and the Grantee hereby agree as follows:

 

1.           Recitals . The foregoing recitals are hereby incorporated herein by reference and acknowledged as true and correct by the parties hereto.

 

2.           Issuance of Shares .

 

2.1           The Company hereby agrees to issue to the Grantee, the Shares, upon completion of the Recapitalization, and deliver to Grantee a certificate representing the Shares in the name of the Grantee (the “ Certificates ”).

 

2.2           The Grantee hereby acknowledges that the Shares are being issued to the Grantee in repayment of the Grantee Consideration. For the avoidance of doubt, the Grantee shall not be obligated to forfeit or otherwise return any portion of the Shares in the event that the Grantee no longer serves as a member of the board of directors of the Company during the year 2019.

 

3.           Representations and Warranties of the Company . The Company hereby represents and warrants to the Grantee as follows:

 

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3.1            Authorization . The Company has all requisite power, legal capacity and authority to enter into this Agreement and to assume and perform its obligations hereunder. This Agreement, when duly executed and delivered by the Company, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

 

3.2            Approvals and Consents . No action, approval, consent or authorization, including but not limited to, any action, approval, consent or authorization by any governmental or quasi-governmental agency, commission, board, bureau or instrumentality is necessary or required as to the Company in order to constitute this Agreement as a valid, binding and enforceable obligation of the Company in accordance with its terms.

 

4.           Representations and Warranties of the Grantee . The Grantee hereby represents, warrants and acknowledges to the Company as follows, and acknowledges that the Company is relying upon these representations and, warranties and acknowledgments in connection with the issuance of the Shares:

 

4.1            Authorization . The Grantee has all requisite power, legal capacity and authority to enter into this Agreement and to assume and perform its obligations hereunder. This Agreement, when duly executed and delivered by such Grantee, will constitute a legal, valid and binding obligation of such Grantee, enforceable against the Grantee in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

 

4.2            Approvals and Consents . No action, approval, consent or authorization, including, but not limited to, any action, approval, consent or authorization by any governmental or quasi-governmental agency, commission, board, bureau or instrumentality is necessary or required as to the Grantee in order to constitute this Agreement as a valid, binding and enforceable obligation of the Grantee in accordance with its terms.

 

4.3            Accredited Investor . The Grantee is an “accredited investor,” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”), and such Grantee is able to bear the economic risk of an investment in the Shares.

 

4.4            Restricted Stock/Control Securities . The Shares are being acquired for the Grantee’s own account, for investment and not with a view to the distribution thereof. The Grantee understands that such Shares have not been registered under the Securities Act and may not be resold unless a subsequent disposition thereof is registered under the Securities Act or is exempt from registration under the Securities Act.

 

4.5            No General Solicitation . The Grantee is not receiving the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

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4.6            Legend . The Grantee understands and agrees that the Certificates shall bear substantially the following legend until (a) such Shares shall have been registered under the Securities Act and effectively disposed of in accordance with a registration statement that has been declared effective or (b) in the opinion of counsel for the Company, such Shares may be sold without registration under the Securities Act, as well as any applicable “blue sky” or state securities laws:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

4.7            The Grantee has properly completed, executed the applicable Exhibits and Appendices attached hereto, and the information contained therein is true and correct.

 

4.8           The Grantee is not a U.S. Person (as such term is defined in Rule 902(k) of Regulation S under the Securities Act of 1933.

 

4.9           If the Grantee is acting as agent for a principal (a “ Disclosed Beneficial Purchaser ”), (i) the Grantee is duly and validly authorized to enter into this Agreement and all other necessary documentation on behalf of such Disclosed Beneficial Purchaser and (ii) this Agreement has been duly and validly authorized, executed and delivered on behalf of, and constitutes a valid and legally binding obligation of such Disclosed Beneficial Purchaser, enforceable in accordance with its terms, subject to customary limitations with respect to bankruptcy, insolvency or other laws affecting creditors' rights generally and to the availability of equitable remedies.

 

4.10         The entering into of this Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Grantee or of any agreement, written or oral, to which the Grantee may be a party or by which the Grantee is or may be bound.

 

4.11         The Grantee (or, if applicable, the Disclosed Beneficial Purchaser) is an “ accredited investor ”, as such term is defined in National Instrument 45-106 Prospectus Exemptions of the Canadian Securities Administrators (“ NI 45-106 ”) or Section 73.3 of the Securities Act (Ontario), as applicable, and reproduced in Appendix B hereto.

 

4.12         The Grantee (or, if applicable, the Disclosed Beneficial Purchaser) was not created or used solely to purchase or hold securities as an accredited investor as described in paragraph (m) of the definition of “accredited investor” in Appendix B hereto.

 

4.13         The Grantee has initialed Appendix B hereto, indicating that the Grantee satisfies one of the categories of “accredited investor” set forth in such definition.

 

  3  

 

 

4.14         If the Grantee is relying on paragraphs (j), (k) or (l) of the definition of “accredited investor”, the Grantee has also completed, signed and delivered a Form for Individual Accredited Investors in the form attached as Appendix C hereto, and in so doing, the Grantee represents and acknowledges that Sections 1, 5 and 6 of such form were completed, as applicable, before the Grantee completed and signed such form.

 

4.15         The Grantee is purchasing the Shares as principal for its own account, not for the benefit of any other person, for investment only and not with a view to resale in the course of or incidental to a distribution of all or any of the Shares.

 

4.16         If the Grantee is resident in or otherwise subject to the laws of a jurisdiction of Canada, the Grantee acknowledges and confirms that any certificates representing the Shares will carry the legend stating substantially the following, as may be revised by the Company to comply with applicable securities laws:

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT THE DISTRIBUTION DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

4.17         The Grantee will provide such additional information and documents as may be requested in order for the Company to determine whether the Grantee or the Disclosed Beneficial Purchaser, as applicable, satisfies the indicated category of accredited investor, including in particular those based on income or assets.

 

4.18         The Grantee acknowledges and agrees that: (a) the Grantee is required to disclose to the applicable securities regulatory authorities or regulators (the “ Securities Authorities ”) certain information pertaining to the Grantee, including the Grantee's name, residential address, telephone number, number of Shares purchased, purchase price therefor, statutory exemption relied on and date of distribution (collectively “ personal informatio n”), that is required to be disclosed in Schedule I of Form 45-106F1 under Canadian Securities Administrators' National Instrument 45-106 – Prospectus Exemptions (“ NI 45-106 ”), which Form 45-106F1 is required to be filed by the Company under NI 45-106; (b) the personal information will be delivered to the applicable Securities Authorities under the authority granted in applicable securities legislation; (c) such personal information is being collected indirectly by the applicable Securities Authorities under the authority granted to it in securities legislation; (d) such personal information is being collected for the purposes of the administration and enforcement of the securities legislation of the local jurisdiction; and (e) the title, business address and business telephone number of the public official in the local jurisdiction who can answer questions about the Securities Authority's indirect collection of such personal information is indicated in Appendix A hereto. By executing this Agreement, each Grantee hereby authorizes the indirect collection of such personal information by the applicable Securities Authorities.

 

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5.           General Provisions .

 

5.1            Entire Agreement; Amendment and Waiver . Except as set forth herein, no representations or warranties have been made to the Grantee by the Company, and in receiving the Shares, the Grantee is not relying upon any representations other then those specifically contained herein. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter contained herein and supersedes all prior oral or written agreements, if any, between the parties hereto with respect to such subject matter and, except as otherwise expressly provided herein, is not intended to confer upon any other person any rights or remedies hereunder. Any amendments hereto or modifications hereof must be made in writing and executed by each of the parties hereto. Any failure by the Company or the Grantee to enforce any rights hereunder shall not be deemed a waiver of such rights.

 

5.2            Consideration for the Shares . The Grantee and the Company hereby acknowledge, as evidenced by their signatures hereto, that (a) the consideration for the Shares is fair, equitable and valid; and (b) the Company’s common shares are subject to market forces which will result in variances in the value thereof, which variances may be significant.

 

5.3            Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario without giving effect to conflict of laws principles.

 

5.4            Binding Effect; Assignment . This Agreement and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the Company and the Grantee and their respective heirs, successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be transferred or assigned (by operation of law or otherwise) by any of the parties hereto without the prior written consent of the other party hereto. Any transfer or assignment of any of the rights, interests or obligations hereunder in violation of the terms hereof shall be void and of no force or effect.

 

5.5            Survival of Representations and Warranties . All representations and warranties made by the parties to this Agreement shall survive the execution and delivery of this Agreement.

 

5.6            Counterparts . This Agreement may be executed in any number of counterparts and each of such counterparts shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument and shall bind all parties signing such counterpart.

 

5.7            Additional Documents . The Company and the Grantee agree to execute any additional documents reasonably required to affect the issuance of the Shares to the Grantee.

 

[Signature Page Follows]  

 

  5  

 

 

IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

 

  EHAVE, INC. :
     
  By: /s/ Prateek Dwivedi
  Name: Prateek Dwivedi
  Title: CEO
     
  /s/ Scott Woodrow
  Scott Woodrow

 

 

 

Exhibit 4.58

 

NOTE CONVERSION AGREEMENT

 

This LETTER AGREEMENT (this “ Agreement ”), dated as of March 7, 2019, is entered into by and among EHAVE, INC., an Ontario corporation (the “ Company ”), and __________. (the “ Holder ”).

 

WHEREAS, the Company has previously issued and sold to the Holder a certain note in the original principal amount of $61,111.00 and numbered BLA-1 (the “ Note ”);

 

WHEREAS, the Company has informed the Holder that the Company intends to enter into agreements with holders of the Company’s notes and warrants, pursuant to which certain outstanding notes and warrants shall be converted into common shares of the Company (the “ Recapitalization ”);

 

WHEREAS, in connection with the Recapitalization, the Company and the Holder agreed to convert the Note into __________ common shares (the “ Shares ”);

 

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

 

1. Cancellation of the Warrants . The Note is hereby converted into the Shares. The Holder shall surrender the Note to the Company. The Note is and shall be deemed to have been indefeasibly satisfied in full.

 

2. Post-Recapitalization Percentage Ownership . Immediately after the issuance of the Shares, the Shares shall consist of ___% of the Company’s capital stock on a fully diluted basis. At the time of the issuance of the Shares to the Holder, the Company will not have outstanding any debt or securities that give any rights of anti-dilution or similar adjustments.

 

3. Representations and Warranties. The Holder represents, warrants and acknowledges to the Company, that it has properly completed, and executed the Appendices attached hereto, and that the information therein (which includes the representations and warranties contained in Appendix A hereto) is true and correct, and further, agrees and acknowledges that the Appendices (including the representations and warranties contained in Appendix A) form an integral part of this Agreement.

 

4. Release . By execution of this Agreement, upon issuance of the Shares, Holder hereby acknowledges and agrees that Holder forever releases and discharges the Company from any and all liability arising under the Note.

 

5. Further Assurances . Each of the parties hereto shall execute and deliver, at the reasonable request of the other party hereto, such additional documents, instruments, conveyances and assurances and take such further actions as such other party may reasonably request to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

 

[signature page follows]

 

  1  

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year written above.

 

THE COMPANY:   HOLDER:
     
EHAVE, INC.   ___________________
         
By:     By:  
  Name: Prateek Dwivedi     Name:
  Title:  Chief Executive Officer     Title:

 

  2  

 

 

Exhibit 4.59

 

PROMISSARY NOTE

 

Borrower: Ehave, Inc. of 277 Lakeshore Road East, Suite 203, Oakville, ON L6J 6J3 (the “Company”)
   
Lender: ___________ of _______________ (the “Lender”)

 

Principal Amount: $_______ CDN

 

1. FOR VALUE RECEIVED, The Borrower promise to pay the Lender at such address as may be provided in writing to the Borrower, the principal sum of $___________ . This note shall rank senior to all other debt of the Company. This Note is due on May 22, 2019.
2. Any time while not in default under this Note, the Borrower may repay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.
3. This Note will be construed in accordance with and governed by the laws of the Province of Ontario.
4. This Note will endure to the benefit of and be binding upon the representative heirs, executors, administrators, successors and assigns of the Borrower and the Lender.

 

IN WITNESS WHEREOF the parties have duly affixed their signatures under seal on this 26 day of March, 2019.

 

SIGNED, SEALED AND DELIVERED Ehave, Inc.
   
March 26, 2019  
   
  Per ______________________
   
SIGNED, SEALED AND DELIVERED _________________
   
March 26, 2019  
   
  Per _ _____________________
   

 

 

 

 

Exhibit 4.60

 

Execution Copy

 

EHAVE, INC.

 

As Vendor

 

- and -

 

ZYUS LIFE SCIENCES INC.

 

As Purchaser

 

 

 

ASSET PURCHASE AGREEMENT

 

March 22, 2019

 

 

 

 

 

 

TABLE OF CONTENTS

 

ARTICLE 1 INTERPRETATION 1
1.1 Definitions. 1
1.2 Construction 11
1.3 Certain Rules of Interpretation. 11
1.4 Knowledge 12
1.5 Computation of Time 12
1.6 Performance on Business Days 12
1.7 Calculation of Interest 12
1.8 Currency and Payment 12
1.9 Accounting Terms 12
1.10 Schedules 13
     
ARTICLE 2 PURCHASE AND SALE 13
2.1 Agreement to Purchase and Sell 13
2.2 Excluded Assets 13
2.3 Liabilities 14
2.4 Purchase Price, Issuance of Consideration Shares and Purchase Price Allocation 14
2.5 Payment of Purchase Price 15
2.6 Transfer Taxes 15
2.7 GST/HST Election 15
2.8 Payment of Taxes 15
     
ARTICLE 3 CLOSING ARRANGEMENTS 15
3.1 Closing 15
3.2 Vendor’s Closing Deliveries 15
3.3 Purchaser’s Closing Deliveries 15
     
ARTICLE 4 CONDITIONS OF CLOSING 16
4.1 Conditions for the Benefit of the Purchaser 16
4.2 Conditions for the Benefit of the Vendor 19
4.3 Termination Events 20
4.4 Effect of Termination 21
     
ARTICLE 5 REPRESENTATIONS AND WARRANTIES 21
5.1 Representations and Warranties of the Vendor 21
5.2 Representations and Warranties of the Purchaser 32
5.3 Survival of Representations, Warranties and Covenants of the Vendor 37
5.4 Survival of the Representations, Warranties and Covenants of the Purchaser 38
5.5 Termination of Liability 39
     
ARTICLE 6 COVENANTS 39
6.1 Exclusive Dealings 39
6.2 Transfer of Documentation 39
6.3 Standstill 40
6.4 Purchaser’s Investigation 40
6.5 Vendor’s Investigation 41
6.6 Personal Information 41

 

 

 

 

6.7 Risk of Loss 42
6.8 Risk of Loss 42
6.9 Vendor Conduct Prior to Closing 42
6.10 Purchaser Conduct Prior to Closing 44
6.11 Notification of Certain Matters 44
6.12 Use of Intellectual Property 45
6.13 Regulatory Approvals 45
6.14 Additional Financial and Other Information 45
6.15 Lock-Up Agreement 45
     
ARTICLE 7 INDEMNIFICATION 46
7.1 Definitions. 46
7.2 Indemnification by the Vendor 47
7.3 Indemnification by the Purchaser 47
7.4 Thresholds and Limitations. 48
7.5 Notice of Claim 49
7.6 Third Party Claims 49
7.7 Direct Claims 51
7.8 Waiver 51
7.9 Duty to Mitigate and Subrogation. 51
7.10 Obligation to Reimburse 51
7.11 Exclusivity 52
7.12 Set-Off 52
7.13 Trust and Agency 52
     
ARTICLE 8 GENERAL 53
8.1 Confidentiality of Information 53
8.2 Public Announcements 53
8.3 Disclosure and Consultation 53
8.4 Expenses 53
8.5 Best Efforts 53
8.6 No Third Party Beneficiary 53
8.7 Entire Agreement 54
8.8 Non-Merger 54
8.9 Time of Essence 54
8.10 Amendment 54
8.11 Waiver of Rights 54
8.12 Jurisdiction 54
8.13 Governing Law 54
8.14 Notices 55
8.15 Assignment 56
8.16 Further Assurances 56
8.17 Severability 56
8.18 Successors 57
8.19 Counterparts 57

 

 

 

 

ASSET PURCHASE AGREEMENT dated March 22, 2019 BETWEEN:

 

EHAVE, INC.

 

As Vendor

 

- and -

 

ZYUS LIFE SCIENCES INC.

 

As Purchaser

 

RECITALS:

 

A. The Vendor carries on the business of a healthcare software development company for stakeholders in the medical cannabis and mental health sectors.

 

B. The Vendor wishes to sell and the Purchaser wishes to purchase the Purchased Assets (as defined herein).

 

THE PARTIES AGREE AS FOLLOWS:

 

ARTICLE 1
INTERPRETATION

 

1.1           Definitions . In this Agreement, including the Recitals to this Agreement, unless the context otherwise requires:

 

(1) Affiliate ” means an affiliated body corporate within the meaning of the following:

 

(a) one body corporate is affiliated with another body corporate if one of them is the subsidiary of the other or both are subsidiaries of the same body corporate or each of them is controlled by the same person; and

 

(b) if two bodies corporate are affiliated with the same body corporate at the same time, they are deemed to be affiliated with each other.

 

For purposes of this definition, a body corporate is controlled by a person or by two or more bodies corporate if (i) securities of the body corporate to which are attached more than 50% of the votes that may be cast to elect directors of the body corporate, are held, other than by way of security only, by or for the benefit of that person or by or for the benefit of those bodies corporate; and (ii) the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the body corporate. For the purposes of this definition, a body corporate is a subsidiary of another body corporate if (i) it is controlled by (A) that other body corporate, (B) that other body corporate and one or more bodies corporate each of which is controlled by that other body corporate, or (C) two or more bodies corporate each of which is controlled by that other body corporate; or (ii) it is a subsidiary of a body corporate that is a subsidiary of that other body corporate.

 

 

 

  

(2) Agreement ” means this asset purchase agreement, including all Schedules to this asset purchase agreement, as amended, supplemented, restated and replaced from time to time in accordance with its provisions.

 

(3) Applicable Law ” means:

 

(a) any domestic (federal, provincial or municipal) or foreign statute, law (including common and civil law), code, ordinance, rule, regulation, order-in-council, restriction or by-law (zoning or otherwise);

 

(b) any judgement, order, writ, injunction, directive, decision, ruling, decree or award;

 

(c) any regulatory policy, practice, standard or guideline;

 

(d) any published administrative position; or

 

(e) any Permit;

 

of any Governmental Authority, binding on or affecting the Person referred to in the context in which the term is used or binding on or affecting the property of that Person referred to in the context in which the term is used.

 

(4) Approvals ” means franchises, licences, qualifications, authorizations, consents, certificates, registrations, exemptions, waivers, filings, grants, notifications, privileges, rights, orders, judgments, rulings, directives, Permits, and other permits and approvals.

 

(5) Associate ”, in respect of a relation with a Person, means:

 

(a) a body corporate of which that Person beneficially owns or controls, directly or indirectly, shares or securities currently convertible into shares carrying more than 10% of the voting rights under all circumstances or by reason of the occurrence of an event that has occurred and is continuing, or a currently exercisable option or right to purchase those shares or those convertible shares;

 

(b) a partner of that Person acting on behalf of the partnership of which they are partners;

 

(c) a trust or estate in which that Person has a substantial beneficial interest or in respect of which that Person serves as a trustee or liquidator of the succession or in a similar capacity;

 

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(d) a spouse of that Person or an individual who is cohabiting with that Person in a conjugal relationship, having so cohabited for a period of at least one year;

 

(e) a child of that person or of the spouse or individual referred to in Section 1.1(5)(d); and

 

(f) a relative of that Person or of the spouse or individual referred to in Section 1.1(5)(d), if that relative has the same residence as that Person.

 

(6) Assumed Liabilities ” has the meaning attributed to that term in Section 2.3(1).

 

(7) Back-up ” has the meaning attributed to that term in Section 5.1(13)(g).

 

(8) Books and Records ” means all books, records, files and papers of the Vendor relating to the Ehave Connect Business, including title documentation, Software documentation (including operator and user manuals, training materials, guides, listings, specifications and any revisions or additions to such documents), electronic data, financial and Tax working papers, financial and Tax books and records, business reports, business plans and projections, sales and advertising materials, sales and purchases records and correspondence, trade association files, research and development records, lists of present and former customers and suppliers, all other documents and data (technical or otherwise) relating to the Ehave Connect Business, the Purchased Assets or the Assumed Liabilities, and all copies and recordings of the foregoing.

 

(9) Business” means the business carried on currently and prior to the date of this Agreement by the Vendor consisting of a healthcare software development company for stakeholders in the medical cannabis and mental health sectors.

 

(10) Business Day ” means any day, except Saturdays and Sundays, on which banks are generally open for non-automated business:

 

(a) for purposes of Section 8.14, in the place specified in that Section; and (b) for all other purposes in this Agreement, in Saskatoon, Saskatchewan.

(11) Business Intellectual Property ” means the Licensed Intellectual Property and the Owned Intellectual Property.

 

(12) Closing ” means the completion of the Transactions on the Closing Date in accordance with this Agreement.

 

(13) Closing Date ” means May 22, 2019 or such other date as agreed to by the Parties in writing.

 

(14) Commercial Software ” means Software that is generally commercially available to the public: (i) through or in consumer retail stores; (ii) from the Software licensors or their distributors, sales agents, representatives or other Persons, including value-added and other resellers or original equipment manufacturers; or (iii) from the internet.

 

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(15) Constating Documents ” means, with respect to any Person, its articles or certificate of incorporation, amendment, amalgamation or continuance, memorandum and articles of association, letters patent, supplementary letters patent, by-laws, partnership agreement, limited liability company agreement or other similar document, and all unanimous shareholder agreements, other shareholder agreements, voting trusts, pooling agreements and similar Contracts, arrangements and understandings applicable to the Person’s Equity Interests, all as amended, supplemented, restated and replaced from time to time.

 

(16) Consulting Agreement ” means the Consulting Agreement(s) to be entered into between such Employees as identified in writing by the Purchaser in its sole discretion, acting reasonably, and the Purchaser, substantially in the form of Schedule 1.1(16).

 

(17) Contract ” means any agreement, contract, indenture, lease, occupancy agreement, deed of trust, licence, option, undertaking, promise or any other commitment or obligation, whether oral or written, express or implied, and whether or not legally binding other than a Permit.

 

(18) CRA ” means the Canada Revenue Agency or any successor agency.

 

(19) Developers ” has the meaning attributed to such term in Section 5.1(12)(g).

 

(20) Disabling Code ” means any clock, timer, counter, computer virus, worm, Software lock, drop dead device, Trojan horse routine, trap door, time bomb, or any other codes, designs, routines or instructions that may be used to access, modify, replicate, distort, delete, damage or disable any Hardware or Software, including Internal IT Systems, the Books and Records and any other data or information.

 

(21) Effective Time ” means 12:01 a.m. on the Closing Date.

 

(22) Ehave Connect Business ” means the business of the Vendor relating to its technology stack, data models, UI flows, APIs and all existing builds to the “Ehave Connect” platform, which includes but is not limited to the input, tracking and extraction of clinical data.

 

(23) Employees ” means all employees of the Vendor who are employed in the Business immediately prior to Effective Time, whether full-time, part-time, salaried, hourly, unionized or non-unionized.

 

(24) Employee Plans ” means any deferred compensation, bonus, incentive or other compensation, share option or purchase, severance, termination pay, hospitalization or other medical benefit, life or other insurance, vision, dental, drug, employee life and health, sick leave, disability, salary continuation, vacation, supplemental unemployment benefits, profit sharing, mortgage assistance, employee loan, discount, assistance or counselling, pension or supplemental pension, retirement compensation, group registered retirement savings, deferred profit sharing, employee profit sharing, savings, retirement or supplemental retirement, and any other plan, program or arrangement, whether funded or unfunded, formal or informal, written or unwritten, including all policies with respect to holidays, sick leave, expense reimbursement, automobile allowances and rights to company-provided automobiles, that is maintained, contributed to, or required to be maintained or contributed to, by the Vendor, or to which the Vendor is a party, or bound by, or under which the Vendor has any liability or contingent liability, for the benefit of the Vendor’s directors, officers, shareholders, consultants, independent contractors or Employees and their respective beneficiaries and dependents.

 

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(25) Employment Agreement ” means the Employment Agreement(s) to be entered into to be entered into between such Employees as identified in writing by the Purchaser in its sole discretion and the Purchaser, substantially in the form of Schedule 1.1(25).

 

(26) Encumbrance ” means any encumbrance, lien, charge, hypothec, pledge, mortgage, title retention agreement, security interest of any nature, prior claim, adverse claim, exception, reservation, restrictive covenant, agreement, easement (whether or not registered against title), lease, licence, right of occupation, option, right of use, right of first refusal, right of pre-emption, privilege or any matter capable of registration against title or any Contract to create any of the foregoing.

 

(27) Equity Interests ” means, with respect to any Person, any and all present and future shares, units, trust units, partnership or other interests, participations or other equivalent rights in that Person’s equity or capital, however designated and whether voting or non- voting.

 

(28) ETA ” means the Excise Tax Act (Canada) and the regulations made thereunder.

 

(29) Excluded Liabilities ” has the meaning attributed to that term in Section 2.3(2).

 

(30) Fairness Opinion ” means the fairness opinion provided by Haywood Securities Inc. to the effect that the acquisition of the Purchased Assets by the Purchaser is fair from a financial point of view to the Vendor.

 

(31) Financial Statements ” means the audited financial statements of the Vendor as at and for the financial years ended December 31, 2017 and December 31, 2016 consisting of the balance sheet, income statement, cash flow statement and statement of retained earnings and all notes, schedules and exhibits thereto and the report thereon of the Vendor’s Auditors, copies of which financial statements are attached as Schedule 1.1(31).

 

(32) GAAP ”, when used in respect of accounting terms or accounting determinations relating to a Person, means the Accounting Standards for Private Enterprises which are in effect from time to time in Canada, as published in Part II of the Handbook of the Canadian Institute of Chartered Accountants or any successor thereof (the “ Handbook ”), provided that if such Person has adopted, or if and when such Person is required, or decides, to adopt, the International Financial Reporting Standards, GAAP means those standards as in effect from time to time in Canada, as published in Part I of the Handbook.

 

(33) GST/HST ” means all Taxes payable under Part IX of the ETA (including where applicable both the federal and provincial portion of those Taxes) or under any provincial legislation imposing a similar value added or multi-staged tax.

 

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(34) Governmental Authority ” means any domestic or foreign government, whether federal, provincial, state, territorial, local, regional, municipal, or other political jurisdiction, and any agency, authority, instrumentality, court, tribunal, board, commission, bureau, arbitrator, arbitration tribunal or other tribunal, or any quasi-governmental or other entity, body, organization or agency, including any exchange or alternative trading system, insofar as it exercises a legislative, judicial, regulatory, administrative, expropriation or taxing power or function of or pertaining to government.

 

(35) Hardware ” means computer hardware, mainframes, personal computers, servers, client/server stations, devices, network equipment, routers, semi-conductor chips, embedded Software, communication lines, storage media and other equipment.

 

(36) Infringe ” means infringe (whether directly, contributorily, by inducement or otherwise), misappropriate, violate or otherwise conflict with or harm (whether direct, contributory, by inducement or otherwise) and “ Infringed ” and “ Infringement ” have a corresponding meaning.

 

(37) Insurance Policies ” has the meaning attributed to that term in Section 5.1(14).

 

(38) Intellectual Property ” means, individually and collectively, howsoever created and wherever located:

 

(a) all domestic and foreign patents and applications thereof and all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof;

 

(b) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know-how, technology, technical data, schematics and customer lists, and all documentation relating to any of the foregoing;

 

(c) all copyrights in all works (including Software) and database right, copyright registrations and applications thereof, and all works of authorship and moral rights, and all other rights corresponding thereto throughout the world;

 

(d) all trade names, domain names, corporate names, trade dress, distinguishing guises, logos, slogans, brand names, trademarks (whether registered or common law and whether used with wares or services and including the goodwill attaching to such trademarks) and registrations and applications for registration thereof;

 

(e) all Software (in source code and object code form) and databases, and any proprietary rights in such Software and databases;

 

(f) all integrated circuit design, mask work, or topography registrations or applications thereof;

 

(g) all industrial designs and applications for and registration of industrial designs, design patents and industrial design registrations;

 

- 6 -

 

 

(h) other intellectual or industrial property whatsoever, including the intellectual property described in Schedule 5.1(12);

 

(i) all income, royalties, damages and payments now and hereafter due and/or payable with respect to any of the foregoing, including damages and payments for past or future Infringements thereof; and

 

(j) all rights to sue for past, present and future Infringements of any of the foregoing.

 

(39) Interim Period ” means the period from the date of this Agreement to the Closing Date.

 

(40) Internal IT Systems ” means all Hardware, Software and internal networks and communications technologies and services that are owned, leased or licensed by the Vendor in connection with the Ehave Connect Business.

 

(41) Licensed Intellectual Property ” means all Intellectual Property used by the Vendor in connection with the Ehave Connect Business except for the Owned Intellectual Property.

 

(42) Losses ” has the meaning attributed to that term in Section 7.1(8).

 

(43) Material Adverse Change ” or “ Material Adverse Effect ” means, with respect to any event, matter or circumstance, any change or effect that:

 

(a) individually or when taken together with all other changes or effects that have occurred during any relevant period of time before the determination of the occurrence of that change or effect, is or is reasonably likely to be materially adverse to the Ehave Connect Business, the Purchased Assets, and the operations, liabilities, capital, prospects, condition (financial or otherwise) or results of operation, of the Vendor; or

 

(b) materially adversely affects the ability of the Purchaser to conduct the Ehave Connect Business after the Effective Time substantially as the Ehave Connect Business has been conducted to the date of this Agreement;

 

except that a Material Adverse Change or Material Adverse Effect does not include a change or effect caused by (i) the execution or announcement of the execution of this Agreement or (ii) changes in general economic, financial, regulatory or market conditions affecting the Ehave Connect Business or of any of its competitors (so long as the Ehave Connect Business is not disproportionately affected thereby).

 

(44) Material Contract ” has the meaning attributed to that term in Section 5.1(15)(d).

 

(45) Non-Competition Agreement ” means the non-competition agreement to be entered into between the Vendor and the Purchaser substantially in the form of Schedule 1.1(45).

 

(46) Non-Disclosure Agreement ” means the non-disclosure agreement entered into by the Parties on January 19, 2019.

 

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(47) Open Source Code ” has the meaning attributed to that term in Section 5.1(13)(j).

 

(48) Ordinary Course ” means, with respect to an action taken by a Person that the action is consistent with the past practices of the Person and is taken in the normal day-to-day operations of the Person.

 

(49) Other Agreements ” has the meaning attributed to that term in Section 8.7.

 

(50) Owned Intellectual Property ” means all Intellectual Property created, owned or developed in whole or in part by or on behalf of the Vendor in connection with the Ehave Connect Business.

 

(51) Owned Software ” means all Software that is owned by, or distributed by or on behalf of, the Vendor.

 

(52) Parties ” means collectively, the Purchaser and the Vendor, and “ Party ” means either of them.

 

(53) Permits ” means franchises, licences, qualifications, approvals, authorizations, consents, certificates, certificates of authorization, decrees, orders-in-council, registrations, exemptions, consents, variances, waivers, filings, grants, notifications, privileges, rights, orders, judgments, rulings, directives, permits and other approvals, obtained from, issued by or required by a Governmental Authority.

 

(54) Permitted Encumbrances ” means:

 

(a) undetermined or inchoate liens, charges and privileges incidental to current construction or current operations, except for liens, charges and privileges related to Taxes;

 

(b) statutory liens, charges, adverse claims, security interests or Encumbrances of any nature whatsoever claimed or held by any Governmental Authority that have not at the time been filed or registered against the title to the asset or served on the Vendor pursuant to Applicable Law or notice of which has not otherwise been received by the Vendor, or that relate to obligations not due or delinquent, except for statutory liens, charges, adverse claims, security interests or Encumbrances related to Taxes;

 

(c) security given in the Ordinary Course of the Ehave Connect Business to any public utility or Governmental Authority in connection with the operations of the Ehave Connect Business, other than security for borrowed money; and

 

(d) the Permitted Encumbrances described in Schedule 1.1(54).

 

(55) Person ” is to be broadly interpreted and includes an individual, a corporation, a partnership, a joint venture, a trust, an association, a syndicate, an unincorporated organization, a Governmental Authority, an executor or administrator or other legal or personal representative, or any other juridical entity.

 

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(56) Personal Information ” means information about an identifiable natural person, but does not include the name, title, business address or telephone number of an employee of the Vendor, that is to be disclosed to the Purchaser at Closing or that was disclosed to the Purchaser to permit the Purchaser to carry out its due diligence in connection with the Transactions.

 

(57) Personal Property ” has the meaning attributed to that term in Section 5.1(10).

 

(58) Personal Property Leases ” has the meaning attributed to that term in Section 5.1(11).

 

(59) Proceeding ” means:

 

(a) any suit, action, dispute, investigation, claim, arbitration, order, summons, citation, directive, charge, demand or prosecution, whether legal or administrative;

 

(b) any other proceeding; or

 

(c) any appeal or application for review;

 

at law or in equity or before or by any Governmental Authority.

 

(60) Purchase Price ” has the meaning attributed to that term in Section 2.4.

 

(61) Purchased Assets ” has the meaning attributed to that term in Section 2.1.

 

(62) Purchaser ” means ZYUS Life Sciences Inc., a corporation incorporated under the laws of the Province of Saskatchewan.

 

(63) Purchaser Closing Certificates ” has the meaning attributed to that term in Section 5.4(a).

 

(64) Purchaser IP ” means all Intellectual Property used by the Purchaser in connection with its business.

 

(65) Purchaser IP Agreements ” means all licences, sublicences, consent to use agreements, settlements, coexistence agreements, covenants not to sue, permissions and other Contracts (including any right to receive or obligation to pay royalties or any other consideration), whether written or oral, relating to Intellectual Property to which the Purchaser is a party, beneficiary or otherwise bound.

 

(66) Purchaser IP Registrations ” means all means all Purchaser IP that is subject to any issuance registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trade-marks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing.

 

(67) Purchaser’s Counsel ” means Borden Ladner Gervais LLP.

 

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(68) Representatives ” means, with respect to any Party, its Affiliates and, if applicable, its and their respective directors, officers, employees, agents and other representatives and advisors.

 

(69) Restricted Asset ” means any Purchased Asset which, by its terms or under Applicable Law is not capable of being sold, transferred, conveyed or assigned without the Approval of a third Person.

 

(70) Security Agreement ” means the security agreement delivered by the Vendor to the Purchaser granting the Purchaser a security interest in the Consideration Shares in support of any indemnity claims made by the Purchaser pursuant to this Agreement until such time that the Purchaser is no longer entitled to make a claim pursuant to Section 5.3(c), substantially in the form of Schedule 1.1(70).

 

(71) Software ” means software, including all versions thereof, whether installed locally, on a local area network or delivered through the internet, and all related documentation, manuals, source code and object code, program files, data files, computer related data, field and data definitions and relationships, data definition specifications, data models, program and system logic, interfaces, program modules, routines, sub-routines, algorithms, program architecture, design concepts, system designs, program structure, sequence and organization, screen displays and report layouts, including any and all modifications, changes, release, versions, upgrades, updates or patches of any of the foregoing, and all other material related to such software.

 

(72) Tax Act ” or any reference to a specific provision thereof means the Income Tax Act (Canada) and legislation of any legislature of any province or territory of Canada (including the Taxation Act (Québec)) and any regulations made thereunder in force of like or similar effect.

 

(73) Tax Returns ” means all returns, declarations, designations, forms, schedules, reports, elections, notices, filings, statements (including withholding tax returns and reports, and information tax returns and reports) and other documents of every nature whatsoever filed or required to be filed with any Governmental Authority with respect to any Taxes, together with all amendments and supplements thereto.

 

(74) Taxes ” means taxes, duties, fees, premiums, assessments, imposts, levies and other charges of any kind whatsoever imposed by any Governmental Authority, including all interest, penalties, fines, additions to tax or other additional amounts imposed in respect thereof (including those levied on, or measured by, or referred to as, income, gross receipts, profits, capital, transfer, land transfer, gains, capital stock, production, gift, wealth, environment, net worth, utility, sales, goods and services, harmonized sales, use, consumption, valued-added, excise, stamp, withholding, premium, business, franchising, property, employer health, payroll, employment, health, social services, education and social security taxes, surtaxes, customs duties and import and export taxes, development, occupancy, social services, licence, franchise and registration fees and employment insurance, health insurance and Canada, Québec and other government pension plan premiums or contributions), and “ Tax ” has a corresponding meaning.

 

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(75) Transactions ” means the purchase and sale of the Purchased Assets and all other transactions contemplated by this Agreement.

 

(76) User ” means any users of the Owned Intellectual Property or Licensed Intellectual Property other than the Vendor.

 

(77) Vendor ” means, Ehave, Inc. a corporation incorporated under the laws of the Province of Ontario.

 

(78) Vendor Closing Certificates ” has the meaning attributed to that term in Section 5.3(a).

 

(79) Vendor Meeting ” means a special meeting of the shareholders of the Vendor to be held in order to seek shareholder approval for, among other things, the sale of the Purchased Assets.

 

(80) Vendor’s Auditors ” means Turner, Stone & Company, LLP.

 

(81) Vendor’s Counsel ” means Garfinkle Biderman LLP.

 

1.2            Construction. This Agreement has been negotiated by each Party with the benefit of legal representation, and any rule of construction to the effect that any ambiguities are to be resolved against the drafting party does not apply to the construction or interpretation of this Agreement.

 

1.3 Certain Rules of Interpretation . In this Agreement:

 

(a) the division into Articles and Sections and the insertion of headings and the Table of Contents are for convenience of reference only and do not affect the construction or interpretation of this Agreement;

 

(b) the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this Agreement and not to any particular portion of this Agreement; and

 

(c) unless specified otherwise or the context otherwise requires:

 

(i) references to any Article, Section or Schedule are references to the Article or Section of, or Schedule to, this Agreement;

 

(ii) “including” or “includes” means “including (or includes) but is not limited to” and is not to be construed to limit any general statement preceding it to the specific or similar items or matters immediately following it;

 

(iii) “the aggregate of”, “the total of”, “the sum of”, or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of”;

 

(iv) references to Contracts are deemed to include all present amendments, supplements, restatements and replacements to those Contracts;

 

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(v) references to any legislation, statutory instrument or regulation or a section thereof are references to the legislation, statutory instrument, regulation or section as amended, re-enacted, consolidated or replaced from time to time;

 

(vi) words in the singular include the plural and vice-versa and words in one gender include all genders.

 

1.4           Knowledge. In this Agreement, any reference to the knowledge of any Party means to the best of the knowledge, information and belief of the Party after reviewing all relevant records and making due inquiries regarding the relevant matter of all relevant Representatives of the Party.

 

1.5           Computation of Time . In this Agreement, unless specified otherwise or the context otherwise requires:

 

(a) a reference to a period of days is deemed to begin on the first day after the event that started the period and to end at 5:00 p.m. on the last day of the period, but if the last day of the period does not fall on a Business Day, the period ends at 5:00 p.m. on the next succeeding Business Day;

 

(b) all references to specific dates mean 11:59 p.m. on the dates;

 

(c) all references to specific times are references to Central time; and

 

(d) with respect to the calculation of any period of time, references to “from” mean “from and excluding” and references to “to” or “until” mean “to and including”.

 

1.6           Performance on Business Days . If any action is required to be taken pursuant to this Agreement on or by a specified date that is not a Business Day, the action is valid if taken on or by the next succeeding Business Day.

 

1.7           Calculation of Interest. In calculating interest payable under this Agreement for any period of time, the first day of the period is included and the last day is excluded.

 

1.8 Currency and Payment . In this Agreement, unless specified otherwise:

 

(a) references to dollar amounts or “$” are to Canadian dollars;

 

(b) any payment is to be made by an official bank draft drawn on a Canadian chartered bank, wire transfer or any other method (other than cash payment) that provides immediately available funds; and

 

(c) except in the case of any payment due on the Closing Date, any payment due on a particular day must be received and available by 2:00 p.m. on the due date and any payment received and available after that time is deemed to have been made and received on the next succeeding Business Day.

 

1.9           Accounting Terms . In this Agreement, unless specified otherwise, each accounting term has the meaning assigned to it under GAAP.

 

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1.10 Schedules . The following Schedules are attached to and form part of this Agreement:

 

Schedule 1.1(16) Form of Consulting Agreement
Schedule 1.1(25) Form of Employment Agreement
Schedule 1.1(31) Financial Statements
Schedule 1.1(45) Form of Non-Competition Agreement
Schedule 1.1(54) Permitted Encumbrances
Schedule 1.1(70) Form of Security Agreement
Schedule 2.1 Purchased Assets
Schedule 2.2 Excluded Assets
Schedule 2.3(1) Assumed Liabilities
Schedule 2.4(3) Purchase Price Allocation
Schedule 4.1(1)(g)(v) List of Agreements to be Terminated
Schedule 4.1(1)(g)(vi) Form of Vendor Bring-Down Certificate
Schedule 4.2(1)(h)(vi) Form of Purchaser Bring-Down Certificate
Schedule 5.1(9)(a) Location of Assets
Schedule 5.1(9)(b) List of Other Intellectual Property
Schedule 5.1(12)(d) Escrow Obligations
Schedule 5.1(10) Personal Property Matters
Schedule 5.1(12)(a) Owned Intellectual Property
Schedule 5.1(12)(b) Licensed Intellectual Property
Schedule 5.1(13) Internal IT Systems
Schedule 5.1(14) Insurance Policies
Schedule 5.1(15) Material Contracts and Other Contracts
Schedule 5.1(18)(b) Third Party Approvals
Schedule 5.2(3) Purchaser Subsidiaries
Schedule 5.2(6) Purchaser Consents and Approvals
Schedule 5.2(13) Authorized and Issued Capital
Schedule 5.2(14) Options

 

ARTICLE 2

PURCHASE AND SALE

 

2.1           Agreement to Purchase and Sell . Subject to the terms and conditions of this Agreement, as of the Effective Time, the Vendor shall sell, transfer, convey and assign to the Purchaser and the Purchaser shall purchase and acquire from the Vendor, free and clear of all Encumbrances other than Permitted Encumbrances, all of the Vendor’s right, title and interest in and to all of the Vendor’s property and assets relating to the Ehave Connect Business, whether real or personal, tangible or intangible, of every kind and description and wheresoever situate (collectively, the “ Purchased Assets ”), all as further set out in Schedule 2.1.

 

2.2           Excluded Assets . Purchaser agrees that it is not purchasing or acquiring, and Vendor is not selling or assigning, any of the assets or properties of Vendor listed in Schedule 2.2 and such assets and properties shall be excluded from the Purchased Assets (collectively, the “ Excluded Assets ”).

 

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2.3 Liabilities .

 

(1) Subject to the terms and conditions of this Agreement, the Purchaser shall assume, pay, satisfy, discharge, perform and fulfil, from and after the Effective Time, only those obligations and liabilities of the Vendor which are listed in Schedule 2.3(1) (the “ Assumed Liabilities ”).

 

(2) Other than the Assumed Liabilities, the Purchaser shall not assume or have any obligation to discharge, perform or fulfill any obligation or liability of the Vendor of any kind whatsoever (collectively, the “ Excluded Liabilities ”) and all Excluded Liabilities remain the obligation and responsibility of the Vendor, including the obligations and liabilities of the Vendor:

 

(a) for Taxes payable, collectible or remittable by the Vendor;

 

(b) owing to a lender or creditor of the Vendor, including any bank overdrafts or bank indebtedness and any indebtedness or liabilities other than the Assumed Liabilities owing under any promissory note, or Contract for the borrowing of money;

 

(c) arising out of or relating to products or services of the Vendor to the extent manufactured, sold, shipped or rendered prior to the Effective Time; and

 

(d) under all Employee Plans and Contracts relating thereto.

 

2.4 Purchase Price, Issuance of Consideration Shares and Purchase Price Allocation .

 

(1) Subject to the terms and conditions of this Agreement, the aggregate purchase price (the “ Purchase Price ”) to be paid by the Purchaser to the Vendor for the Purchased Assets is:

 

(a) $1,200,000 less $260,000 provided by the Purchaser to Vendor as a deposit pursuant to the non-binding term sheet dated January 24, 2019; and

 

(b) 361,011 common shares (each with a value of $5.54 per common share) in the share capital of the Purchaser (the “ Consideration Shares ”).

 

(2) The Consideration Shares shall be issued to the Vendor free and clear of all Encumbrances pursuant to prospectus exemptions under Applicable Laws but will be subject to resale restrictions pursuant to National Instrument 45-102 – Resale Restrictions .

 

(3) The Purchaser and the Vendor shall allocate the Purchase Price among the Purchased Assets in accordance with Schedule 2.4(3) and shall report the purchase and sale of the Purchased Assets for all Tax purposes in a manner consistent with that allocation. If any Governmental Authority does not agree with that allocation, the Purchaser and the Vendor shall use their commercially reasonable efforts to agree on a different allocation acceptable to that Governmental Authority, and the Purchaser and the Vendor shall amend the original allocation and the relevant Tax Returns accordingly.

 

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2.5 Payment of Purchase Price .

 

(1) The Purchaser shall pay and satisfy the Purchase Price by:

 

(a) payment at Closing to or to the order of the Vendor of the amount of $940,000; and

 

(b) delivery of share certificates representing the Consideration Shares registered in the name of the Vendor.

 

2.6           Transfer Taxes. The Purchaser shall pay to the Vendor or, where permitted by Applicable Law, directly to the appropriate Governmental Authorities, all sales and transfer taxes, registration charges and transfer fees, including GST/HST, payable by it in respect of the purchase and sale of the Purchased Assets under this Agreement, and, on request of the Vendor, the Purchaser shall furnish to the Vendor proof of direct payment to a Governmental Authority. The Purchaser shall indemnify and save harmless the Vendor from any amounts, including interest and penalties, that may be assessed against the Vendor arising out of the failure of the Purchaser to pay, when due, any Taxes described in this Section.

 

2.7           GST/HST Election. The Purchaser and the Vendor shall jointly elect under subsection 167(1) of the ETA and under any similar provision of any applicable provincial legislation imposing a similar value added or multi-staged tax, that no tax be payable with respect to the purchase and sale of the Purchased Assets pursuant to this Agreement. The Purchaser and the Vendor shall make those elections in prescribed form containing prescribed information and shall file those elections in compliance with the requirements of applicable legislation.

 

2.8           Payment of Taxes. The Vendor shall pay, collect and remit all Taxes relating to the Ehave Connect Business which arise, or are related to a period of time, prior to the Effective Time.

 

ARTICLE 3

CLOSING ARRANGEMENTS

 

3.1           Closing. Subject to the satisfaction or waiver by the applicable Party of the conditions set out in Article 4, the Parties shall hold the Closing on the Closing Date, at such time as agreed to by the Vendor and the Purchaser and at the offices of the Purchaser’s Counsel in Toronto, Ontario or at such other place as agreed to by the Vendor and the Purchaser.

 

3.2           Vendor’s Closing Deliveries. At Closing, the Vendor shall deliver or cause to be delivered to the Purchaser all certificates, agreements, documents and instruments as required under Section 4.1(1)(g).

 

3.3           Purchaser’s Closing Deliveries. At Closing the Purchaser shall deliver or cause to be delivered to the Vendor all payments, certificates, agreements, documents and instruments as required under Section 4.2(1)(g).

 

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ARTICLE 4

CONDITIONS OF CLOSING

 

4.1 Conditions for the Benefit of the Purchaser .

 

(1) The Purchaser shall be obliged to complete the Transactions only if each of the following conditions precedent has been satisfied in full at or before the time of Closing on the Closing Date:

 

(a) each of the representations and warranties of the Vendor contained in this Agreement that is qualified by materiality shall be true and correct at and as of the date hereof and the Closing Date as though such representation and warranty was made on and as of the Closing Date (except to the extent that such representation and warranty was made as of a specified date, in which case such representation and warranty shall continue on the Closing Date to have been true in all respects as of such specified date) and each of the representations and warranties that is not so qualified shall be true and correct at and as of the date hereof and in all material respects as of the Closing Date as though such representation and warranty was made on and as of the Closing Date (except to the extent that such representation and warranty was made as of a specified date, in which case such representation and warranty shall continue on the Closing Date to have been true in all material respects as of such specified date);

 

(b) the Vendor has complied with or performed all of the obligations, covenants and agreements under this Agreement to be complied with or performed by the Vendor on or before the Closing Date, to the satisfaction of the Purchaser, acting reasonably;

 

(c) all corporate proceedings required to be taken by the Vendor in connection with the Transactions, including approval by the shareholders of the Vendor for the Transactions, are satisfactory in form and substance to the Purchaser, acting reasonably, and the Purchaser has received copies of all instruments and other evidence as it may reasonably request in order to establish the consummation of the Transactions and the taking of all necessary corporate proceedings in connection therewith;

 

(d) all Approvals necessary to give effect to the Transactions described in Schedule 5.1(18)(b) have been obtained, in each case in form and substance satisfactory to the Purchaser, acting reasonably, and are in full force and effect;

 

(e) there is no injunction or restraining order issued preventing, and no pending or threatened Proceeding, against any Party, for the purpose of enjoining or preventing, the completion of the Transactions or otherwise claiming that this Agreement or the completion of the Transactions is improper or would give rise to a Proceeding, under any Applicable Law or under any Contract;

 

(f) since the date of this Agreement there has not occurred any event which has had, or may have, a Material Adverse Effect;

 

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(g) the Vendor has caused to be delivered to the Purchaser the following:

 

(i) a certificate of status or its equivalent under the laws of the jurisdiction of its incorporation dated as of the Closing Date; and

 

(ii) a certificate of a senior officer dated as of the Closing Date certifying:

 

(A) the corporate status of the Vendor;

 

(B) the Constating Documents of the Vendor;

 

(C) the resolutions of the board of directors and shareholders of the Vendor authorizing the execution, delivery and performance of this Agreement and of all contracts, agreements, instruments, certificates and other documents required by this Agreement to be delivered by the Vendor;

 

(D) a copy of the invoice from Haywood Securities Inc. in respect of the Fairness Opinion; and

 

(E) the incumbency and signatures of the officers of the Vendor executing this Agreement and any other document relating to the Transactions.

 

(iii) all deeds, conveyances, bills of sale, assurances, transfers, assignments and any other documentation or action which in the opinion of the Purchaser are necessary or reasonably required to transfer the Purchased Assets to the Purchaser with good and marketable title, free and clear of all Encumbrances except for Permitted Encumbrances, in each case duly executed by the Vendor and in form and substance satisfactory to the Purchaser, acting reasonably;

 

(iv) evidence, satisfactory to the Purchaser of the release and discharge of all Encumbrances affecting any of the Purchased Assets, other than the Permitted Encumbrances;

 

(v) evidence, satisfactory to the Purchaser of the termination of (A) the agreements set out in Schedule 4.1(1)(g)(v), and (B) such other Material Contracts as may be identified by the Purchaser in writing during the Interim Period, on terms and conditions satisfactory to the Purchaser, acting reasonably;

 

(vi) a certificate of the Vendor in respect of its representations and warranties set out in Section 5.1 and its covenants and other obligations set out in this Agreement, substantially in the form of Schedule 4.1(1)(g)(vi);

 

(vii) the Non-Competition Agreements, duly executed by the parties to those agreements (other than the Purchaser);

 

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(viii) the Consulting Agreement(s);

 

(ix) the Employment Agreement(s);

 

(x) written acknowledgement and certificate of the Vendor, in a form satisfactory to the Purchaser, that following the Closing the Purchaser shall have exclusive access to the Purchased Assets; and Vendor and its Representatives shall have no access to the Purchased Assets (including any source code) and which acknowledgement and certificate shall describe the process by which the Vendor provided exclusive access to the Purchaser to each category of the Purchased Assets set out in Schedule 2.1;

 

(xi) the Security Agreement;

 

(xii) a license agreement between the Parties, in a form satisfactory to the Parties, acting reasonably, providing for a license from the Vendor in favour of the Purchaser for the Clinical Games set out in Schedule 2.2;

 

(xiii) a written confirmation from The Hospital For Sick Children (“ SickKids ”) confirming that none of the Purchased Assets are currently being used by SickKids under any Contracts with the Vendor, in a form satisfactory to the Purchaser, acting reasonably;

 

(xiv) a written confirmation that the License and Reseller Agreement between the Vendor and Companion Healthcare Technologies Inc. dated October 30, 2018 (“ CHT Agreement ”) has been amended or otherwise varied in a manner and form satisfactory to the Purchaser such that the Vendor or its successor will not use, copy or replicate, or be required to use copy or replicate, any part of the Intellectual Property forming part of the Purchased Assets in respect of the product and services referred to in the CHT Agreement;

 

(xv) such other documentation as the Purchaser reasonably requests in a timely manner in order to establish the completion of the Transactions and the taking of all corporate proceedings in connection with the Transactions (as to certification and otherwise), in each case in form and substance satisfactory to the Purchaser, acting reasonably; and

 

(h) The Purchaser, acting in its sole discretion, shall be satisfied with the results of its investigations pursuant to Section 6.4, including, without limitation, any investigation related to the matters set out in the certificate to be delivered by the Vendor under Section 4.1(1)(g)(x).

 

(2) Each of the conditions set out in Section 4.1(1) is for the exclusive benefit of the Purchaser and the Purchaser may waive compliance with any such condition in whole or in part by notice in writing to the Vendor, except that no such waiver operates as a waiver of any other condition.

 

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4.2 Conditions for the Benefit of the Vendor.

 

(1) The Vendor shall be obliged to complete the Transactions only if each of the following conditions precedent has been satisfied in full at or before the time of Closing on the Closing Date:

 

(a) each of the representations and warranties of the Purchaser contained in this Agreement that is qualified by materiality shall be true and correct at and as of the date hereof and the Closing Date as though such representation and warranty was made on and as of the Closing Date (except to the extent that such representation and warranty was made as of a specified date, in which case such representation and warranty shall continue on the Closing Date to have been true in all respects as of such specified date) and each of the representations and warranties that is not so qualified shall be true and correct at and as of the date hereof and in all material respects as of the Closing Date as though such representation and warranty was made on and as of the Closing Date (except to the extent that such representation and warranty was made as of a specified date, in which case such representation and warranty shall continue on the Closing Date to have been true in all material respects as of such specified date);

 

(b) the Purchaser has materially complied with or performed all of the obligations, covenants and agreements under this Agreement to be complied with or performed by the Purchaser on or before the Closing Date to the satisfaction of the Vendor, acting reasonably;

 

(c) all corporate proceedings required to be taken by the Purchaser in connection with the Transactions are satisfactory in form and substance to the Vendor, acting reasonably, and the Vendor has received copies of all instruments and other evidence as it may reasonably request in order to establish the consummation of the Transactions and the taking of all necessary corporate proceedings in connection therewith;

 

(d) the requisite approval for the sale of the Purchased Assets is obtained at the Vendor Meeting;

 

(e) all Permits required from all relevant Governmental Authorities to permit the completion of the Transactions have been obtained and are in full force and effect;

 

(f) there is no injunction or restraining order issued preventing, and no pending or threatened Proceeding, against any Party, for the purpose of enjoining or preventing, the completion of the Transactions or otherwise claiming that this Agreement or the completion of the Transactions is improper or would give rise to a Proceeding, under any Applicable Law or under any Contract; and

 

(g) evidence, satisfactory to the Vendor of the termination of the agreements set out in Schedule 4.1(1)(g)(v) on terms and conditions which do not impose any material financial obligations on the Vendor, acting reasonably;

 

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(h) the Purchaser has caused to be delivered to the Vendor the following:

 

(i) a certificate of status of the Purchaser or its equivalent under the laws of the jurisdiction of its incorporation; and

 

(ii) a certificate of a senior officer of the Purchaser certifying the corporate status of the Purchaser, the Constating Documents of the Purchaser, certifying the resolutions of the board of directors of the Purchaser issuing the Consideration Shares and authorizing the execution, delivery and performance of this Agreement and of all contracts, agreements, instruments, certificates and other documents required by this Agreement to be delivered by the Purchaser, and certifying the incumbency and signatures of the officers of the Purchaser executing this Agreement and any other document relating to the Transactions

 

(iii) payment of the amounts required to be paid on the Closing Date under Section 2.5;

 

(iv) certificates representing the Consideration Shares;

 

(v) the Fairness Opinion;

 

(vi) a certificate of the Purchaser in respect of its representations and warranties set out in Section 5.2 and in respect of its covenants and other obligations set out in this Agreement, substantially in the form of Schedule 4.2(1)(h)(vi);

 

(vii) the Consulting Agreement(s), duly executed by the Purchaser; and

 

(viii) any assumption agreement in the form required by any third Person that has a right of approval in respect of a sale, transfer, conveyance or assignment of any Purchased Asset or in respect of the assumption of any of the Assumed Liabilities, duly executed by the Purchaser.

 

(i) The Vendor, acting reasonably, shall be satisfied with the results of its investigations pursuant to Section 6.5.

 

(2) Each of the conditions set out in Section 4.2(1) is for the exclusive benefit of the Vendor and the Vendor may waive compliance with any such condition in whole or in part by notice in writing to the Purchaser, except that no such waiver operates as a waiver of any other condition.

 

4.3           Termination Events . By notice given prior to or at Closing, subject to Section 4.4, this Agreement may be terminated as follows:

 

(a) by the Purchaser if any condition in Section 4.1 has not been satisfied as of the Closing Date or if the satisfaction of any condition by the Closing Date is or becomes impossible (other than through the failure of the Purchaser to comply with its obligations under this Agreement), and the Purchaser has not waived that condition on or before Closing Date;

 

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(b) by the Vendor if any condition in Section 4.2 has not been satisfied as of the Closing Date or if the satisfaction of any condition by the Closing Date is or becomes impossible (other than through the failure of the Vendor to comply with their obligations under this Agreement), and the Vendor has not waived that condition on or before the Closing Date;

 

(c) by mutual consent of the Purchaser and the Vendor; or

 

(d) by the Purchaser unless it is in material breach of this Agreement or by the Vendor unless it is in material breach of this Agreement, if the Closing has not occurred on or before sixty (60) after the Closing Date.

 

4.4           Effect of Termination . Each Party’s right of termination under Section 4.3 is in addition to any other rights it may have under this Agreement or otherwise, whether at law, in equity or otherwise, and the exercise of that right of termination is not an election of remedies. If this Agreement is terminated pursuant to Section 4.3, all obligations of the Parties under this Agreement will terminate except that the obligations contained in this Section 4.4 and in Article 8 (except for Sections 8.5) will survive, provided that if this Agreement is terminated pursuant to Section 4.3(a) or 4.3(b), the terminating Party’s right to pursue all legal remedies will survive that termination unimpaired.

 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

 

5.1           Representations and Warranties of the Vendor . The Vendor represents and warrants to the Purchaser as follows and acknowledges that the Purchaser is relying on these representations and warranties in connection with its purchase of the Purchased Assets and that the Purchaser would not purchase the Purchased Assets and assume the Assumed Liabilities without these representations and warranties:

 

(1) Organization and Status of the Vendor . The Vendor is duly incorporated and organized, and is validly subsisting, under the laws of the Province of Ontario and is up-to-date in the filing of all corporate and similar returns under the laws of that jurisdiction. There are no other jurisdictions in which the nature of the Ehave Connect Business or the Purchased Assets makes the registration, licensing or qualification necessary.

 

(2) Corporate Power . The Vendor has all necessary corporate power and authority to own or lease or dispose of its undertakings, property and assets and to carry on the Ehave Connect Business as is now conducted by it. The Vendor has all necessary corporate power and authority to enter into this Agreement and the contracts, agreements and instruments required by this Agreement to be delivered by it, and to perform its obligations hereunder and thereunder, provided that the Vendor obtains the requisite approval at the Vendor Meeting for the sale of the Purchased Assets.

 

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(3) Authorization . All necessary corporate action has been taken by the Vendor or on its part to authorize its execution and delivery of this Agreement and the contracts, agreements and instruments required by this Agreement to be delivered by it and the performance of its obligations hereunder and thereunder, provided that the Vendor obtains the requisite approval at the Vendor Meeting for the sale of the Purchased Assets.

 

(4) Enforceability . This Agreement has been duly executed and delivered by the Vendor and (assuming due execution and delivery by the other Parties) is a legal, valid and binding obligation of it enforceable against it in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction. Each of the contracts, agreements and instruments required by this Agreement to be delivered by it will at the Closing have been duly executed and delivered by it and (assuming due execution and delivery by the other parties thereto) will at Closing be enforceable against it in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction.

 

(5) No Other Agreements to Purchase . No Person other than the Purchaser has any Contract or any right or privilege capable of becoming a Contract for the purchase or acquisition from the Vendor of any of the Purchased Assets.

 

(6) Bankruptcy . The Vendor is not an insolvent Person within the meaning of the Bankruptcy and Insolvency Act (Canada) and has not made an assignment in favour of its creditors or a proposal in bankruptcy to its creditors or any class thereof, and no petition for a receiving order has been presented in respect of it. The Vendor has not initiated proceedings with respect to a compromise or arrangement with its creditors or for its winding up, liquidation or dissolution. No receiver or interim receiver has been appointed in respect of it or any of its undertakings, property or assets (including any of the Purchased Assets) and no execution or distress has been levied on any of its undertakings, property or assets (including any of the Purchased Assets), nor have any proceedings been commenced in connection with any of the foregoing.

 

(7) Absence of Conflict . The execution, delivery and performance of this Agreement by the Vendor and the completion of the Transactions will not (whether after the passage of time or notice or both) result in:

 

(a) the breach or violation of any of the provisions of, or constitute a default under, or give any Person the right to seek or cause a termination, cancellation, amendment or renegotiation of any Contract to which it is a party or by which any of its undertakings, property or assets (in the case of the Vendor, including the Purchased Assets and the Ehave Connect Business) is bound or affected;

 

(b) the breach or violation of any of the provisions of, or constitute a default under, or conflict with any of its obligations under:

 

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(i) any provision of its Constating Documents or resolutions of its board of directors (or any committee thereof) or shareholders;

 

(ii) any judgment, decree, order or award of any Governmental Authority having jurisdiction over it;

 

(iii) any Approval issued to, or held by, the Vendor or held, for the benefit of or necessary to the operation of the Ehave Connect Business; or

 

(iv) any Applicable Law;

 

(c) the creation or imposition of any Encumbrance over any of the Purchased Assets; or

 

(d) the requirement of any Approval from any of its creditors.

 

(8) Conduct of Business . The Vendor is conducting the Ehave Connect Business in compliance with all Applicable Laws. Since the date the Vendor commenced carrying on business, the Vendor conducted the Ehave Connect Business in compliance with all Applicable Laws, except for such failure to comply which would not have any impact on the ownership of the Purchased Assets by the Purchaser or the Purchaser’s operations. The Purchased Assets are sufficient to permit the continued operation of the Ehave Connect Business in substantially the same manner as conducted in the one year period preceding the date of this Agreement.

 

(9) Title to Purchased Assets.

 

(a) The Vendor has good and marketable title to all the Purchased Assets, free and clear of any and all Encumbrances other than the Permitted Encumbrances. Schedule 5.1(9)(a) is a true, accurate and complete list of all locations where the Purchased Assets are situated. All of the Purchased Assets as currently used by the Vendor are free of defects (patent or latent), in good operating condition and in a state of good repair and maintenance.

 

(b) Schedule 5.1(9)(b) contains a true, accurate and complete list of all Intellectual Property created, owned or developed in whole or in part by or on behalf of the Vendor and which does not form part of the Purchased Assets.

 

(10) Personal Property . Schedule 5.1(10) is a true, accurate and complete list of each item of machinery, equipment, furniture, motor vehicles and other personal property owned or leased by the Vendor in connection with the Ehave Connect Business (including those in possession of third parties) (the “ Personal Property ”).

 

(11) Personal Property Leases. Schedule 5.1(10) is a true, accurate and complete list of all equipment leases, rental agreements, conditional sales agreements and similar agreements relating to any of the Purchased Assets (the “ Personal Property Leases ”) and identifies those Personal Property Leases that cannot be terminated by the Vendor without liability at any time on less than 30 days’ notice or that involve payment by it in the future of more than $1,000. All of the Personal Property Leases were entered into by the Vendor in the Ordinary Course. True, accurate and complete copies of all Contracts set out in Schedule 5.1(10), or where those Contracts are oral, true, accurate and complete summaries of their terms, have been provided to the Purchaser.

 

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(12) Intellectual Property .

 

(a) Schedule 5.1(12)(a) sets forth a complete and accurate list of all Owned Intellectual Property, including all registrations of, and applications for registration of, Owned Intellectual Property and all Contracts that comprise or relate to the Owned Intellectual Property. The Vendor holds the entire right, title and interest in and to all of the Owned Intellectual Property, free of all Encumbrances, and has the exclusive and unfettered right to use the Owned Intellectual Property, except to the extent the Vendor has licensed others to use the Owned Intellectual Property pursuant to Contracts listed in Schedule 5.1(12)(a). The Owned Intellectual Property is valid and the rights of the Vendor in the Owned Intellectual Property are enforceable. All registrations and applications for registration of the Owned Intellectual Property are in good standing, have been filed in a timely manner within the appropriate offices to preserve the rights thereto and assignments have been recorded in favour of the Vendor. To the knowledge of the Vendor, no Owned Intellectual Property has expired, has been cancelled, expunged or impeached, or has lapsed for failure to be renewed or maintained and no Owned Intellectual Property has been used, not used, enforced or not enforced in a manner that could reasonably be expected to result in the abandonment, cancellation or unenforceability of any of the Owned Intellectual Property.

 

(b) Schedule 5.1(12)(b) sets forth a complete and accurate list of all Licensed Intellectual Property, and all Contracts that comprise or relate to such Licensed Intellectual Property. The Vendor has the non-exclusive right to use the Licensed Intellectual Property set out in Schedule 5.1(12)(b). The Vendor is not a party to any contract or commitment to pay any royalty or other fee to use the Licensed Intellectual Property except as set out in the Contracts listed in Schedule 5.1(12)(b). The Licensed Intellectual Property is used by the Vendor with the consent or license from the rightful owner thereof, and all necessary consents and licences relating to the Licensed Intellectual Property are in good standing, binding and enforceable in accordance with their respective terms and no default exists on the part of the Vendor thereunder, and none of those consents and licenses requires prior approval of any transfer or assignment to remain in force and effect. No consents are required in order for the Licensed Intellectual Property to be licensed or sub- licensed to the Vendor except as set out in Schedule 5.1(12)(b). The Vendor is not in material default or breach of any license agreement required to be scheduled on Schedule 5.1(12)(b) and there exists no state of facts which, after notice or lapse of time or both, would constitute a material default or material breach.

 

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(c) To the knowledge of the Vendor and except as set out in the Contracts listed in Schedule 5.1(12)(b), neither the Licensed Intellectual Property nor the Owned Intellectual Property contains embedded computer code that contains any “open source” Software or any code derived from open source Software (in any format or medium whatsoever). To the extent any computer code embedded in any Licensed Intellectual Property or Owned Intellectual Property contains any “open source” software or any code derived from open source software (in any format or medium whatsoever), Vendor warrants that the Licensed Intellectual Property and the Owned Intellectual Property, when used by or on behalf of Purchaser or any Users will not cause any Licensed Intellectual Property or Owned Intellectual Property or any other Software with which it is used to become subject to any free or open source license or require the distribution or disclosure of the source code for Licensed Intellectual Property, Owned Intellectual Property or any Software acquired by or licensed to Purchaser by Vendor.

  

(d) The Business Intellectual Property is all of the Intellectual Property used or required for the proper carrying on of the Ehave Connect Business, as it has been and is now conducted, and in accordance with the current documented plans of the Vendor. No Business Intellectual Property is subject to any outstanding order, award, decision, injunction, judgment, decree, stipulation or agreement materially restricting the transfer, use, enforcement or licensing thereof by the Vendor in the operation of the Ehave Connect Business. Except as set out in Schedule 5.1(12)(d), no Business Intellectual Property is subject to any escrow obligations. The Purchaser has the right and authority to use after the Closing Date the Business Intellectual Property in connection with the conduct of the Ehave Connect Business in the manner presently conducted by the Vendor and to the Vendor’s knowledge, Vendor is not subject to any agreement or arrangement containing any covenant or other provision that in any way limits or restricts the ability of Purchaser to register, use, exploit, assert or enforce any Owned Intellectual Property anywhere in the world.

 

(e) To the knowledge of the Vendor, neither the use of the Business Intellectual Property nor the conduct of the Ehave Connect Business has Infringed the Intellectual Property of any other Person. The Vendor has not received any notice that the use of the Business Intellectual Property or the conduct of the Ehave Connect Business Infringes any Intellectual Property of any other Person, and no Proceedings have been instituted or, to the knowledge of the Vendor, are pending or threatened, alleging any such infringement.

 

(f) To the knowledge of the Vendor, no Person has Infringed any of the Owned Intellectual Property or the right and interest of the Vendor in the Licensed Intellectual Property. The Vendor has not issued a notice to any Person alleging any such infringement, and no Proceedings have been instituted or are pending or threatened, alleging any such infringement.

 

(g) All of the Owned Intellectual Property that has been developed or created by Employees or pursuant to Contracts with consultants or contractors (collectively, the “ Developers ”) has been assigned to the Vendor in writing or in another enforceable manner. The Developers have waived in writing their moral and authors’ rights they may have in the Owned Intellectual Property. To the knowledge of the Vendor, no Person has claimed that any current or former Developer has, as a result of contribution to any Owned Intellectual Property, violated the terms and conditions of any Contract with that Person or disclosed or used any trade secret of that Person, and no Developer has claimed any rights in the Owned Intellectual Property.

 

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(h) The Owned Intellectual Property is not subject to any Proceedings, including any actual or, to the knowledge of the Vendor, threatened claim for cancellation, expungement, impeachment, re-examination, invalidity or any termination or limitation thereof.

 

(i) Entering into this Agreement will not alter, impair or extinguish any of the Business Intellectual Property or trigger any rights of first refusal requiring the sale, assignment or transfer of any Business Intellectual Property to another Person.

 

(j) The Vendor is not required to use, copy or replicate any part of the Intellectual Property forming part of the Purchased Assets in connection with the operations it may conduct after the Closing Date, including, without limitation, in respect of any of the Intellectual Property listed in Schedule 5.1(9)(b) and any Contract to which the Vendor is a party.

 

(k) There has been no sale, offer for sale or, to the knowledge of the Vendor, public disclosure, of any invention owned by the Vendor and forming a part of the Owned Intellectual Property, by the Vendor (including through a non-confidential publication or presentation by a Developer, officer, or director) that could reasonably be expected to affect the Vendor or the Purchaser obtaining or maintaining valid patent rights for that invention.
   
(l) There has been no sale, offer for sale or, to the knowledge of the Vendor, public disclosure, of any invention that is described in a patent application (whether now in preparation or filed and in good standing) and forming a part of the Owned Intellectual Property by a Person that would prevent the Vendor or the Purchaser from obtaining or maintaining valid patent rights to that invention following Closing.

 

(m) To the knowledge of the Vendor, there is no publication, including any patent, published or laid-open patent application, journal article, catalogue, promotion, or specification of any other Person which would prevent the Vendor or the Purchaser from obtaining or maintaining valid patent rights to an invention described in a patent application (whether now in preparation or filed and in good standing) and forming part of the Owned Intellectual Property.

 

(13) Internal IT Systems .

 

(a) Schedule 5.1(13) sets out a brief description of the Internal IT Systems and an accurate and complete list of all Contracts, including warranties, leases and licences, that comprise or relate to the Internal IT Systems.

 

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(b) The Internal IT Systems are either owned by, or properly licensed or leased to, the Vendor. The Vendor is not in default under the licences or leases and there are no grounds on which they might be terminated. There are no circumstances in which the ownership, benefit, or right to use the Internal IT Systems may be lost by virtue of the Transaction or the performance of this Agreement.

 

(c) The Internal IT Systems have not failed to any material extent and the data which they process has not been corrupted. The Vendor has, in accordance with best industry practice, taken precautions to preserve the availability, security and integrity of the Internal IT Systems and the data and information stored on the Internal IT Systems. To the knowledge of the Vendor, the Internal IT Systems do not contain any Disabling Code, and the Vendor has taken reasonable steps and implemented reasonable procedures, in accordance with best industry practice, to ensure that its Internal IT Systems do not and will not contain Disabling Code.

 

(d) The Internal IT Systems do not contain systems which are not available from third party suppliers on arm’s-length commercial terms.

 

(e) The Internal IT Systems, all Business Intellectual Property and all Personal Information have at all times been subjected to commercially appropriate security controls by the Vendor, or by its respective agents and representatives, so as to restrict the use and disclosure thereof solely to authorized Persons, and to protect and safeguard the secrecy and confidentiality of the Internal IT Systems, Business Intellectual Property and Personal Information.

 

(f) To the knowledge of the Vendor, the Internal IT Systems adequately meet the data processing needs of the Ehave Connect Business and the Vendor’s operations and affairs, in each case as presently conducted and as currently contemplated to be conducted. The Vendor has taken appropriate action by instruction, Contract or otherwise with the Employees or other Persons permitted access to Internal IT Systems and data used or stored in the Internal IT Systems to protect against unauthorized access, use, copying, modification, theft and destruction of any part of the Internal IT Systems or data. The Vendor and the Employees shall have no further access to the Internal IT Systems following Closing, other than as expressly provided in the Licensing Agreement.

 

(g) The Vendor has and has maintained back-up systems and disaster recovery for the Ehave Connect Business, consistent with current industry standards, designed to adequately and properly ensure the availability of the functionality provided by the Internal IT Systems in the event of any malfunction of, or other form of disaster affecting, the Internal IT Systems. The Vendor has maintained a back-up copy of the Purchased Assets, as applicable, in its Internal IT Systems (the “ Back-up ”).

 

(h) The Vendor maintains and stores, and has maintained and stored, in a secure environment, all of its Books and Records and client data and records necessary to permit auditors or its clients to conduct a complete audit of such records by auditors or under Contracts with its clients.

 

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(i) All licensed Software which comprises part of the Internal IT Systems, other than Software which is provided over the internet, is in machine-readable form, contains current revisions of that Software as delivered to the Vendor by the licensors thereof and includes all object codes and documentation which is used or required by the Vendor for use in its Internal IT Systems sufficient to permit a Person of reasonable skill and experience to operate and maintain that Software. Except for Commercial Software and as set out in Schedule 5.1(13), to the extent that Software is licensed Software, a copy of the source code for such Software is in escrow for the benefit of the Vendor in the event of the occurrence of certain triggering events and none of the licences for that Software will be adversely affected by the Transaction or requires prior approval of the Transaction by the applicable licensor to remain in force or effect.

 

(j) All of the Software in the Internal IT Systems contains open source code, free code, community source code or similar Software, including any libraries or Software licensed under the General Public License, Lesser General Public License or any other license agreement or arrangement obliging a user of any part of Software to make source or object code available to third parties (collectively, “ Open Source Code ”).

 

(k) Owned Software when used by or on behalf of Vendor or any Users will not cause any Owned Software to become subject to any free or open source license or require the distribution or disclosure of the source code for Owned Software.

 

(l) There are no known problems or defects in the Owned Software including bugs, logic errors or failures of the Owned Software to operate as described in the related documentation and the Owned Software operates in accordance with its documentation and specifications. The Owned Software does not contain any undocumented Disabling Code.

 

(m) Only object code versions of the Owned Software have been provided to customers of the Owned Software who have executed licences or services agreements with the Vendor, and no Person except for such licensees and customers have been provided with a copy of the object code of all or any part of the Owned Software. Such executed licences and services agreements contain appropriate non-disclosure and restricted use provisions such that: (i) all proprietary interests of the Vendor therein are maintained and not diminished in any way; and (ii) such licensees and customers are legally prevented from deriving or otherwise discerning the corresponding source code for all or any part of the Owned Software object code and other executables thereof. The source code for all or any part of the Owned Software has not been delivered or made available to any Person and the Vendor has not agreed to, undertaken to, or in any other way promised to, provide such source code to any Person.

 

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(14) Insurance . The Purchased Assets of the Vendor are covered by insurance with responsible insurers against such risks and in such amounts as are reasonable for prudent owners of comparable assets. Schedule 5.1(14) sets out true, accurate and complete particulars of all insurance policies maintained by the Vendor on the Ehave Connect Business and on the Purchased Assets (the “ Insurance Policies ”), specifying in each case, the name of the insurer, the risks insured against, the amount of the coverage, the amount of the annual premium, the amount of the deductible, details of the amount of premiums (whether prepaid or unpaid) from prior years, the policy number, and any pending claims under the policy. No other insurance is necessary to the conduct of the Ehave Connect Business or would be considered to be desirable by a prudent Person operating a business similar to the Ehave Connect Business. The Vendor is not in default, whether as to the payment of premiums or with respect to any other provision contained in any Insurance Policy and has not failed to give any notice or present any claim under any Insurance Policy in a due and timely manner. The Vendor has no reason to believe that any of the Insurance Policies will not be renewed by the insurer on the scheduled expiry of the policy or will be renewed by the insurer only on the basis that there will be a material increase in premiums payable in respect of the policy. True, accurate and complete copies of all Contracts set out in Schedule 5.1(14) and of the most recent inspection reports, if any, received from insurance underwriters or others as to the condition of the Purchased Assets, have been provided to the Purchaser.

 

(15) Material Contracts and Other Contracts . Except as set out in Schedule 5.1(15) and except as disclosed in any other Schedule to this Agreement, the Vendor is not a party to or bound by:

 

(a) any Contract for charitable contributions or gifts of any of the Purchased Assets;

 

(b) any Contract for the sale of any of the Purchased Assets or any part of the Ehave Connect Business;

 

(c) any confidentiality, secrecy or non-disclosure Contract (whether the Vendor is a beneficiary or obligor thereunder) relating to any proprietary or confidential information or any non-competition or similar Contract;

 

(d) any Contract by which any of the Purchased Assets is subject (a “ Material Contract ”);

 

(e) any Contract which has or could have a Material Adverse Effect or is or could be materially burdensome to the Ehave Connect Business or any of the Purchased Assets; and

 

(f) any Contract relating to the Intellectual Property referred to in Schedule 5.1(9)(b).

 

True, accurate and complete copies of all Contracts set out in Schedule 5.1(15), or where those Contracts are oral, true, accurate and complete summaries of their terms, have been provided to the Purchaser.

 

(16) No Default Under Contracts . The Vendor has performed all of the obligations required to be performed by it and is entitled to all benefits under, and is not in default or alleged to be in default in respect of, any Contract relating to the Ehave Connect Business or the Purchased Assets (including the Contracts referred to in any Schedule to this Agreement. All such Contracts are in good standing and in full force and effect, and no event, condition or occurrence exists that, after notice or lapse of time or both, would constitute a default under any such Contract. There is no dispute between the Vendor and any other party under any such Contract. Except as disclosed in the Schedules to this Agreement, none of those Contracts contain terms under which the execution or performance of this Agreement would give any other contracting party the right to terminate or adversely change the terms of that Contract or otherwise require the consent of any other Person. None of those Contracts have been assigned, or if applicable subleased, in whole or in part.

 

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(17) Permits . There are no Permits necessary to conduct the Ehave Connect Business or to own, lease or operate any of the Purchased Assets.

 

(18) Regulatory and Third Party Approvals .

 

(a) There is no requirement to make any filing with, give any notice to or obtain any Permit as a condition to the lawful completion of the Transactions contemplated by this Agreement except that relate solely to the identity of the Purchaser or the nature of any business carried on by the Purchaser.

 

(b) There is no requirement under any Contract or Permit relating to the Ehave Connect Business, the Purchased Assets, the Permitted Encumbrances or the Vendor to which the Vendor is a party or by which the Ehave Connect Business, the Purchased Assets or the Vendor is bound or affected for any Approvals from any party to that Contract or Permit or from any other Person relating to the completion of the Transactions except for the Approvals described in Schedule 5.1(18)(b).

 

(19) Financial Statements . The Financial Statements:

 

(a) have been prepared in accordance with GAAP, applied on a basis consistent with that of the preceding periods;

 

(b) are complete and accurate in all material respects;

 

(c) accurately disclose the assets, liabilities (whether accrued, absolute, contingent or otherwise) and financial condition of the Vendor and the results of the operations of the Vendor as at the dates thereof and for the periods covered thereby;

 

(d) reflect all proper accruals as at the dates thereof and for the periods covered thereby of all amounts which, though not payable until a time after the end of the relevant period, are attributable to activities undertaken in respect of the Ehave Connect Business and other business carried on by the Vendor during or prior to that period; and

 

(e) contain or reflect adequate provision for all liabilities and obligations of the Vendor of any nature, whether absolute, contingent or otherwise, matured or unmatured, in respect of the business of the Vendor, as at the date thereof.

 

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No information has become available to the Vendor that would render the Financial Statements materially incomplete or inaccurate. The financial position and condition of the Vendor is now no materially less favourable in the aggregate as that shown or reflected in the Financial Statements.

 

(20) Books and Records . The Vendor has disclosed the existence of and made available for review by the Purchaser all Books and Records. The system of internal accounting controls is sufficient to provide reasonable assurances that transactions are executed in accordance with management’s general or specific authorization and that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets. The Books and Records are not recorded, stored, maintained, operated or otherwise dependent on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not), which are not or will not be available to the Purchaser after Closing.

 

(21) Taxes .

 

(a) The Vendor is not a non-resident of Canada for purposes of the Tax Act.

 

(b) There are no outstanding liabilities for Taxes payable, collectible or remittable by the Vendor, whether assessed or not, which may result in an Encumbrance on or other claim against or seizure of all or any part of the Purchased Assets or which would otherwise adversely affect the Ehave Connect Business or would result in the Purchaser becoming liable or responsible for those liabilities. The Vendor has withheld and has duly and timely remitted, or shall duly and timely remit, to the appropriate Governmental Authority, all Taxes and other deductions required by Applicable Law to be withheld or deduct from amounts paid or credited by it to or for the account or benefit of all Employees, shareholders, independent contractors, officers or directors and any non-residential Person.

 

(c) The Vendor is duly registered under Subdivision (d) of Division V of Part IX of the ETA and its registration number is 84754 4301 RT0001.

 

(d) The Vendor has not made any election or designation for purposes of any Applicable Law relating to Taxes that would affect the Ehave Connect Business or any of the Purchased Assets after the Effective Time.

 

(22) Litigation . There are no Proceedings (whether or not purportedly on behalf of the Vendor) pending or, to the knowledge of the Vendor, threatened against or affecting, the Vendor, the Ehave Connect Business or the Purchased Assets. To the knowledge of the Vendor, there is not any factual or legal basis on which any Proceeding might be commenced with any reasonable likelihood of success.

 

(23) Personal Information . The Personal Information that has been or will be disclosed by the Vendor to the Purchaser:

 

(a) prior to the date of this Agreement, was necessary to determine whether to proceed with the Transactions;

 

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(b) on or after the date of this Agreement, is necessary to complete the Transactions;

 

(c) is all the Personal Information necessary for the Purchaser to carry on the Ehave Connect Business;

 

(d) was and will be, to the extent required by Applicable Law, disclosed to the Purchaser in accordance with the consents of the individuals to whom the Personal Information relates;

 

(e) is, to the best of the Vendor’s knowledge, accurate and complete; and

 

(f) is not the subject of any order, judgment or findings of non-compliance with the requirements of any Applicable Law with respect to personal information of any Governmental Authority, or of any complaint alleging non-compliance with the requirements of any Applicable Law with respect to Personal Information.

 

(24) Accredited Investor . The Vendor is an “accredited investor” within the meaning of National Instrument 45-106 – Prospectus Exemptions and will provide the Purchaser with such further evidence of the Vendor’s status as an accredited investor as the Purchaser reasonably requires. The Vendor further acknowledges that the Consideration Shares will be subject to restrictions on transfer and resale imposed under the articles of the Purchaser and Applicable Laws.

 

(25) Full Disclosure . Neither this Agreement nor any other contract, agreement, instrument, certificate or other document required to be delivered by or otherwise to be delivered pursuant to this Agreement by the Vendor nor any certificate, report, statement or other document furnished by the Vendor in connection with the negotiation of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.

 

5.2           Representations and Warranties of the Purchaser . The Purchaser represents and warrants to the Vendor as follows and acknowledges that the Vendor is relying on these representations and warranties in connection with the sale by the Vendor of the Purchased Assets and that the Vendor would not sell the Purchased Assets and acquire the Consideration Shares without these representations and warranties:

 

(1) Organization and Corporate Power . The Purchaser is a corporation duly incorporated and organized, and is validly subsisting, under the laws of the Province of Saskatchewan and is up-to-date in the filing of all material corporate and similar returns under the laws of that jurisdiction. The Purchaser has all necessary corporate power and authority to acquire the Purchased Assets, to enter into this Agreement and to perform its obligations hereunder. The Purchaser is duly registered, licensed or qualified as an extra-provincial or foreign corporation, under the laws of any of the jurisdictions in which such registration, license or qualification is required.

 

(2) Authorization . All necessary corporate action has been taken by or on the part of the Purchaser to authorize its execution and delivery of this Agreement and the contracts, agreements and instruments required by this Agreement to be delivered by it and the performance of its obligations hereunder and thereunder.

 

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(3) Subsidiaries . The Purchaser does not own, or have any interest in any shares or have securities, or another ownership interest, in any other Person, other than as set out in Schedule 5.2(3).

 

(4) Enforceability . This Agreement has been duly executed and delivered by the Purchaser and (assuming due execution and delivery by the other Parties) is a legal, valid and binding obligation of the Purchaser enforceable against it in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction. Each of the contracts, agreements and instruments required by this Agreement to be delivered by the Purchaser will at the Closing have been duly executed and delivered by it and (assuming due execution and delivery by the other parties thereto) will be enforceable against it in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction.

 

(5) Bankruptcy . The Purchaser is not an insolvent person within the meaning of the Bankruptcy and Insolvency Act (Canada) and has not made an assignment in favour of its creditors or a proposal in bankruptcy to its creditors or any class thereof, and no petition for a receiving order has been presented in respect of it. The Purchaser has not initiated proceedings with respect to a compromise or arrangement with its creditors or for its winding up, liquidation or dissolution. No receiver or interim receiver has been appointed in respect of it or any of its undertakings, property or assets and no execution or distress has been levied on any of its undertakings, property or assets, nor have any proceedings been commenced in connection with any of the foregoing.

 

(6) Consents and Approvals . Except as set out in Schedule 5.2(6), there is no requirement for the Purchaser to make any filing with or give any notice to any Governmental Authority or to obtain any Permit, as a condition to the lawful completion of the Transactions.

 

(7) Absence of Conflict . The execution, delivery and performance by the Purchaser of this Agreement and the completion of the Transactions will not, (whether after the passage of time or notice or both), result in:

 

(a) the breach or violation of any of the provisions of, or constitute a default under, or give any Person the right to seek or cause a termination, cancellation, amendment or renegotiation of any Contract to which it is a party or by which any of its undertakings, property or assets is bound or affected;

 

(b) the breach or violation of any of the provisions of, or constitute a default under, or conflict with or cause the acceleration of any of its obligations, under:

 

(i) any provision of its Constating Documents or resolutions of its board of directors (or any committee thereof) or shareholders;

 

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(ii) any judgment, decree, order or award of any Governmental Authority having jurisdiction over it;

 

(iii) any Approval issued to, held by or for the benefit of, the Purchaser;

 

(iv) any Applicable Law; or

 

(c) the requirement for any Approval from any creditor of the Purchaser.

 

(8) Conduct of the Business . The Purchaser is conducting its business in compliance with all Applicable Laws. The Purchaser’s assets are sufficient for the Purchaser to carry on its business.

 

(9) Books and Records . The system of internal accounting controls is sufficient to provide reasonable assurances that transactions are executed in accordance with management’s general or specific authorization and that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets.

 

(10) Litigation . There are no Proceedings (whether or not purportedly on behalf of the Purchaser) pending or, to the knowledge of the Purchaser, threatened against or affecting, the Purchaser or its business. To the knowledge of the Vendor, there is not any factual or legal basis on which any Proceeding might be commenced with any reasonable likelihood of success.

 

(11) Personal Information . The Personal Information, if any, that has been or will be disclosed by the Purchaser to the Vendor:

 

(a) prior to the date of this Agreement, was necessary to determine whether to proceed with the Transactions;

 

(b) on or after the date of this Agreement, is necessary to complete the Transactions; (c) was and will be, to the extent required by Applicable Law, disclosed to the Vendor in accordance with the consents of the individuals to whom the Personal Information relates;

 

(d) is, to the best of the Purchaser’s knowledge, accurate and complete; and

 

(e) is not the subject of any order, judgment or findings of non-compliance with the requirements of any Applicable Law with respect to personal information of any Governmental Authority, or of any complaint alleging non-compliance with the requirements of any Applicable Law with respect to Personal Information.

 

(12) ETA Registration . The Purchaser is duly registered under Subdivision (d) of Division V of Part IX of the ETA and its registration number is 76136 4710 RT0001.

 

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(13) Authorized and Issued Capital . Schedule 5.2(13) sets out the authorized and issued shares of the Purchaser. All of the shares indicated in Schedule 5.2(13) are the only issued and outstanding shares of the Purchaser and have been validly issued and are outstanding as fully paid and non-assessable shares, and were not issued in violation of the pre-emptive rights of any Person or any Contract or Applicable Law by which the Purchaser was bound as the time of the issuance. Other than as set out on Schedule 5.2(13), there are no shareholders agreements, voting trusts, pooling agreements or other Contracts, arrangements or understandings in respect of the voting of any of the shares of the Purchaser. True, accurate and complete copies of the Constating Documents (including all Contracts, arrangements and understandings set out in Schedule 5.2(13)) and other organizational documents of the Purchaser, or where those Contracts, arrangements or understandings are oral, true, accurate and complete written summaries of their terms, have been provided to the Vendor.

 

(14) Options. Other than the Consideration Shares to be issued under the terms of this Agreement, and other than as set out on Schedule 5.2(14), no Person has any Contract or any right or privilege capable of becoming a Contract, including convertible securities, warrants or convertible obligations of any nature, for the purchase, subscription, allotment or issuance of any issued or un-issued shares or other securities of the Purchaser.

 

(15) Consideration Shares . The Consideration Shares to be issued hereunder to the Vendor will be validly issued as fully paid or credited as fully paid and non-assessable shares in the capital of the Purchaser. All of the Consideration Shares issued at Closing shall be free and clear of all Encumbrances of any kind whatsoever, except as may arise under the Security Agreement.

 

(16) Intellectual Property .

 

(a) All required filings and fees related to the Purchaser IP Registrations have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all Purchaser IP Registrations are otherwise in good standing. The Purchaser has provided the Vendor with true and complete copies of file histories, documents, certificates, examiner’s reports, office actions, correspondence and other materials related to all Purchaser IP Registrations.

 

(b) Neither the Purchaser nor any other party thereto is in breach of or default under (or is alleged to be in breach of or default under), or has provided or received any notice of breach or default of or any intention to terminate, any Purchaser IP Agreement.

 

(c) The Purchaser is the sole and exclusive legal and beneficial, and with respect to the Purchaser IP Registrations, registered, owner of all right, title and interest in and to the Purchaser IP, and has the valid right to use all other Intellectual Property used in the Purchaser’s current operations, in each case, free and clear of Encumbrances other than Permitted Encumbrances.

 

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(d) The consummation of the Transactions will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, the Purchaser’s right to own, use or hold for use any Intellectual Property as owned, used or held for use in the conduct of the Purchaser’s business or the Purchaser’s operations as currently conducted.
   
(e) The Purchaser’s rights in the Purchaser IP are valid, subsisting and enforceable. The Purchaser has taken all reasonable steps to maintain the Purchaser IP and to protect and preserve the confidentiality of all trade secrets included in the Purchaser IP, including requiring all Persons having access thereto to execute written non- disclosure agreements.
   
(f) To the knowledge of the Vendor, the conduct of the Purchaser’s business as currently and formerly conducted, have not Infringed, and do not Infringe the Intellectual Property or other rights of any Person.
   
(g) There are no Proceedings (including any oppositions, expungement proceedings, interferences or re-examinations) settled, pending or threatened (including in the form of offers to obtain a licence): (i) alleging any Infringement of the Intellectual Property of any Person by the Purchaser; (ii) challenging the validity, enforceability, registrability or ownership of any Purchaser IP or the Purchaser’s rights with respect to any Purchaser IP; or (iii) by the Purchaser or any other Person alleging any Infringement by any Person of the Purchaser IP.

 

(17) Insurance . Other than policies currently in force, no other insurance is necessary to the conduct of the Purchaser’s business as currently conducted or would be considered to be desirable by a prudent Person operating a similar business. The Purchaser is not in default, whether as to the payment of premiums or with respect to any other provision contained in any insurance policy and has not failed to give any notice or present any claim under any insurance policy in a due and timely manner. The Purchaser has no reason to believe that any of its insurance policies will not be renewed by the insurer on the scheduled expiry of the policy or will be renewed by the insurer only on the basis that there will be a material increase in premiums payable in respect of the policy.

 

(18) Permits . The Purchaser holds all Permits necessary to conduct the Purchaser’s business or to own, lease or operate any of the Purchaser’s assets as currently conducted. Each such Permit is valid, subsisting and in good standing. The Purchaser is not in default or in breach of the terms of any Permit and, to the knowledge of the Vendor, there exists no grounds nor is any action or proceeding pending or, to the knowledge of the Purchaser, threatened to revoke, suspend, amend or limit any Permit.

 

(19) Taxes .

 

(a) The Purchaser has duly and timely filed all its Tax Returns with all appropriate Governmental Authorities. Each such Tax Return was true, correct and complete in all material respects. All Taxes due and payable by the Corporation for periods (or portions thereof) ending on or before the date of this Agreement (whether or not shown due on any Tax Returns and whether or not assessed or reassessed by the appropriate Governmental Authority) have been paid.

 

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(b) No Governmental Authority of a jurisdiction in which the Purchaser has not filed a Tax Return has made any written claim that the Purchaser is or may be subject to Tax or required to file Tax Returns by that Governmental Authority in such jurisdiction. There is no basis for a claim that the Purchaser is subject to Tax in a jurisdiction in which the Purchaser does not file Tax Returns.

 

(c) There are no matters under audit or appeal with any Governmental Authority relating to Taxes of the Purchaser.

 

(d) The Purchaser has not received any notice in writing from any Governmental Authority that it is taking steps to assess any additional Taxes against the Purchaser for any period for which Tax Returns have been filed and, to the Purchaser’s knowledge, there are no actual or pending audit investigations or other Actions of, or against, the Purchaser by any Governmental Authority relating to Taxes. No Governmental Authority has given written notice of any intention to assert any deficiency or claim for additional Taxes against the Purchaser.

 

(e) The Purchaser is not a non-resident of Canada for purposes of the Tax Act.

 

(20) Full Disclosure . Neither this Agreement nor any other contract, agreement, instrument, certificate or other document required to be delivered by or otherwise to be delivered pursuant to this Agreement by the Purchaser nor any certificate, report, statement or other document furnished by the Purchaser in connection with the negotiation of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.

 

5.3           Survival of Representations, Warranties and Covenants of the Vendor . The representations and warranties of the Vendor and, to the extent that they have not been fully performed or waived at or prior to Closing, the covenants and other obligations of the Vendor contained in this Agreement and in any contract, agreement, instrument, certificate or other document executed or delivered pursuant to this Agreement survive Closing and continue for the benefit of the Purchaser notwithstanding the Closing, any investigation made by or on behalf of the Purchaser or any knowledge of the Purchaser, as follows:

 

(a) the representations and warranties set out in Sections 5.1(1) (insofar as it relates to the due incorporation and organization and the valid existence of the Vendor), 5.1(2), 5.1(3), 5.1(4), 5.1(5), 5.1(6) and 5.1(9) (insofar as it relates to title to and Encumbrances relating to the Purchased Assets) (and the corresponding representations and warranties set out in the certificates to be delivered pursuant to Section 4.1(1)(g)(vi) (the “ Vendor Closing Certificates ”), and the covenant set out in Section 6.12, survive and continue in full force and effect without limitation of time;

 

 

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(b) the representations and warranties set out in Sections 5.1(20) (and the corresponding representations and warranties set out in the Vendor Closing Certificates) survive Closing and continue in full force and effect until, but not beyond, the 180 th day following the expiration of the period, if any, during which an assessment, reassessment or other form of recognized document assessing liability for Taxes under applicable Tax legislation in respect of any taxation year to which those representations and warranties extend could be issued under that Tax legislation to the Vendor, provided the Vendor did not file any waiver or other document extending that period;

  

(c) the remainder of the representations and warranties set out in Section 5.1 (and the corresponding representations and warranties set out in the Vendor Closing Certificates) survive Closing and continue in full force and effect until, but not beyond, the second anniversary of the Closing Date; and

 

(d) notwithstanding Sections 5.3(a) through 5.3(c), a claim for any breach by the Vendor of any of the representations, warranties and covenants contained in this Agreement or in any contract, agreement, instrument, certificate or other document executed or delivered pursuant hereto involving fraud, fraudulent misrepresentation, intentional misrepresentation or deliberate or wilful breach may be made at any time following the Closing Date, subject only to applicable limitation periods imposed by Applicable Law.

 

5.4           Survival of the Representations, Warranties and Covenants of the Purchaser . The representations and warranties of the Purchaser and, to the extent that they have not been fully performed or waived at or prior to Closing, the covenants and other obligations of the Purchaser, contained in this Agreement and in any contract, agreement, instrument, certificate or other document executed or delivered pursuant to this Agreement survive Closing and continue for the benefit of the Vendor notwithstanding the Closing, any investigation made by or on behalf of the Vendor or any knowledge of the Vendor, as follows:

 

(a) the representations and warranties set out in Sections 5.2(1) (insofar as it relates to the due incorporation and organization and the valid existence of the Purchaser, 5.2(2), 5.2(4) and 5.2(5) (and the corresponding representations and warranties set out in the certificates to be delivered pursuant to Section 4.2(1)(h)(vi) (the “ Purchaser Closing Certificates ”) survive and continue in full force and effect without limitation of time;
   
(b) the remainder representations and warranties set out in Section 5.2 (and the corresponding representations and warranties set out in the Purchaser’s Closing Certificates survive Closing and continue in full force and effect, but not beyond, the second anniversary of the Closing Date; and
   
(c) notwithstanding Section 5.4(a), a claim for any breach by the Purchaser of any of its representations, warranties and covenants contained in this Agreement or in any contract, agreement, instrument, certificate or other document executed or delivered pursuant hereto involving fraud, fraudulent misrepresentation, intentional misrepresentation, or deliberate wilful breach may be made at any time following the Closing Date, subject only to applicable limitation periods imposed by Applicable Law.

 

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5.5 Termination of Liability .

 

(1) No Party or other Person is entitled to indemnification pursuant to this Agreement unless the Party or other Person has given written notice of its Claim for indemnification pursuant to Article 7, as the case may be, prior to the expiry of the relevant survival period prescribed by Sections 5.3 and 5.4 and in that event, only on and subject to the terms and conditions of and to the extent provided for in Article 7.

 

(2) This Agreement constitutes a “business agreement” under the Limitations Act 2002 (Ontario) and to the extent that the provisions of this Agreement are found to be an agreement to vary or exclude, or suspend or extend, a limitation period prescribed under such legislation, that limitation period will be deemed to be varied or excluded, or suspended or extended, as the case may be, to the extent necessary to give full force and effect to the provisions of this Agreement.

 

ARTICLE 6

COVENANTS

 

6.1           Exclusive Dealings. During the Interim Period, the Vendor shall not take any action, directly or indirectly, to encourage, initiate or engage in discussions or negotiations with, or provide any information to, or enter into any agreement or arrangement or understanding with, any Person, other than the Purchaser and its designated and authorized Representatives, concerning any sale, transfer or assignment of any portion of the Ehave Connect Business or the Purchased Assets. The Vendor shall notify the Purchaser promptly if any such discussions or negotiations are sought or if any proposal for a sale, transfer or assignment of any portion of the Ehave Connect Business or the Purchased Assets is received or being considered.

 

6.2 Transfer of Documentation .

 

(1) On the Closing Date, the Vendor shall deliver, and shall cause to be delivered, to the Purchaser the Books and Records and all documents (except, in the case of those required by Applicable Law to be retained by the Vendor, copies thereof) and other data, technical or otherwise, which are owned by the Vendor at the Closing Date, relating to the Ehave Connect Business or the Purchased Assets. The Purchaser shall preserve all those documents delivered to it in accordance with the Purchaser’s document retention procedures or for such longer period as is required by Applicable Law. The Purchaser shall permit the Vendor and its authorized Representatives reasonable access to those documents while they are in the Purchaser’s possession or control solely to the extent that access is required by the Vendor to perform its obligations under this Agreement or under Applicable Law, but the Purchaser shall not be responsible or liable to the Vendor for, or as a result of, any loss or destruction of or damage to any such documents and other data unless that destruction, loss or damage is caused by the Purchaser’s negligence or wilful misconduct. The Vendor shall be responsible for all reasonable out-of-pocket costs and expenses incurred, directly or indirectly, by the Purchaser in connection with any access contemplated by this Section 6.2(1).

 

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(2) Notwithstanding Section 6.2(1), the Vendor shall be entitled to retain copies of any documents or other data delivered to the Purchaser pursuant to Section 6.2(1) provided that those documents or data are reasonably required and only used or relied on by the Vendor to perform its obligations under this Agreement or under Applicable Law. The Vendor shall retain any documents or data which relate to the Ehave Connect Business and which are retained by the Vendor pursuant to this Section 6.2(2) in strict confidence and shall not use or otherwise disclose the data or information contained therein except as permitted by the Non-Disclosure Agreement.

 

6.3 Standstill .

 

(1) During the Interim Period, the Purchaser shall not directly or indirectly do or permit to occur any of the following:

 

(a) redeem, purchase or otherwise acquire any of its outstanding shares or other securities including, without limitation, under an issuer bid, with the exception of purchase from directors or employees of the Purchaser;
   
(b) adopt a plan of liquidation or resolutions providing for the liquidation, dissolution, merger, consolidation or reorganization of itself or any of its subsidiaries;
   
(c) declare, set aside or pay any dividend or other distribution or payment (whether in cash, shares or property) in respect of its shares owned by any Person other than inter-corporate loans and advances; and
   
(d) other than in connection with the Transactions, reorganize, amalgamate or merge with any other person, nor acquire by amalgamating, merging or consolidating with, purchasing a majority of the voting securities or substantially all of the assets of or otherwise, any business or Person which acquisition or other transaction would reasonably be expected to prevent or materially delay the Transactions contemplated hereby.

 

6.4 Purchaser’s Investigation .

 

(1) During the Interim Period, the Vendor shall, and shall cause its Representatives to, permit the Purchaser and its authorized Representatives to make such investigations, inspections, surveys or tests of the Ehave Connect Business and the Purchased Assets, and of their respective financial, legal and physical condition, as the Purchaser deems necessary or desirable to familiarize itself with the Ehave Connect Business, Purchased Assets and other matters. Without limiting the generality of the foregoing, the Vendor shall, and shall cause its Representatives to, provide the Purchaser with free and unrestricted access during normal business hours to (i) all documents relating to information scheduled or required to be disclosed under this Agreement, (ii) the Books and Records and all employee data and personnel records of the Employees, (iii) the Internal IT Systems, (iv) the Contracts, (v) the Employees, (vi) records regarding suppliers, customers and regulators, and (vii) all other reports (including title opinions) prepared by advisors of the Vendor and its Affiliates in connection with the Ehave Connect Business and the Purchased Assets, and the Vendor shall, and shall cause its Representatives to provide photocopies to the Purchaser of all such written information and documents as reasonably requested by the Purchaser.

 

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(2) At the Purchaser’s request, the Vendor shall execute, or cause to be executed, such consents, authorizations and directions as may be necessary to permit any inspection of the Ehave Connect Business and any of the Purchased Assets and to enable the Purchaser or its authorized Representatives to obtain full access to all files and records relating to the Ehave Connect Business or relating to any of the Purchased Assets maintained by Governmental Authorities and self-regulating authorities.

 

(3) At the Purchaser’s request, the Vendor shall co-operate and assist with the Purchaser in arranging any meetings as the Purchaser should reasonably request with:

 

(a) the Employees;
   
(b) customers, suppliers, distributors or others who have or have had a business relationship with the Vendor in respect of the Ehave Connect Business; and
   
(c) auditors, solicitors or any other Persons engaged or previously engaged to provide services to the Vendor who have knowledge of matters relating to the Ehave Connect Business or the Purchased Assets.

 

(4) The exercise of any rights of inspection by or on behalf of the Purchaser under this Section 6.3 does not mitigate or otherwise affect the representations and warranties of the Vendor under this Agreement, which continue in full force and effect as provided in Section 5.3.

 

6.5 Vendor’s Investigation

 

(1) During the Interim Period, the Purchaser shall, and shall cause its Representatives to, permit the Vendor and its authorized Representatives to make such reasonable investigations, inspections, surveys or tests of the Purchaser’s business and assets, and of their respective financial and legal advisors necessary to support the preparation of the Fairness Opinion and value ascribed to the Consideration Shares.

 

(2) The exercise of any rights of inspection by or on behalf of the Purchaser under this Section 6.5 does not mitigate or otherwise affect the representations and warranties of the Vendor under this Agreement, which continue in full force and effect as provided in Section 5.4.

 

6.6 Personal Information .

 

(1) The Vendor and the Purchaser shall:

 

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(a) at all times, use and disclose the Personal Information under its control solely for the purposes for which the Personal Information was collected or permitted to be used or disclosed, unless to the extent required by Applicable Law, the Vendor or the Purchaser, as the case may be, has obtained the consent of or has given notice to the individual to whom the Personal Information relates of the additional purposes for which the Personal Information is to be used or disclosed, or such additional purposes are permitted or authorized by Applicable Law;

  

(b) protect the Personal Information using security safeguards that meet or exceed industry standards, taking into account the sensitivity of the Personal Information; and

 

(c) give effect to any withdrawal of consent by the individual to whom the Personal Information relates where the Personal Information was collected with consent.

 

(2) The Vendor shall, to the extent required by Applicable Law, notify the individuals to whom the Personal Information relates that the Transactions have been completed and of the disclosure of their Personal Information to the Purchaser.

 

(3) In the event that the Transactions are not completed, the Purchaser shall, within a reasonable period of time, return the Personal Information to the Vendor or, in its discretion, destroy it and provide a certificate of a senior officer of the Purchaser to that effect to the Vendor.

 

6.7           Risk of Loss. During the Interim Period, the Vendor shall maintain in force all the policies under which the Purchased Assets or the Ehave Connect Business is insured. If, before the Closing, any of the Purchased Assets or part of the Ehave Connect Business is lost, damaged or destroyed, and the loss, damage or destruction constitutes a Material Adverse Change, then the Purchaser at its sole discretion may either:

 

(a) terminate this Agreement in accordance with the provisions of Section 4.3; or
   
(b) require the Vendor to reduce the Purchase Price by the amount of the replacement cost of the Purchased Assets and/or the Ehave Connect Business which were lost, damaged or destroyed less the amount of any proceeds of insurance payable as a result of the occurrence, which proceeds of insurance are to be directed by the Vendor to be paid to the Purchaser.

 

6.8           Risk of Loss. During the Interim Period, the Purchaser shall maintain in force all the policies of business interruption insurance and of property damage insurance under which any of the Purchaser’s business is insured. If, before the Closing, any of the Purchaser’s business is lost, damaged or destroyed, and the loss, damage or destruction constitutes is material to the Purchaser, then the Vendor at its sole discretion may terminate this Agreement in accordance with the provisions of Section 4.3.

 

6.9           Vendor Conduct Prior to Closing . Without in any way limiting any other obligations of the Vendor hereunder, during the Interim Period, the Vendor shall: 

 

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(a) conduct the Ehave Connect Business only in the Ordinary Course, and shall not, without the prior written consent of the Purchaser, enter into any transaction or refrain from doing any action that, if effected before the date of this Agreement, would constitute a breach of any representation, warranty, covenant or other obligation of the Vendor in this Agreement and, without limiting the generality of the foregoing, the Vendor shall not:

  

(i) enter into any compromise or settlement of any litigation, proceeding or government investigation relating to the Ehave Connect Business or any of the Purchased Assets; and

 

(ii) enter into any Contract of the kind described in Section 5.1(15);

 

(b) not do any act or thing that would result in a breach of Section 6.1;

 

(c) continue to maintain in full force and effect all the Insurance Policies or renewals thereof currently in effect;

 

(d) take out, at the expense of the Purchaser, such additional insurance as may be reasonably requested by the Purchaser;

 

(e) report all claims or known circumstances or events which may give rise to a claim to its insurers under the Insurance Policies in a due and timely manner to the Closing Date and provide copies of those reports to the Purchaser;

 

(f) use its best efforts to obtain the Approvals described in Schedule 5.1(18)(b);

 

(g) preserve intact the Ehave Connect Business and shall carry on the Ehave Connect Business as currently conducted, including, without limitation, maintaining the Back-up;

 

(h) notwithstanding any other provision contained herein, preserve the Purchased Assets and shall not, without the prior written consent of the Purchaser, make any modifications, changes, upgrades, updates or patches whatsoever to the Purchased Assets;

 

(i) pay and discharge the liabilities of the Vendor relating to the Ehave Connect Business and the Purchased Assets in the Ordinary Course in accordance and consistent with the previous practice of the Vendor, except those contested in good faith by the Vendor;

 

(j) take all necessary corporate action, steps and proceedings to approve or authorize, validly and effectively, the execution and delivery of this Agreement and the other agreements and documents contemplated hereby and to complete the transfer of the Purchased Assets to the Purchaser and to cause all necessary meetings of directors and shareholders of the Vendor to be held for that purpose;

 

(k) periodically report to the Purchaser as it requests concerning the state of the Ehave Connect Business and the Purchased Assets; and

 

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(l) use its best efforts to satisfy the conditions contained in Section 4.1.

 

6.10        Purchaser Conduct Prior to Closing . Without in any way limiting any other obligations of the Purchaser hereunder, during the Interim Period, the Purchaser shall:

 

(a) conduct the Purchaser’s business only in the Ordinary Course, and shall not, without the prior written consent of the Vendor, enter into any transaction or refrain from doing any action that, if effected before the date of this Agreement, would constitute a breach of any representation, warranty, covenant or other obligation of the Purchaser in this Agreement.

 

(b) use its best efforts to obtain the Approvals described in Schedule 5.2(6);

 

(c) pay and discharge the liabilities of the Purchaser relating to the Purchaser’s business in the Ordinary Course in accordance and consistent with the previous practice of the Vendor, except those contested in good faith by the Vendor;

 

(d) take all necessary corporate action, steps and proceedings to approve or authorize, validly and effectively, the execution and delivery of this Agreement and the other agreements and documents contemplated hereby and to complete the Transactions and to cause all necessary meetings of directors and shareholders of the Purchaser to be held for that purpose; and

 

(e) use its best efforts to satisfy the conditions contained in Section 4.2.

 

6.11 Notification of Certain Matters .

 

(1) During the Interim Period, each of the Parties shall give prompt notice in writing to the other Party of:

 

(a) the occurrence, or failure to occur, of any event, which occurrence or failure would be likely to cause any of the representations or warranties of such Party contained in this Agreement to be untrue or inaccurate during the Interim Period;

 

(b) any notice or communication from any Person alleging that the consent of such Person is or may be required in connection with the Transactions;

 

(c) any notice or communication from any Governmental Authority in connection with the Transactions;

 

(d) any Proceeding commenced or threatened against such Party or relating to or involving or otherwise affecting any of them, or which relates to the consummation of the Transactions; and

 

(e) any failure by any of the Vendor to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied under this Agreement.

 

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(2) The Vendor shall confer, if requested by the Purchaser, on a regular and frequent basis with one or more designated Representatives of the Purchaser to report on operational matters and on the general status of the Ehave Connect Business. The Vendor shall notify the Purchaser of any emergency or other change in the Ordinary Course or in the operation of the Ehave Connect Business and of any governmental complaints, investigations or hearings (or communications indicating that such may be contemplated) or adjudicatory proceedings involving any portion of the Business or the Purchased Assets, and will keep the Purchaser fully informed of such events and permit the Representatives of the Purchaser access to all materials prepared in connection therewith.

 

(3) The giving of any notice under this Section 6.10 does not in any way change or modify the representations and warranties of the Vendor, or the conditions to the obligations of the Purchaser, contained in this Agreement or otherwise affect the remedies available to the Purchaser under this Agreement.

 

6.12 Use of Intellectual Property .

 

(1) Following Closing, the Vendor shall not, directly or indirectly, use, copy or replicate any of the Intellectual Property forming part of the Purchased Assets.

 

(2) The Vendor shall enforce all confidentiality obligations in favour of the Vendor with respect to its current and former Representatives and other third parties to the extent such obligations are related to, or have an impact on, the Purchased Assets.

 

6.13 Regulatory Approvals .

 

(1) The Vendor shall use its best efforts to shall obtain, at or prior to Closing, from all appropriate Governmental Authorities.

 

6.14 Additional Financial and Other Information

 

(1) The Vendor covenants and agrees provide the Purchaser with such additional financial information and other information as may be required by the Purchaser in connection with the Purchaser’s preparation of a registration statement, prospectus or other such document prepared in connection with the Purchaser conducting an initial public offering or other going public transaction. The Vendor covenants and agrees to cause the Vendor’s Auditor to consent to the inclusion of the Financial Statements (including the Vendor’s Auditor’s report thereon) in the registration statement, prospectus or equivalent document as may be required in accordance with Applicable Law.

 

6.15 Lock-Up Agreement

 

(1) The Vendor and the Purchaser shall enter into a lock-up agreement prior to the Purchaser completing an initial public offering or going public transaction restricting the resale of the Consideration Shares for a period of six months from the date the Purchaser completes the initial public offering or going public transaction, subject to certain additional terms of the Purchaser or lead underwriter of the initial public offering or going public transaction which are customary in a lock-up agreement entered into by shareholders of a company undergoing an initial public offering or going public transaction.

 

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ARTICLE 7

INDEMNIFICATION

 

7.1 Definitions . In this Article 7:

 

(1) Claim ” means any act, omission or state of facts and any demand, action, investigation, inquiry, suit, proceeding, claim, assessment, judgment or settlement or compromise relating thereto which may give rise to a right of indemnification under this Agreement.

 

(2) Direct Claim ” means any Claim by an Indemnitee against an Indemnitor which does not result from a Third Party Claim.

 

(3) Increased Amount ” has the meaning attributed to that term in Section 7.10(3).

 

(4) Indemnification Notice ” means written notice by an Indemnitee to the applicable Indemnitor or Indemnitors of a Third Party Claim or Direct Claim, as the case may be.

 

(5) Indemnitee ” means any Person entitled to indemnification under this Agreement.

 

(6) Indemnitees Representative ” means:

 

(a) in respect of the Purchaser Indemnitees, the Purchaser; and

 

(b) in respect of the Vendor Indemnitees, the Vendor.

 

(7) Indemnitor ” means any Party obligated to provided indemnification under this Agreement.

 

(8) Losses ” means any and all loss, liability, obligation, damage, cost, expense, charge, fine, penalty or assessment, suffered, incurred, sustained or required to be paid by the Person seeking indemnification (including lawyers’, experts’ and consultants’ fees and expenses), directly resulting from or arising out of any Claim, including the costs and expenses of any action, suit, proceeding, investigation, inquiry, arbitration award, grievance, demand, assessment, judgment, settlement or compromise relating thereto, but: (i) excluding any contingent liability until it becomes actual; (ii) reduced by any net Tax benefit; (iii) reduced by any recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other Person; and

(iv) excluding punitive, exemplary, incidental, consequential, special or indirect damages (including loss of revenue, diminution in value and any damages based on any type of multiple).

 

(9) Payment ” has the meaning attributed to that term in Section 7.10(4).

 

(10) Purchaser Indemnitees ” means the Representatives of the Purchaser, and related Persons.

 

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(11) Third Party Claim ” means any Claim asserted against an Indemnitee by any Person who is not a Party or an Affiliate of a Party.

 

(12) Vendor Indemnitees ” means the Representatives of the Vendor, and related Persons.

 

7.2        Indemnification by the Vendor . In addition to any other indemnification provided by the Vendor contained in this Agreement and subject to this Article 7, the Vendor shall indemnify and save harmless the Purchaser and, to the extent named or involved in any Third Party Claim, the Purchaser Indemnitees from, and shall pay to the Purchaser and the Purchaser Indemnitees, on demand, the amount of any and all Losses, as a result of or arising in connection with:

 

(a) any inaccuracy of or any breach of any representation or warranty made by the Vendor in this Agreement or in any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement, whether or not the Purchaser relied on or had knowledge of it;
   
(b) to the extent not performed or waived prior to Closing any breach or non-performance by the Vendor of any covenant or other obligation contained in this Agreement or in any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement;
   
(c) the operations of the Ehave Connect Business or the ownership of the Purchased Assets up to the Effective Time, except to the extent it constitutes an Assumed Liability;
   
(d) any of the Excluded Liabilities, including any alleged responsibility of the Purchaser in respect thereof;
   
(e) defect or deficiencies in any product or component thereof or any services provided by the Vendor, in whole or in part, prior to the Closing Date;
   
(f) any Claim to which the Vendor is a party at any time on or prior to the Closing Date, or to which it becomes a party after the Closing Date arising from the fact or circumstances that existed at any time on or prior to the Closing Date;
   
(g) any breach or alleged breach of any Contract by the Vendor which occurred prior to the Closing Date or any such breach which occurs after the Closing Date but arises out of a continuation of a course of conduct which commenced prior to the Closing Date; and
   
(h) any Claim by any Person for brokerage or finder’s fees, commission or similar payments based on any agreement or understanding made or alleged to have been made by any such Person with the Vendor (or any Person acting on their behalf) in connection with the Transactions.

 

7.3        Indemnification by the Purchaser . In addition to any other indemnification provided by the Purchaser contained in this Agreement and subject to this Article 7, the Purchaser shall indemnify and save harmless the Vendor and, to the extent named or involved in any Third Party Claim, the Vendor Indemnitees from, and shall pay to the Vendor and the Vendor Indemnitees, on demand, the amount of any and all Losses as a result of or arising in connection with:

 

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(a) any inaccuracy of or any breach of any representation or warranty made by the Purchaser in this Agreement or in any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement, whether or not the Vendor relied on or had knowledge of it;
   
(b) to the extent not performed or waived prior to Closing any breach or non-performance by the Purchaser of any covenant or other obligation contained in this Agreement or in any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement;
   
(c) any Claim to which the Purchaser is a party at any time on or prior to the Closing Date, or to which it becomes a party after the Closing Date arising from the fact or circumstances that existed at any time on or prior to the Closing Date;
   
(d) any breach or alleged breach of any Contract by the Purchaser which occurred prior to the Closing Date or any such breach which occurs after the Closing Date but arises out of a continuation of a course of conduct which commenced prior to the Closing Date; and
   
(e) any Claim by any Person for brokerage or finder’s fees, commission or similar payments based on any agreement or understanding made or alleged to have been made by any such Person with the Purchaser (or any Person acting on its behalf) in connection with the Transactions.

 

7.4 Thresholds and Limitations .

 

(1) The obligation of the Vendor to indemnify the Purchaser and the Purchaser Indemnitees pursuant to Section 7.2 and the Purchaser’s obligation to indemnify the Vendor and the Vendor Indemnitees pursuant to Section 7.3 are applicable only if the aggregate of all those Losses suffered or incurred by the Purchaser and the Purchaser Indemnitees, on the one hand, or by the Vendor and the Vendor Indemnitees, on the other hand, as applicable, is in excess of $10,000. If the aggregate of all those Losses suffered or incurred by the Purchaser and the Purchaser Indemnitees exceeds that amount, the Vendor shall be obliged to indemnify the Purchaser and the Purchaser Indemnitees for all of those Losses, including the Losses up to and including that amount. If the aggregate of all those Losses suffered or incurred by the Vendor and the Vendor Indemnitees exceeds that amount, the Purchaser shall be obliged to indemnify the Vendor and the Vendor Indemnitees for all of those Losses, including the Losses up to and including that amount.

 

(2) For purposes of calculating Losses pursuant to this Article, each of the representations and warranties made by the Vendor shall be deemed to have been made without the inclusion of or reference to limitations or qualifications as to materiality and/or knowledge, including the words “materiality” or “knowledge” or the phrase “in all material respects” or words and phrases of similar meaning or intent.

 

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7.5 Notice of Claim .

 

(1) An Indemnitee, promptly on becoming aware of any circumstances that have given or could give rise to a Third Party Claim or a Direct Claim, shall give an Indemnification Notice of those circumstances to its Indemnitees Representative and to the applicable Indemnitor or Indemnitors. The Indemnification Notice will specify whether the Losses arise as a result of a Third Party Claim or a Direct Claim, and will also specify with reasonable particularity (to the extent the information is available) the factual basis for the Claim and the amount of the Losses, if known.

 

(2) The failure to give, or delay in giving, an Indemnification Notice does not relieve the Indemnitor of its obligations except and only to the extent of any prejudice caused to the Indemnitor by that failure or delay.

 

(3) Provided that the Indemnitee gives an Indemnification Notice of the Claim to the Indemnitor on or prior to the expiry of the applicable time period related to that representation and warranty or covenant, as the case may be, set out in Sections 5.3 and 5.4, liability of the Indemnitor for that representation, warranty or covenant will continue in full force and effect until the final determination of that Claim.

 

7.6 Third Party Claims .

 

(1) The Indemnitor has the right, by notice to the applicable Indemnitees Representative given not later than 30 days after receipt of the Indemnification Notice, to assume control of the defence, compromise or settlement of the Third Party Claim provided that:

 

(a) the Third Party Claim involves only money damages and does not seek any injunctive or other equitable relief;
   
(b) if the named parties in any Third Party Claim include both the Indemnitor and the Indemnitee, representation by the same counsel would, in the judgment of the Indemnitee, still be appropriate notwithstanding any actual or potential differing interests between them (including the availability of different defences);
   
(c) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the judgment of the Indemnitee, likely to establish a precedent, custom or practice adverse to the continuing business interest of the Indemnitee; and
   
(d) the Indemnitor, from time to time, at the request of the Indemnitees Representative, gives security satisfactory to the Indemnitees Representative against any costs and other liabilities to which the Indemnitee may be or become exposed as a result of that Third Party Claim.

 

(2) On the assumption of control by the Indemnitor, it is conclusively established for purposes of this Agreement that the Third Party Claim is within the scope of, and is subject to, the indemnification pursuant to this Article 7, and:

 

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(a) the Indemnitor will actively and diligently proceed with the defence, compromise or settlement of the Third Party Claim at the Indemnitor’s sole cost and expense, including the retaining of counsel reasonably satisfactory to the Indemnitees Representative;
   
(b) the Indemnitor will keep the Indemnitees Representative fully advised with respect to the defence, compromise or settlement of the Third Party Claim (including supplying copies of all relevant documents promptly as they become available) and will arrange for its counsel to inform the Indemnitees Representative on a regular basis of the status of the Third Party Claim;
   
(c) the Indemnitee may retain separate co-counsel at its sole cost and expense and participate in the defence of the Third Party Claim (provided the Indemnitor shall continue to control that defence); and
   
(d) the Indemnitor will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim unless consented to by the Indemnitees Representative (which consent may not be unreasonably or arbitrarily withheld, delayed or conditioned).

 

(3) Provided all the conditions set forth in Section 7.6(1) are satisfied and the Indemnitor is not in breach of any of its obligations under Section 7.6(2), each of the Indemnitee and its Indemnitees Representative will, at the expense of the Indemnitor, co-operate with the Indemnitor and use its best efforts to make available to the Indemnitor all relevant information in its possession or under its control (provided that it does not cause the Indemnitee or its Indemnitees Representative to breach any confidentiality obligations) and will take such other steps as are, in the reasonable opinion of counsel for the Indemnitor, necessary to enable the Indemnitor to conduct that defence, provided always that:

 

(a) no admission of fault may be made by or on behalf of the Purchaser or any Purchaser Indemnitee without the prior written consent of the Purchaser;
   
(b) no admission of fault may be made by or on behalf of the Vendor or any Vendor Indemnitee without the prior written consent of the Vendor; and
   
(c) the Indemnitee and its Indemnitees Representative are not obligated to take any measures which, in the reasonable opinion of the Indemnitee’s legal counsel, could be prejudicial or unfavourable to the Indemnitee.

 

(4) If (i) the Indemnitor does not give the relevant Indemnitees Representative the notice provided in Section 7.6(1), (ii) any of the conditions in Section 7.6(1) are unsatisfied, or (iii) the Indemnitor breaches any of its obligations under Sections 7.6(2) or 7.6(3), the applicable Indemnitees Representative may assume control of the defence, compromise or settlement of the Third Party Claim as in its sole discretion may appear advisable, and is entitled to retain counsel as in its sole discretion may appear advisable, the whole at the Indemnitor’s sole cost and expense. Any settlement or other final determination of the Third Party Claim will be binding on the Indemnitor. The Indemnitor will, at its sole cost and expense, cooperate fully with the Indemnitee and its Indemnitees Representative and use its best efforts to make available to the Indemnitee and its Indemnitees Representative all relevant information in its possession or under its control and take such other steps as are, in the reasonable opinion of counsel for the Indemnitee, necessary to enable the Indemnitee to conduct the defence. The Indemnitor will reimburse the Indemnitee and its Indemnitees Representative promptly and periodically for the costs of defending against the Third Party Claim (including legal fees and expenses), and will remain responsible for any Losses the Indemnitee and its Indemnitees Representative may suffer resulting from, arising out of or relating to the Third Party Claim to the fullest extent provided in this Article 7.

 

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7.7           Direct Claims. Following receipt of an Indemnification Notice in respect of a Direct Claim, the Indemnitor has 60 days to make such investigation of the Direct Claim as is considered necessary or desirable. For the purpose of that investigation, the Indemnitee shall make available to the Indemnitor the information relied on by the Indemnitee to substantiate the Direct Claim, together with such information as the Indemnitor may reasonably request. If the Parties agree at or prior to the expiry of this 60 day period (or prior to the expiry of any extension of this period agreed to by the Parties) as to the validity and amount of that Direct Claim, the Indemnitor shall immediately pay to the Indemnitee the full amount as agreed to by the Parties of the Direct Claim. For clarity, the Purchaser is deemed to have incurred or suffered Losses as of and from the Closing Date as a consequence of any reduction in the value of the Purchased Assets resulting from an inaccuracy or breach of any representation or warranty or any breach or non-fulfillment by the Vendor of any of its covenants or obligations under this Agreement.

 

7.8           Waiver. The Indemnitor waives any right it may have to require an Indemnitee to proceed against or enforce any other right, power, remedy or security or to claim payment from any other Person before claiming under the indemnity provided for in this Article 7. It is not necessary for an Indemnitee to incur expense or make payment before enforcing that indemnity.

 

7.9 Duty to Mitigate and Subrogation .

 

(1) Nothing in this Agreement in any way restricts or limits the general obligation under Applicable Law of an Indemnitee to mitigate any loss which it may suffer or incur by reason of a breach by an Indemnitor of any representation, warranty, covenant or obligation of the Indemnitor under this Agreement or in any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement.

 

(2) The Indemnitee shall, to the extent permitted by Applicable Law, subrogate its rights relating to any Third Party Claim to the Indemnitor and shall make all counterclaims and implead all third Persons as may be reasonably required by the Indemnitor, the whole at the cost and expense of the Indemnitor.

 

7.10 Obligation to Reimburse .

 

(1) The Indemnitor shall reimburse to the Indemnitee the amount of any Losses, as of the later of (i) date that the Indemnitee incurs any such Losses and (ii) the date of demand by the Indemnitee, together with interest thereon from that date until payment in full, at the rate per annum equal to the prime lending rate of the Royal Bank of Canada from time to time plus 5%, that payment being made without prejudice to the Indemnitor’s right to contest the basis of the Indemnitee’s Claim for indemnification.

 

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(2) The amount of any and all Losses under this Article 7 are to be determined net of any amounts recovered or recoverable by the Indemnitee under insurance policies, indemnities, reimbursement arrangements or similar contracts with respect to those Losses. The Indemnitee shall take all appropriate steps to enforce that recovery. Each Party waives, to the extent permitted under its applicable insurance policies, any subrogation rights that its insurer may have with respect to any indemnifiable Losses.

 

(3) If an Indemnitee is subject to Tax in respect of the receipt of an amount pursuant to this Article 7, after taking into account any offsetting deduction or tax credit available in respect of the applicable Losses, then the amount payable by the Indemnitor will be increased by an amount (the “ Increased Amount ”) such that the Indemnitee will be in the same position after paying Tax on the amount received hereunder, including any Taxes payable on the Increased Amount, as the Indemnitee would have been in had the Losses giving rise to that payment not arisen and had that amount not been payable.

 

(4) If any payment (the “ Payment ”) made pursuant to this Article 7 is subject to GST/HST or is deemed by the ETA or any similar provision of any Applicable Law to be inclusive of GST/HST, the Indemnitor will pay to the Indemnitee, in addition to the Payment, an amount equal to the GST/HST in connection with that Payment and that additional amount.

 

7.11         Exclusivity. Unless otherwise provided in this Agreement or any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement, the provisions of this Article 7 constitute the sole remedy available to the Vendor and the Purchaser to any Claim for breach of covenants, representation, warranty or other obligation or provision of this Agreement or any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement (other than a Claim for specific performance or injunctive relief) and to any and all other indemnities provided in this Agreement or in any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement.

 

7.12         Set-Off. A Party is entitled to set-off any Losses subject to indemnification under this Agreement or in any contract, agreement, instrument, certificate or other document delivered pursuant to this Agreement against any other amounts payable by the Party to another party whether under this Agreement or otherwise.

 

7.13         Trust and Agency. The Purchaser accepts each indemnity in favour of any of the Purchaser Indemnitees that is not a Party as agent and trustee of that Purchaser Indemnitee and may enforce any such indemnity in favour of that Purchaser Indemnitee on behalf of that Purchaser Indemnitee. The Vendor accepts each indemnity in favour of any of the Vendor Indemnitees as agent and trustee of that Vendor Indemnitee and may enforce any such indemnity in favour of that Vendor Indemnitee on behalf of that Vendor Indemnitee.

 

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ARTICLE 8

GENERAL

 

8.1           Confidentiality of Information . The Parties shall at all times treat the Confidential Information (as such term is defined in the Non-Disclosure Agreement) in accordance with the terms of the Non-Disclosure Agreement.

 

8.2           Public Announcements. No Party shall make any public statement or issue any press release concerning the Transactions except as agreed by the Parties acting reasonably or as may be necessary, in the opinion of counsel to the Party making that disclosure, to comply with the requirements of all Applicable Law. If any public statement or release is so required, the Party making the disclosure shall consult with the other Parties before making that statement or release, and the Parties shall use all reasonable efforts, acting in good faith, to agree on a text for the statement or release that is satisfactory to the Parties.

 

8.3 Disclosure and Consultation .

 

(1) Before any public statement or press release concerning the Transactions, no Party shall disclose this Agreement or any aspect of the Transactions except to its board of directors, its senior management, its legal, accounting, financial or other professional advisors, any financial institution contacted by it with respect to any financing required in connection with the Transactions and counsel to that institution, or as may be required by any Applicable Law or as agreed by the Parties.

 

(2) The Vendor and the Purchaser shall consult with each other concerning the manner by which the Vendor’s Employees, customers, suppliers and other Persons having dealings with the Vendor shall be informed of the Transactions, and the Purchaser shall have the right to be present for any such communication.

 

8.4           Expenses. Each Party shall pay all expenses (including Taxes imposed on those expenses) it incurs in the authorization, negotiation, preparation, execution and performance of this Agreement and the Transactions, including all fees and expenses of its legal counsel, bankers, investment bankers, brokers, accountants or other representatives or consultants. Notwithstanding the forgoing, the Vendor shall be responsible for all costs associated with the Fairness Opinion.

 

8.5           Best Efforts. In this Agreement, unless specified otherwise, an obligation of any Party to use its best efforts to obtain any Approval does not require the Party to make any payment to any Person for the purpose of procuring the Approval, except for payments for amounts due and payable to that Person, payments for incidental expenses incurred by that Person and payments required by any Applicable Law.

 

8.6           No Third Party Beneficiary . Except as provided for in Section 7.13, this Agreement is solely for the benefit of the Parties and no third party accrues any benefit, claim or right of any kind pursuant to, under, by or through this Agreement.

 

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8.7           Entire Agreement . This Agreement together with the other agreements to be entered into as contemplated by this Agreement (the “ Other Agreements ”) constitute the entire agreement between the Parties pertaining to the subject matter of this Agreement and the Other Agreements and supersede all prior correspondence, agreements, negotiations, discussions and understandings, written or oral. Except as specifically set out in this Agreement or the Other Agreements, there are no representations, warranties, conditions or other agreements or acknowledgements, whether direct or collateral, express or implied, written or oral, statutory or otherwise, that form part of or affect this Agreement or the Other Agreements or which induced any Party to enter into this Agreement or the Other Agreements. No reliance is placed on any representation, warranty, opinion, advice or assertion of fact made either prior to, concurrently with, or after entering into, this Agreement or any Other Agreement, or any amendment or supplement hereto or thereto, by any Party to this Agreement or any Other Agreement or its Representatives, to any other Party or its Representatives, except to the extent the representation, warranty, opinion, advice or assertion of fact has been reduced to writing and included as a term in this Agreement or that Other Agreement, and none of the parties to this Agreement or any Other Agreement has been induced to enter into this Agreement or any Other Agreement or any amendment or supplement by reason of any such representation, warranty, opinion, advice or assertion of fact. There is no liability, either in tort or in contract, assessed in relation to the representation, warranty, opinion, advice or assertion of fact, except as contemplated in this Section.

 

8.8           Non-Merger . Except as otherwise provided in this Agreement, the covenants, representations and warranties set out in this Agreement do not merge but survive Closing and, notwithstanding such Closing or any investigation by or on behalf of a Party, continue in full force and effect. Closing does not prejudice any right of one Party against another Party in respect of any remedy in connection with anything done or omitted to be done under this Agreement.

 

8.9 Time of Essence . Time is of the essence of this Agreement.

 

8.10        Amendment. This Agreement may be supplemented, amended, restated or replaced only by written agreement signed by each Party.

 

8.11        Waiver of Rights . Any waiver of, or consent to depart from, the requirements of any provision of this Agreement is effective only if it is in writing and signed by the Party giving it, and only in the specific instance and for the specific purpose for which it has been given. No failure on the part of any Party to exercise, and no delay in exercising, any right under this Agreement operates as a waiver of that right. No single or partial exercise of any such right precludes any other or further exercise of that right or the exercise of any other right.

 

8.12         Jurisdiction. The Parties irrevocably and unconditionally attorn to the exclusive jurisdiction of the courts of the province of Ontario sitting in Toronto in respect of all disputes arising out of, or in connection with, this Agreement, or in respect of any legal relationship associated with it or derived from it.

 

8.13         Governing Law. This agreement is governed by, and interpreted and enforced in accordance with, the laws of the Province of Ontario and the laws of Canada applicable in the Province of Ontario, excluding the choice of law rules of that province.

 

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8.14 Notices .

 

(1) Any notice, demand or other communication (in this Section 8.14, a “ notice ”) required or permitted to be given or made under this Agreement must be in writing and is sufficiently given or made if:

 

(a) delivered in person and left with a receptionist or other responsible employee of the relevant Party at the applicable address set forth below;
   
(b) sent by prepaid courier service or (except in the case of actual or apprehended disruption of postal service) mail; or
   
(c) email or functionally equivalent electronic means of transmission; in the case of a notice to the Vendor, addressed to it at:

 

Ehave, Inc.

203-277 Lakeshore Road East

ON L6J 6J3, Canada

 

Attention: Prateek (Teek) Dwivedi
Email: teek@ehave.com :

 

with a copy (not constituting notice) to:

 

Garfinkle Biderman LLP

Dynamic Funds Tower, Suite 801

Toronto, Ontario M5C 2V9

 

Attention: Shimmy Posen / Grant Duthie
Email: sposen@garfinkle.com / gduthie@garfinkle.com

 

and in the case of a notice to the Purchaser, addressed to it at:

 

ZYUS Life Sciences Inc.

407 Downey Road, Suite 204

Saskatoon, SK S7N 4L8

 

Attention: Michelle Gursky
Email: legal@zyus.com

 

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with a copy (not constituting notice) to:

 

Borden Ladner Gervais LLP

East Tower, Bay Adelaide Centre

22 Adelaide St W #3400

Toronto, ON M5H 4E3

 

Attention: Philippe Tardif / Andrew McLean
Email: ptardif@blg.com / amclean@blg.com

 

(2) Any notice sent in accordance with this Section 8.14 is deemed to have been received:

 

(a) if delivered prior to or during normal business hours on a Business Day in the place where the notice is received, on the date of delivery;
   
(b) if sent by mail, on the fifth Business Day after mailing in the place where the notice is received, or, in the case of disruption of postal service, on the fifth Business Day after cessation of that disruption;
   
(c) if sent by email or other functionally equivalent electronic means, on the day on which it is transmitted; but if the notice is transmitted on a day which is not a Business Day or after 5:00 p.m. (local time of the recipient), the notice will be deemed to have been given or made and received on the next Business Day; or
   
(d) if sent in any other manner, on the date of actual receipt;

 

except that any notice delivered in person not on a Business Day or after normal business hours on a Business Day, in each case in the place where the notice is received, is deemed to have been received on the next succeeding Business Day in the place where the notice is received.

 

8.15 Assignment.

 

(1) Subject to item (2), no party may assign or transfer, whether absolutely, by way of security or otherwise, all or any part of its rights or obligations under this Agreement to any Person.

 

(2) The Purchaser may assign all of its rights and obligation under this Agreement to a subsidiary wholly-owned by it, except that such assignment shall not relieve the Purchaser of any of its obligations under this Agreement.

 

8.16         Further Assurances. Each Party shall promptly do, execute, deliver or cause to be done, executed or delivered all further acts, documents and matters in connection with this Agreement that any other Party may reasonably require, for the purposes of giving effect to this Agreement.

 

8.17         Severability. If, in any jurisdiction, any provision of this Agreement or its application to any Party or circumstance is restricted, prohibited or unenforceable, that provision will, as to that jurisdiction, be ineffective only to the extent of that restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement, without affecting the validity or enforceability of that provision in any other jurisdiction and, if applicable, without affecting its application to the other Parties or circumstances. The Parties shall engage in good faith negotiations to replace any provision which is so restricted, prohibited or unenforceable with an unrestricted and enforceable provision, the economic effect of which comes as close as possible to that of the restricted, prohibited or unenforceable provision which it replaces.

 

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8.18         Successors. This Agreement is binding on, and enures to the benefit of, the Parties and their respective successors.

 

8.19          Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together constitute one agreement. Delivery of an executed counterpart of this Agreement by facsimile or transmitted electronically in legible form, including in a tagged image format file (TIFF) or portable document format (PDF), shall be equally effective as delivery of a manually executed counterpart of this Agreement.

 

[Signature Page Follows]

 

- 57 -

 

  

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

 

  EHAVE INC.
   
  By: /s/ Prateek Dwivedi
    Name: Prateek Dwivedi
    Title: CEO

 

 

ZYUS LIFE SCIENCES INC.

 

  By: /s/ Brent Zettl
    Name: Brent Zettl
    Title: CEO

 

Asset Purchase Agreement

 

 

 

Exhibit 4.61

 

THIS PLEDGE AGREEMENT (the " Agreement ") is made as of the [●], 2019,

 

BETWEEN:

 

EHAVE, INC.

 

(the " Pledgor ")

 

-and-

 

ZYUS LIFE SCIENCES INC.

 

(the " Pledgee ")

 

RECITALS:

 

A. Pursuant to an asset purchase agreement dated [●], 2019 (the " Purchase Agreement ") between the Pledgor, as vendor, and Pledgee, as purchaser, the Pledgor sold certain assets to the Pledgee as more particularly described in the Purchase Agreement.

 

B. In consideration for the purchased assets, the Pledgee, among other things, issued 361,011 common shares (the " Shares ") in the capital of the Pledgee to the Pledgor.

 

C. Pursuant to the Purchase Agreement, the Pledgor is required to pledge to the Pledgee the Shares as security for the indemnity obligations of the Pledgor under the Purchase Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants set for herein, and for other good and valuable consideration (the receipt and sufficiency are hereby acknowledged by each party hereto)

 

1. INTERPRETATION

 

1.1 Capitalized Terms In this Agreement, except where the context otherwise requires:

 

(a) " Collateral " means all present and after-acquired property and assets of the Pledgor of the following kinds:

 

(i) the Shares;

 

(ii) all books, accounts, invoices, letters, papers, documents, disks and other records in any form, electronic or otherwise, evidencing or relating to the Shares and all other rights and benefits in respect of the Shares;

 

(iii) all renewals, substitutions and replacements of the Shares and all increases and additions to the Shares; and

 

 

 

 

(iv) all proceeds from the Shares, including property in any form derived directly or indirectly from any dealing with the Shares or proceeds from the Share.

 

Any reference to "the Collateral" in this Agreement shall be interpreted as referring to "the Collateral or any of it."

 

(b) " Event of Default " means the occurrence of (i) a "default," "event of default" or similar circumstance identified in the Purchase Agreement that entitles the Pledgee to enforce any of its rights under the Purchase Agreement, or (ii) the failure of the Pledgor to pay any of the Obligations when due.

 

(c) " Obligations " means all liabilities and obligations of the Pledgor to the Pledgee, whether present or future, direct or indirect, absolute or contingent, matured or not, at any time owing or remaining unpaid by the Pledgor to the Pledgee in any currency, under or in connection with the Purchase Agreement, including the indemnity given by the Pledgor to the Pledgee therein, and all interest, fees, commissions and legal and other costs, charges and expenses owing or remaining unpaid by the Pledgor to the Pledgee in any currency.

 

(d) " PPSA " means the Personal Property Security Act (Ontario).

 

1.2 PPSA Definitions In this Agreement, except where the context otherwise requires, the words "account," "certificated security," "control," "instrument," "money," "option," "proceeds," "securities intermediary," "security," "security certificate" and "uncertificated security" shall have the same meanings as their defined meanings where they are defined in the PPSA.

 

1.3 No Contra Proferentum This Agreement has been negotiated by the Pledgor and the Pledgee with the benefit of legal representation, and any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the construction or interpretation of this Agreement.

 

1.4 Other Interpretation Rules In this Agreement:

 

(a) The division into Sections and the insertion of headings are for convenience of reference only and do not affect the construction or interpretation of this Agreement.

 

(b) Unless otherwise specified or the context otherwise requires, (i) "including" or "includes" means "including (or includes) but is not limited to" and shall not be construed to limit any general statement preceding it to the specific or similar items or matters immediately following it, (ii) a reference to any legislation, statutory instrument or regulation or a section of it is a reference to the legislation, statutory instrument, regulation or section as amended, restated and re-enacted from time to time, and (iii) words in the singular include the plural and vice-versa and words in one gender include all genders.

 

 

 

 

(c) Unless otherwise specified or the context otherwise requires, any reference in this Agreement to payment of the Obligations includes performance of the Obligations.

 

2. GRANT OF SECURITY, ETC.

 

2.1 Grant of Security As security for payment and performance of the Obligations, the Pledgor mortgages, charges, assigns, transfers and pledges the Collateral to the Pledgee as a fixed and specific mortgage and charge, and grants the Pledgee a security interest in the Collateral.

 

2.2 Attachment The Pledgor agrees that the Pledgee has given value and that the liens created by this Agreement are intended to attach (a) with respect to Collateral that is now in existence, upon execution of this Agreement, and (b) with respect to Collateral that comes into existence in the future, upon the Pledgor acquiring rights in the Collateral or the power to transfer rights in the Collateral to the Pledgee. In each case, the parties do not intend to postpone the attachment of any lien created by this Agreement.

 

2.3 Continuing Agreement Subject to section 4.13, the liens created by this Agreement are continuing, to secure a current or running account, and will extend to the ultimate balance of the Obligations, if any, at the relevant time.

 

2.4 Merger of Pledgor If the Pledgor amalgamates or merges with one or more other entities, the Obligations and the liens created by this Agreement shall continue as to the Obligations and the Collateral, and the term shall extend to the amalgamated or merged entity, all as if the amalgamated or merged entity had executed this Agreement as the Pledgor.

 

2.5 Limitation Periods To the extent that any limitation period applies to any claim for payment of the Obligations or remedy for enforcement of the Obligations, the Pledgor agrees that:

 

(a) any limitation period is expressly excluded and waived entirely if permitted by applicable law;

 

(b) if a complete exclusion and waiver of any limitation period is not permitted by applicable law, any limitation period is extended to the maximum length permitted by applicable law;

 

(c) any applicable limitation period shall not begin before an express demand for payment of the Obligations is made in writing by the Pledgee to the Pledgor;

 

(d) any applicable limitation period shall begin afresh upon any payment or other acknowledgment of the Obligations by the Pledgor; and

 

(e) this Agreement is a "business agreement" as defined in the Limitations Act, 2002 (Ontario) if that Act applies.

 

 

 

 

3. REPRESENTATIONS OF PLEDGOR

 

3.1 Representations The Pledgor represents and warrants to the Pledgee as follows, acknowledging that its representations and warranties are material, will be relied upon by the Pledgee (notwithstanding any investigation made by the Pledgee at any time) and shall survive the execution and delivery of this Agreement without any time limitation:

 

(a) The Pledgor is the registered and beneficial owner of all of the Shares.

 

(b) All of the Pledgor's right, title and interest in, to and under the Collateral may, be freely assigned and transferred to the Pledgee, and the liens created in the Collateral may be dealt with by the Pledgee as provided in this Agreement without obtaining any approval or consent of any person or the filing of any document or the fulfilment of any legal requirement or the taking of any proceeding, other than any approval or consent that may be required from the board of directors or shareholders of the Pledgee pursuant to its constating documents.

 

(c) There is no existing agreement, option, right or privilege capable of becoming an agreement or option pursuant to which the Pledgor would be required to sell or otherwise dispose of any of the Collateral.

 

(d) The Pledgee is not acting as agent of the Pledgor in any way with respect to the Collateral.

 

(e) No person, other than the Pledgee, now has control (for purposes of the PPSA) of any part of the Collateral.

 

4. RIGHTS AND OBLIGATIONS OF THE PLEDGOR

 

4.1 Maintain Collateral The Pledgor shall diligently maintain the Collateral so as to preserve the Collateral and the income from the Collateral and shall comply with all requirements of any governmental authority and all agreements relating to any of the Collateral and all other conditions on which the Collateral is held.

 

4.2 Restrictions on Liens and Dispositions The Pledgor shall not create, assume, incur or permit the existence of any lien on the Collateral, nor shall the Pledgor sell, lend or otherwise dispose of the Collateral, or permit such a disposition to occur.

 

4.3 Possession and Control of Collateral The Pledgor shall take whatever steps the Pledgee requires from time to time to enable the Pledgee to obtain control of the Collateral, including (a) delivering any certificated security to the Pledgee with any necessary endorsement, and (b) having the Shares registered in the name of the Pledgee or its nominee.

 

4.4 Safekeeping The Pledgee shall have no duty with respect to any Collateral delivered to it other than to exercise reasonable care in the safe custody of the Collateral and otherwise in accordance with applicable law.

 

 

 

 

4.5 Receipts by Pledgor The Pledgor shall hold the certificate representing the Shares in trust for the Pledgee and immediately deliver it to the Pledgee in the form received with any endorsement required by the Pledgee, to be held by the Pledgee as part of the Collateral.

 

4.6 Other Assurances; Power of Attorney On request by the Pledgee, the Pledgor shall execute, acknowledge and deliver all financing statements, certificates, further assignments, documents, transfers, stock transfer powers, proxies, instruments, security documents, acknowledgments and assurances and do all further acts and things as the Pledgee may consider necessary or desirable to give effect to the intent of this Agreement, or for the collection, disposition, realization or enforcement of the Collateral or the liens created by this Agreement. The Pledgor constitutes and appoints the Pledgee its true and lawful attorney, with full power of substitution, to do any of the foregoing or any other things that the Pledgor has agreed to do in this Agreement, whenever and wherever the Pledgee may consider it to be necessary or desirable, and to use the Pledgor's name in the exercise of the Pledgee's rights under this Agreement. This power of attorney is coupled with an interest and is irrevocable by the Pledgor.

 

4.7 Restriction on Change of Name The Pledgor shall not change its name without providing the Pledgee with 30 days advance written notice and promptly taking other steps, if any, as the Pledgee requests to ensure that the position of the Pledgee is not adversely affected by the change in name.

 

4.8 Restriction on Change of Office Location The Pledgor shall not permit its chief executive office to be located out of the province of Ontario without providing the Pledgee with 30 days advance written notice and promptly taking other steps, if any, as the Pledgee requests to ensure that the position of the Pledgee is not adversely affected by the change of location.

 

4.9 Proceeds Before Default Subject to Section 4.5 above and to the provisions of the Purchase Agreement, until the occurrence of an Event of Default that is continuing, the Pledgor may receive any payments or other proceeds relating to the Collateral.

 

4.10 Voting Before Default Until the occurrence of an Event of Default that is continuing, the Pledgor may exercise all of the rights and powers of a holder of the Shares, including the right to vote.

 

4.11 Pledgee May Perform Pledgor's Duties If the Pledgor fails to perform any of its duties under this Agreement, the Pledgee may, but shall not be obligated to, perform any or all of those duties, without waiving any rights to enforce this Agreement. The Pledgor shall pay the Pledgee, immediately on written demand, an amount equal to the costs, fees and expenses incurred by the Pledgee in doing so plus interest from the date the costs, fees and expenses are incurred until paid at the highest rate of interest applicable to the Obligations. The costs, fees, expenses and interest shall be included in the Obligations under this Agreement.

 

 

 

 

4.12 Pledgee Not Liable for Pledgor's Agreements Nothing in this Agreement shall make the Pledgee liable to observe or perform any term of any agreement to which the Pledgor is a party or by which it or the Collateral is bound, or make the Pledgee a mortgagee in possession. The Pledgor shall indemnify the Pledgee and save it harmless from any claim arising from any such agreement.

 

4.13 Release of Liens The liens created by this Agreement shall expire on the earlier of (such date, the " Termination Date "): (a) the date on which the Pledgor has indefeasibly paid the Obligations in full in cash, if any, and otherwise performed all of the terms of the Purchase Agreement, and all indemnity obligations of the Pledgor under the Purchase Agreement have expired, and (b) the date that is two years after the date of this Agreement. Forthwith following the Termination Date, the Pledgee shall, at the request and expense of the Pledgor, fully release and discharge the liens created by this Agreement and execute and deliver whatever documents, and take such acts, as may be reasonably required to do so.

 

5. RIGHTS AND OBLIGATIONS ON DEFAULT

 

5.1 Application of Article The provisions of this Article 5 apply on the occurrence of an Event of Default that is continuing.

 

5.2 Termination of Further Credit and Acceleration of Obligations Upon the Obligations becoming due and payable, the Pledgee may enforce payment of the Obligations and the Pledgee shall have the rights and remedies of a secured party under the PPSA and other applicable law together with those rights and remedies provided by this Agreement or otherwise provided by applicable law.

 

5.3 Proceeds After Default The Pledgee may hold and/or use the Collateral in the manner and to the extent that the Pledgee may consider appropriate. The Pledgee may take charge of all proceeds of the Collateral and may hold them as additional security for the Obligations. The Pledgee shall not, however, be required to collect any proceeds of the Collateral. The Pledgee may also enforce any rights of the Pledgor in respect of the Collateral by any manner permitted by law.

 

5.4 Voting After Default The Pledgee may have any Collateral registered in its name or in the name of its nominee and shall be entitled but not required to exercise voting and other rights that the holder of that Collateral may at any time have, but the Pledgee shall not be responsible for any loss occasioned by the exercise of those rights or by failure to exercise them. The Pledgee may also enforce its rights under any agreement with any securities intermediary or issuer of uncertificated securities.

 

5.5 Notice of Disposition If required to do so by applicable law, the Pledgee shall give the Pledgor written notice of any intended disposition of the Collateral. The Pledgor waives giving of notice to the maximum extent permitted by applicable law.

 

5.6 Statutory Waivers To the maximum extent permitted by law, the Pledgor waives all of the rights, benefits and protections given by any present or future statute that imposes limits on the rights, remedies or powers of the Pledgee or on the methods of realization of security, including any seize or sue or anti-deficiency statute or any similar provisions of any other statute.

 

 

 

 

5.7 Disposition and Other Rights of Pledgee The Pledgee may (a) make payments on account of, to discharge, or to obtain an assignment of any lien on the Collateral, whether or not ranking in priority to the liens created by this Agreement, (b) borrow money required for the seizure, retaking, repossession, holding, insuring, maintaining, protecting, preserving, preparing for disposition or disposition of the Collateral or for any other enforcement of this Agreement on the security of the Collateral in priority to the liens created by this Agreement, (c) file proofs of claim and other documents to establish the claims of the Pledgee in any proceeding relating to the Pledgor, (d) sell or otherwise dispose of all or any part of the Collateral at public auction, by public tender or by private sale or other disposition, either for cash or on credit, at such time and on such terms and conditions as the Pledgee may determine, and (e) complete blanks in any endorsement by the Pledgor of a certificated security in order to complete a disposition. If any disposition involves deferred payment, the Pledgee will not be accountable for and the Pledgor will not be entitled to be credited with the proceeds of disposition until payment is actually received in cash. On any disposition, the Pledgee shall have the right to acquire all or any part of the Collateral that is offered for disposition and the rights of the Pledgor in that Collateral shall be extinguished. The Pledgee may also accept the Collateral in satisfaction of the Obligations or may from time to time designate any part of the Obligations to be satisfied by the acceptance of particular Collateral that the Pledgee reasonably determines to have a net realizable value equal to the amount of the designated part of the Obligations, in which case only the designated part of the Obligations shall be satisfied by the acceptance of the particular Collateral.

 

5.8 Commercially Reasonable Actions and Omissions In exercising its rights and obligations under this Agreement, the Pledgee shall not be responsible or liable to the Pledgor or any other person for any loss or damage from the realization or disposal of any Collateral or the enforcement of this Agreement, or any failure to do so, provided that any act or omission on the Pledgee’s part or on the part of any of its directors, officers, employees, agents or advisors, as applicable, are commercially reasonable in the circumstances. For greater certainty, and notwithstanding the foregoing, the Pledgee may be responsible or liable for loss or damage arising from its wilful misconduct or gross negligence.

 

5.9 Costs of Realization All reasonable costs incurred in connection with realizing the security constituted by this Agreement or exercising any of the Pledgee's rights under this Agreement, including costs incurred in connection with repossessing, holding, insuring, repairing, processing, preparing for disposition, and disposing of any Collateral and legal fees on a full indemnity (sometimes called solicitor and own client) basis (in this Section, " realization costs ") shall be payable by the Pledgor to the Pledgee immediately on demand. Realization costs shall bear interest from the date they are incurred until paid at the highest rate of interest applicable to the Obligations. Realization costs and interest shall be included in the Obligations under this Agreement.

 

5.10 Other Security; Application of Money The Pledgee may (a) refrain from enforcing any other security or rights held by or on behalf of the Pledgee in respect of the Obligations, or enforce any other security or rights in any manner and order as it sees fit, and (b) apply any money received from or in respect of the Collateral in any manner and order as it sees fit and change any application of money received in whole or in part from time to time, or refrain from applying any money and hold it in a suspense account.

 

 

 

 

5.11 Third Parties No person dealing with the Pledgee is required to determine (a) whether the liens created by this Agreement or the powers purporting to be exercised have become enforceable, (b) whether any Obligations remain owing, (c) the propriety of any aspect of the disposition of Collateral or (d) how any payment to the Pledgee has been or will be applied. Any person who acquires Collateral from the Pledgee in good faith shall acquire it free from any interest of the Pledgor.

 

5.12 Rights Cumulative No failure on the part of the Pledgee to exercise, nor any delay in exercising, any right or remedy under the Purchase Agreement or this Agreement shall operate as a waiver or impose any liability on the Pledgee, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and do not exclude any rights and remedies provided by applicable law. If the Pledgee has enforced any right or remedy under this Agreement and the enforcement proceeding has been discontinued, abandoned or determined adversely to the Pledgee for any reason, then the Pledgor and the Pledgee shall, without any further action, be restored to their previous positions to the maximum extent permitted by law and subject to any determination in the enforcement proceeding or express agreement between the Pledgor and the Pledgee, and thereafter all rights and remedies of the Pledgee shall continue as if no enforcement proceeding had been taken.

 

5.13 Pledgor Liable for Deficiency If the proceeds arising from the disposition of the Collateral fail to satisfy the Obligations, the Pledgor shall pay any deficiency to the Pledgee on demand. Neither the taking of any judicial or extra-judicial proceeding nor the exercise of any power of seizure or disposition or other remedy shall extinguish the liability of the Pledgor to pay and perform the Obligations, nor shall the acceptance of any payment or alternate security create any novation. No covenant, representation or warranty of the Pledgor in this Agreement shall merge in any judgment.

 

6. NOTICES

 

6.1 Notices in Writing Any communication to be made under this Agreement shall be made in accordance with section 8.14 of the Purchase Agreement.

 

7. ENTIRE AGREEMENT; SEVERABILITY

 

7.1 Entire Agreement This Agreement embodies all the agreements between the Pledgor and the Pledgee relating to the liens created in this Agreement and the related rights and remedies. No party shall be bound by any representation or promise made by any person relating to this Agreement that is not embodied in it. Any waiver of, or consent to departure from, the requirements of any provision of this Agreement shall be effective only if it is in writing and signed by the Pledgee, and only in the specific instance and for the specific purpose for which it has been given.

 

 

 

 

7.2 Severability If, in any jurisdiction, any provision of this Agreement or its application to any circumstance is restricted, prohibited or unenforceable, that provision shall, as to that jurisdiction, be ineffective only to the extent of that restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement, without affecting the validity or enforceability of that provision in any other jurisdiction and, if applicable, without affecting its application to other circumstances.

 

8. DELIVERY OF AGREEMENT

 

8.1 Counterparts This Agreement may be executed in any number of counterparts and all counterparts taken together shall be deemed to constitute one agreement.

 

8.2 Delivery To evidence the fact that it has executed this Agreement, the Pledgor may send a signed copy of this Agreement or its signature to this Agreement by facsimile transmission or e-mail and the signature sent in that way shall be deemed to be its original signature for all purposes.

 

8.3 No Conditions Possession of this Agreement by the Pledgee shall be conclusive evidence against the Pledgor that the Agreement was not delivered in escrow or pursuant to any agreement that it should not be effective until any condition precedent or subsequent has been complied with. This Agreement shall be operative and binding notwithstanding that it is not executed by any proposed signatory.

 

8.4 Receipt and Waiver The Pledgor acknowledges receipt of a copy of this Agreement. The Pledgor waives any notice of acceptance of this Agreement by the Pledgee. The Pledgor also waives the right to receive a copy of any financing statement or financing change statement that may be registered in connection with this Agreement or any verification statement issued with respect to a registration, if waiver is not otherwise prohibited by law. The Pledgor agrees that the Pledgee may from time to time provide information regarding this Agreement, the Collateral and the Obligations to persons that the Pledgee believes in good faith are entitled to the information under applicable law.

 

9. GOVERNING LAW

 

9.1 Governing Law This Agreement and any dispute arising from or in relation to this Agreement shall be governed by, and interpreted and enforced in accordance with, the law of the province of Ontario and the laws of Canada applicable in that province, excluding the conflict of law rules of that province.

 

9.2 Pledgor's Exclusive Dispute Resolution Jurisdiction The Pledgor agrees that the courts of the province of Ontario have exclusive jurisdiction over any dispute arising from or in relation to this Agreement and the Pledgor irrevocably and unconditionally attorns to the exclusive jurisdiction of that province. The Pledgor agrees that the courts of that province are the most appropriate and convenient forum to settle disputes and agrees not to argue to the contrary.

 

9.3 Pledgee Entitled to Concurrent Jurisdiction Despite Section 9.2, the Pledgee is permitted to take proceedings in relation to any dispute arising from or in relation to this Agreement in any court of another province or another state with jurisdiction and to the extent allowed by law may take concurrent proceedings in any number of jurisdictions.

 

 
 

 

10. SUCCESSORS AND ASSIGNS

 

10.1 Successors and Assigns The Pledgor may not assign or transfer all or any part of its liabilities under this Agreement. All rights of the Pledgee under this Agreement shall be assignable and the Pledgor shall not assert against any assignee any claim or defence that the Pledgor now has or may in the future have against the Pledgee. This Agreement shall enure to the benefit of the Pledgee and its successors and assigns and be binding on the Pledgor and its successors and any permitted assigns.

 

[ signature page immediately follows

 

 

 

 

IN WITNESS OF WHICH, the Pledgor and Pledgee have duly executed this Agreement.

 

  EHAVE, INC.
   
  By:  
    Name:
    Title:
     
    (I have authority to bind the corporation)

 

  ZYUS LIFE SCIENCES INC.
   
  By:  
    Name:
    Title:
     
    (I have authority to bind the corporation)

 

Pledge Agreement

 

 

 

 

Exhibit 4.62

 

Non-competition AGREEMENT

 

THIS AGREEMENT dated the ____ day of ___________ , 2019.

 

BETWEEN:

 

EHAVE, INC.

 

As Vendor

 

- and -

 

ZYUS LIFE SCIENCES INC.

 

As Purchaser

 

RECITALS:

 

A. Pursuant to an asset purchase agreement (the " Purchase Agreement ") dated [●], 2019 entered into among Ehave, Inc. (the " Vendor ") and ZYUS Life Sciences Inc. (the " Purchaser "), the Vendor has agreed to sell and the Purchaser has agreed to purchase the Purchased Assets (as such term is defined under the Purchase Agreement).

 

B. The covenants contained in this Agreement are fundamental conditions to the completion of the transactions contemplated by the Purchase Agreement, without which the Purchaser would not purchase the Purchased Assets.

 

IN CONSIDERATION of the mutual covenants and agreements contained in this Agreement and for other good and valuable consideration (the receipt and adequacy of which are acknowledged), the Parties agree as follows:

 

Article 1
Interpretation

 

1.1 Definitions . In this Agreement, including the Recitals to this Agreement, unless the context otherwise requires:

 

(1) " Agreement " means this non-competition agreement, as amended, supplemented, restated and replaced from time to time in accordance with its provisions.

 

(2) " Business " means the business of a healthcare software development company for stakeholders in health sectors related to plant-based therapeutics.

 

 

 

 

(3) " Confidential Information " means all information, data, and documents in any form relating to the Business, irrespective of whether such information, data, and documents are marked, labeled or otherwise identified as proprietary or confidential, and includes, without limitation, all oral and visual communications, all business and marketing plans, Intellectual Property, the identities of actual and potential clients, business opportunities, methods, funding sources, sellers of stock or assets, suppliers, licensees, potential transactions, conceptual ideas, business investors, products, services, business partners, associates, the identities of customers and potential customers, financial information, and processes and techniques, but does not include information that, at the time of disclosure was already in the public domain or becomes generally available to the public other than as a result, directly or indirectly, of a breach of this Agreement (and for this purpose, information is not deemed to be available to the public merely because it is within the common general knowledge, nor is information deemed to be available to the public merely because its individual features are available to the public, unless the combination of features or their nexus are available to the public).

 

(4) " Indemnified Party " has the meaning attributed to that term in Section 3.1.

 

(5) " Infringe " means infringe (whether directly, contributorily, by inducement or otherwise), misappropriate, violate or otherwise conflict with or harm (whether direct, contributory, by inducement or otherwise) and " Infringed " and " Infringement " have a corresponding meaning.

 

(6) " Intellectual Property " means, individually and collectively, howsoever created and wherever located:

 

(a) all domestic and foreign patents and applications thereof and all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof;

 

(b) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know-how, technology, technical data, schematics and customer lists, and all documentation relating to any of the foregoing;

 

(c) all trade names, domain names, corporate names, trade dress, distinguishing guises, logos, slogans, brand names, trademarks (whether registered or common law and whether used with wares or services and including the goodwill attaching to such trademarks) and registrations and applications for registration thereof;

 

(d) all Software (in source code and object code form) and databases, and any proprietary rights in such Software and databases;

 

(e) all integrated circuit design, mask work, or topography registrations or applications thereof;

 

(f) all industrial designs and applications for and registration of industrial designs, design patents and industrial design registrations;

 

(g) other intellectual or industrial property whatsoever;

 

  - 2 -  

 

 

(h) all income, royalties, damages and payments now and hereafter due and/or payable with respect to any of the foregoing, including damages and payments for past or future Infringements thereof; and

 

(i) all rights to sue for past, present and future Infringements of any of the foregoing.

 

(7) " Parties " means collectively the Vendor and the Purchaser, and " Party " means either of them.

 

(8) " Purchase Agreement " has the meaning attributed to that term in the Recitals.

 

(9) " Purchaser " has the meaning attributed to that term in the Recitals.

 

(10) " Software " means software, including all versions thereof, whether installed locally, on a local area network or delivered through the internet, and all related documentation, manuals, source code and object code, program files, data files, computer related data, field and data definitions and relationships, data definition specifications, data models, program and system logic, interfaces, program modules, routines, sub-routines, algorithms, program architecture, design concepts, system designs, program structure, sequence and organization, screen displays and report layouts, including any and all modifications, changes, release, versions, upgrades, updates or patches of any of the foregoing, and all other material related to such software.

 

(11) " Territory " has the meaning attributed to that term in Section 2.1(1).

 

(12) " Transactions " means the transactions contemplated by the Purchase Agreement.

 

(13) " Vendor " has the meaning attributed to that term in the Recitals.

 

1.2 Certain Rules of Interpretation . In this Agreement:

 

(a) capitalized terms not otherwise defined herein have the meanings attributed to them in the Purchase Agreement;

 

(b) the division into Articles and Sections and the insertion of headings are for convenience of reference only and do not affect the construction or interpretation of this Agreement;

 

(c) the expressions "hereof", "herein", "hereto", "hereunder", "hereby" and similar expressions refer to this Agreement and not to any particular portion of this Agreement; and

 

(d) unless specified otherwise or the context otherwise requires:

 

(i) references to any Article, Section or Schedule are references to the Article or Section of, or Schedule to, this Agreement;

 

  - 3 -  

 

 

(ii) "including" or "includes" means "including (or includes) but is not limited to" and is not to be construed to limit any general statement preceding it to the specific or similar items or matters immediately following it;

 

(iii) words in the singular include the plural and vice-versa and words in one gender include all genders.

 

1.3 Computation of Time . In this Agreement, unless specified otherwise or the context otherwise requires:

 

(a) a reference to a period of days is deemed to begin on the first day after the event that started the period and to end at 5:00 p.m. on the last day of the period, but if the last day of the period does not fall on a Business Day, the period ends at 5:00 p.m. on the next succeeding Business Day;

 

(b) all references to specific dates mean 11:59 p.m. on the dates;

 

(c) all references to specific times are references to Toronto time; and

 

(d) with respect to the calculation of any period of time, references to "from" mean "from and excluding" and references to "to" or "until" mean "to and including".

 

Article 2
Non-competition and confidentiality

 

2.1 Non-Competition .

 

(1) The Vendor shall not, for a period of four (4) years from the date of this Agreement, within Canada and the United States of America (the " Territory "), directly or indirectly, in any manner whatsoever including either individually, in partnership, jointly or in conjunction with any other Person, or as employee, consultant, independent contractor, principal, agent, director, officer, owner or shareholder :

 

(a) be engaged in any undertaking or business;

 

(b) have any financial or other interest (including an interest by way of royalty or other compensation arrangements) in or in respect of the business of any Person which carries on, directly or indirectly, an undertaking or business; or

 

(c) advise, lend money to, guarantee the debts or obligations of or give security on behalf of any Person which carries on, directly or indirectly, an undertaking or business;

 

that is in whole or in part the same as or substantially similar to or competitive with the Business.

 

  - 4 -  

 

 

(2) Notwithstanding Section 2.1(1) or anything to the contrary herein, the following shall not be, and shall not give rise to, a breach or contravention of this Agreement any passive equity investment by the Vendor and/or any of its Affiliates in any Person which, directly or indirectly, carries on a business in the Territory that is in whole or in part the same as or substantially similar to or competitive with the Business and whose equity securities are listed on a recognized stock exchange, where the equity investment does not in the aggregate exceed five (5%) percent of the issued equity shares of that Person.

 

(3) For the purposes of Section 2.1, a business is substantially similar to the Business if the business, viewed objectively in light of its products, services and functions, (i) resembles (but is not necessarily identical to) the Business, or (ii) resembles aspects of the Business, in one or more (but not necessarily all) material, relevant or significant respects, and/or has a general nature or character related to that of the Business.

 

2.2 Confidentiality .

 

(1) The Vendor acknowledges that it has and/or had access to and has been acquiring or adding to Confidential Information which information is the exclusive property of the Purchaser. Subject to 2.2(2), the Vendor shall hold in confidence and keep confidential all Confidential Information and shall not use for its own benefit or for the benefit of others any Confidential Information and shall not transfer, publish or otherwise disclose any Confidential Information to any Person.

 

(2) The prohibition in this Section 2.2 does not prohibit the Vendor from disclosing any Confidential Information where required to do so by applicable law or regulatory requirements or where required by any competent judicial, legislative or regulatory body or authority, provided that the Vendor shall, to the extent permitted by applicable law, provide reasonable advance notice of such disclosure to the Purchaser to permit it to exercise its commercially reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such information and allow the Purchaser a reasonable opportunity to comment on such disclosure.

 

(3) The obligations of the Vendor under this Section 2.2 shall remain in effect in perpetuity and exist and continue in full force and effect notwithstanding any breach or repudiation, or alleged breach or repudiation, by the Vendor of this Agreement. The obligations contained in this Section 2.2 are not in substitution for any obligations which the Vendor may now or hereafter owe to the Purchaser and which exist apart from this Section 2.2 and do not replace any rights of the Purchaser with respect to any such obligations.

 

  - 5 -  

 

 

2.3 Remedies .

 

(1) The Vendor specifically acknowledges that a breach by the Vendor of any of the provisions of Sections 2.1 to 2.2 inclusive would cause the Business and consequently the Purchaser irreparable harm not compensable in damages alone. The Vendor further acknowledges that in the event of any such breach by the Vendor, it is essential to the effective enforcement of this Agreement that, in addition to any other remedies to which the Purchaser may be entitled at law or in equity or otherwise under this Agreement, the Purchaser be entitled to seek and obtain, in a summary manner, from any court having jurisdiction under Section 4.5 or from the arbitrator, interim, interlocutory and permanent injunctive relief, specific performance and other equitable remedies.

 

(2) In addition to any other remedies to which the Purchaser may be entitled at law or in equity or otherwise under this Agreement, in the event of a breach of any of the covenants or other obligations contained in this Agreement, the Purchaser shall be entitled to an accounting and repayment of all profits, compensation, royalties, commissions, remunerations or benefits which the Vendor, directly or indirectly, shall have realized or may realize relating to, arising out of, or in connection with any such breach.

 

Article 3
indemnification

 

3.1            Indemnity . The Vendor shall indemnify and save harmless the Purchaser and its shareholders, subsidiaries, directors, officers, employees, agents and representatives (each, an " Indemnified Party ") from any and all claims, actions, suits, proceedings, investigations, inquiries, arbitration awards, grievances, demands, judgments, settlements, compromises, losses, liabilities, damages (including incidental and consequential damages), costs, expenses, charges, fines, penalties or assessments suffered or incurred by the Purchaser or any Indemnified Party as a result of or arising in connection with any violation, contravention or breach of this Agreement by the Vendor. The Purchaser accepts each indemnity in favour of an Indemnified Party as agent and trustee of that Indemnified Party and may enforce any such indemnity in favour of that Indemnified Party on behalf of that Indemnified Party.

 

Article 4
General

 

4.1 Acknowledgement . The Vendor acknowledges that:

 

(a) the Vendor has received the value and advantage of special information and expertise in the Business, and that the Vendor may well be able to utilize that information and expertise to the serious detriment of the Purchaser;

 

(b) in agreeing to enter into the Transactions, the Purchaser has relied on each of the Vendor's covenants of non-competition and confidentiality set out in this Agreement and that this Agreement is an integral part of Transactions under which the Vendor has received significant benefit;

 

(c) it has had sufficient time to review and consider this Agreement thoroughly;

 

  - 6 -  

 

 

(d) it has read and understands the terms of this Agreement and covenants and agreements hereunder; and

 

(e) it has been given an opportunity to obtain independent legal advice, or such other advice as the Vendor may desire, concerning the interpretation and effect of this Agreement.

 

4.2            Entire Agreement . This Agreement together with the Purchase Agreement and the other agreements contemplated by the Purchase Agreement (collectively, the " Other Agreements ") constitute the entire agreement between the Parties pertaining to the subject matter of this Agreement and the Other Agreements and supersede all prior correspondence, agreements, negotiations, discussions and understandings, written or oral. Except as specifically set out in this Agreement or the Other Agreements there are no representations, warranties, conditions or other agreements or acknowledgements, whether direct or collateral, express or implied, written or oral, statutory or otherwise, that form part of or affect this Agreement or the Other Agreements or which induced any Party to enter into this Agreement or the Other Agreements.

 

4.3            Amendment . This Agreement may be supplemented, amended, restated or replaced only by written agreement signed by each Party.

 

4.4            Waiver of Rights . Except as expressly provided in this Agreement, any waiver of, or consent to depart from, the requirements of any provision of this Agreement is effective only if it is in writing and signed by the Party giving it, and only in the specific instance and for the specific purpose for which it has been given. No failure on the part of any Party to exercise, and no delay in exercising, any right under this Agreement operates as a waiver of that right. No single or partial exercise of any such right precludes any other or further exercise of that right or the exercise of any other right.

 

4.5            Jurisdiction . The Parties irrevocably and unconditionally attorn to the exclusive jurisdiction of the courts of the Province of Ontario sitting in Toronto in respect of all disputes arising out of, or in connection with, this Agreement, or in respect of any legal relationship associated with it or derived from it.

 

4.6            Governing Law . This Agreement is governed by, and interpreted and enforced in accordance with, the laws of the Province of Ontario and the laws of Canada applicable in Ontario, excluding the choice of law rules of Ontario.

 

4.7 Notices .

 

(1) Any notice, demand or other communication (in this Section 4.7, a " notice ") required or permitted to be given or made under this Agreement must be in writing and is sufficiently given or made if:

 

(a) delivered in person and, if applicable, left with a receptionist or other responsible employee of the relevant Party at the applicable address set forth below;

 

  - 7 -  

 

 

(b) sent by prepaid courier service, mail (except in the case of actual or apprehended disruption of postal service) or email; or

 

(c) email or functionally equivalent electronic means of transmission;

 

in the case of a notice to the Vendor, addressed to it at:

 

Ehave, Inc.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

Attention: Prateek (Teek) Dwivedi
Email: teek@ehave.com

 

in the case of a notice to the Purchaser, addressed to it at:

 

ZYUS Life Sciences Inc.

407 Downey Road, Suite 204
Saskatoon, SK S7N 4L8

 

Attention: Michelle Gursky
Email: legal@zyus.com

 

(2) Any notice sent in accordance with this Section 4.7 is deemed to have been received:

 

(a) if delivered prior to or during normal business hours on a Business Day in the place where the notice is received, on the date of delivery;

 

(b) if sent by mail, on the fifth Business Day after mailing in the place where the notice is received, or, in the case of disruption of postal service, on the fifth Business Day after cessation of that disruption;

 

(c) if sent by email or other functionally equivalent electronic means, on the day on which it is transmitted; but if the notice is transmitted on a day which is not a Business Day or after 5:00 p.m. (local time of the recipient), the notice will be deemed to have been given or made and received on the next Business Day; or

 

(d) if sent in any other manner, on the date of actual receipt;

 

except that any notice delivered in person or sent by transmission not on a Business Day or after normal business hours on a Business Day is deemed to have been received on the next succeeding Business Day in the place where the notice is received.

 

(3) Either Party may change its address for notice by giving notice to the other Party.

 

  - 8 -  

 

 

4.8            Assignment . This Agreement and the obligations of the Vendor shall not be assigned by the Vendor, in whole or in part, without the prior written consent of the Purchaser, which consent may be withheld for any reason. This Agreement and the obligations of the Purchaser may be assigned by the Purchaser, in whole or in part, without the prior consent of the Vendor.

 

4.9            Severability . Each provision of this Agreement is declared to constitute a separate and distinct covenant and to be severable from all other such separate and distinct covenants. Without limiting the generality of the foregoing, if any of the capacities, activities, periods or areas specified in this Agreement are considered by a court of competent jurisdiction as being unreasonable, the court has the authority to limit the capacities, activities, periods or areas to those that the court deems proper in the circumstances. If, in any jurisdiction, any provision of this Agreement or its application to either Party or circumstance is restricted, prohibited or unenforceable, that provision will, as to that jurisdiction, be ineffective only to the extent of that restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement, without affecting the validity or enforceability of that provision in any other jurisdiction and, if applicable, without affecting its application to the other Parties or circumstances. The Parties shall engage in good faith negotiations to replace any provision which is so restricted, prohibited or unenforceable with an unrestricted and enforceable provision, the economic effect of which comes as close as possible to that of the restricted, prohibited or unenforceable provision which it replaces. To the extent permitted by applicable law, the Parties waive any provision of applicable law which renders any provision of this Agreement invalid or unenforceable in any respect.

 

4.10          Enurement . This Agreement enures to the benefit and is binding on the Parties and their respective successors and permitted assigns.

 

4.11          Counterparts . This Agreement may be executed in any number of counterparts, each of which is deemed to be an original and all of which taken together constitute one agreement. Delivery of an executed counterpart of this Agreement by facsimile or transmitted electronically in legible form, including in a tagged image format file (TIFF) or portable document format (PDF), is equally effective as delivery of a manually executed counterpart of this Agreement.

 

[signature page follows]  

 

  - 9 -  

 

 

IN WITNESS WHEREOF the Parties have duly executed this Agreement.

 

  EHAVE, INC.
   
  By:  
    Name:
    Title:

 

  ZYUS LIFE SCIENCES INC.
   
  By:  
    Name:
    Title:

 

[Signature Page – Non-Competition Agreement]

 

 

 

Exhibit 4.63

 

MINUTES OF SETTLEMENT

BETWEEN:

EHAVE, INC. (“ Ehave ”)

 

- and -

 

COMPANION HEALTHCARE TECHNOLOGIES INC. (“ Companion ”)

 

WHEREAS Ehave and Companion (collectively, the “ Parties ”) entered into a license and reseller agreement dated as of October 30, 2018 (the “ License Agreement ”);

 

AND WHEREAS the Parties now desire to, among other things, terminate the License Agreement and fully and finally settle and resolve all existing and potential claims and disputes arising out of the License Agreement;

 

AND WHEREAS Ehave and ZYUS Life Sciences Inc. (“ Zyus ”) entered into an asset purchase agreement dated as of March 22, 2019, pursuant to which, among other things, Zyus will, upon the closing of the transactions (the “ APA Closing ”) contemplated thereby, advance the sum of $940,000 to Ehave (the “ APA Consideration ”);

 

AND WHEREAS Ehave intends to apply a portion of the APA Consideration to satisfy its obligations under these minutes of settlement;

 

Provided that, and conditional upon the occurrence of the APA Closing, the Parties hereto do hereby agree to settle all matters arising as between them, as follows:

 

1. Ehave shall, within ten (10) business days following the date of the APA Closing, pay to Companion, in cash, the sum of up to $242,000 (the “ Settlement Payment ”), which payment shall fully and finally satisfy all outstanding fees owed to Companion under the License Agreement. The Settlement Payment is comprised of:

 

a. $205,000; and

b. up to $37,000 for legal services that Companion incurred in the negotiation of the License Agreement, which shall be substantiated with invoices from Companion’s legal services providers.

 

2. In consideration for the Settlement Payment, Companion and Ehave shall enter into the termination and release agreement, in the form attached hereto as Schedule “A”.

 

3. If the APA Closing does not occur on or prior to June 30, 2019, then these minutes of settlement will be deemed to be of no force and effect, as if never made.

 

4. These minutes of settlement may be executed in one or more counterparts, each of which so executed shall constitute an original and all of which together shall constitute one and the same agreement. A facsimile counterpart of these minutes of settlement bearing the signatures of the parties shall be binding on both parties to these minutes of settlement.

 

 

 

 

IN WITNESS WHEREOF the parties hereto have executed these minutes of settlement on the 18th day of April, 2019.

 

    COMPANION HEALTHCARE TECHNOLOGIES INC.
     
  Per: /s/ Scott Woodrow
    Name: Scott Woodrow
    Title: Chief Executive Officer
     
    EHAVE, INC.
     
  Per: /s/ Prateek Dwivedi
    Name: Prateek Dwivedi
    Title: Chief Executive Officer

 

 

 

 

Exhibit 12.1

 

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Prateek Dwivedi, certify that:

 

1. I have reviewed this annual report on Form 20-F of Ehave, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

Date: May 15, 2019  
   
/s/ Prateek Dwivedi  
Prateek Dwivedi  
Chief Executive Officer  

 

 

 

 

Exhibit 12.2

 

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Dianne Parsons, certify that:

 

1. I have reviewed this annual report on Form 20-F of Ehave, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

Date: May 15, 2019

 

/s/ Dianne Parsons  
Dianne Parsons  
Acting Chief Financial Officer  

 

 

  

 

Exhibit 13.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER SECTION 906 OF THE SARBANES-OXLEY ACT

 

Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Ehave, Inc. (the “Company”) hereby certifies, to such officer’s knowledge that:

 

1. The accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 15, 2019

 

/s/ Prateek Dwivedi  
Prateek Dwivedi  
Chief Executive Officer  

 

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

 

  

 

Exhibit 13.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER SECTION 906 OF THE SARBANES-OXLEY ACT

 

Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Ehave, Inc. (the “Company”) hereby certifies, to such officer’s knowledge that:

 

1. The accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 15, 2019

 

/s/ Dianne Parsons  
Dianne Parsons  
Acting Chief Financial Officer  

 

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.