As filed with the Securities and Exchange Commission on September 15, 2022.
Registration No.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
| GOLDEN STAR ENTERPRISES LTD. |
| (Exact name of registrant as specified in its charter) |
| Delaware | | 7370 | | 52-2132622 |
| (State or other jurisdiction of incorporation or organization) | | (Primary Standard Industrial Classification Code Number) | | (I.R.S. Employer Identification Number) |
Golden Star Enterprises Ltd.
Suite B, 2803 Philadelphia Pike
Claymont, DE 19703
(888) 680-8033
(Name, Address, including zip code, and telephone and facsimile number, including area code, of registrants’ principal executive offices)
Approximate date of commencement sales to the public: As soon as practicable after the effective date of this Registration Statement and from time to time after this registration statement has become effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| | | Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The Registrant hereby amends this Registration Statement (the “Registration Statement”) on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where an offer or sale is not permitted
SUBJECT TO COMPLETION DATED SEPTEMBER 15, 2022
PRELIMIARY PROSPECTUS
Golden Star Enterprises Ltd.
Selling Shareholders
40,000,000 Shares of Common Stock Pursuant to an Equity Purchase Agreement (MHLFP EPA)
29,000,000 Shares of Common Stock Pursuant to the Exercise of Common Stock Purchase Warrants (MHLFP SPA Warrant Shares and MHLFP EPA Warrant Shares)
37,000,000 Shares of Common Stock Pursuant to a Promissory Note (MHLFP Note Shares)
4,920,000 Shares of Common Stock Pursuant to a Securities Purchase Agreement (MHLFP Commitment Shares)
7,500,000 Shares of Common Stock Pursuant to a Consulting Agreement (Beyond Shares)
118,420,000 Shares of Common Stock
Equity Purchase Agreement
On May 27, 2022, we entered into a Equity Purchase Agreement (“MHLFP EPA”) with Mast Hill Fund, LP (“MHFLP”, or a “Selling Stockholder”), pursuant to which, upon the terms and subject to the conditions thereof, MHFLP is committed to purchase, on an unconditional basis, shares of our common stock (the “Put Shares”) at an aggregate price of up to $5,000,000 (the “Maximum Commitment Amount”) over the course of its term. The term of the Equity Purchase Agreement will end on the earlier of (i) the date on which such Selling Stockholder has purchased Common Stock pursuant to the Equity Purchase Agreement equal to the Maximum Commitment Amount, (ii) two years from the date this Registration Statement is deemed effective, or (iii) written notice of termination by us.
From time to time over the term of the Equity Purchase Agreement, commencing on the date on which a registration statement registering Put Shares becomes effective, we may, in our sole discretion, provide MHFLP with a put notice (each a “Put Notice”) to purchase a specified number of Put Shares (each a “Put Amount Requested”) subject to the limitations discussed below and contained in the Equity Purchase Agreement. Upon delivery of a Put Notice, we must deliver the Put Amount Requested as Deposit Withdrawal at Custodian (DWAC) shares to Selling Stockholder within five trading days.
The actual amount of proceeds we receive pursuant to each Put Notice (each, the “Put Amount”) is determined by multiplying the Put Amount Requested by the applicable purchase price. The purchase price for each of the Put Shares equals 70% of the “Market Price,” which is defined as the lowest closing bid price of the Company’s Common Stock on the Principal Market during the fourteen (14) Trading Days immediately preceding the Put Date of the respective Put Notice, The Valuation Period is the seven (7) trading days immediately following the date MHFLP receives the Put Shares in its brokerage account.
In order to deliver a Put Notice, certain conditions set forth in the Equity Purchase Agreement must be met. In addition, we are prohibited from delivering a Put Notice if: (i) the sale of Put Shares pursuant to such Put Notice would cause us to issue and sell to Selling Stockholder, or the Selling Stockholder to acquire or purchase, a number of shares of our common stock that, when aggregated with all shares of Common Stock purchased by Selling Stockholder pursuant to all prior Put Notices issued under the Equity Purchase Agreement, would exceed the Maximum Commitment Amount; or (ii) the issuance of the Warrant Shares upon exercise of the Warrants would cause us to issue and sell to Selling Stockholder, or the Selling Stockholder to acquire or purchase, an aggregate number of shares of Common Stock that would result in Selling Stockholder beneficially owning more than 4.99% of the issued and outstanding shares of our common stock (the “Beneficial Ownership Limitation’).
If issued presently, the 40,000,000 shares of common stock registered for resale by MHFLP under the MHFLP EPA would represent approximately 37% of our existing issued and outstanding shares of common stock as of September 13, 2022, which totals 107,416,146, and approximately 18% of the fully diluted outstanding share capital, including issuance of the 40,000,000 shares and all other potentially dilutive shares including share purchase warrants and shares underlying convertible notes.
In connection with the execution of the Equity Purchase Agreement, we issued a common stock purchase warrant (the “MHFLP EPA Warrant”) for the purchase of 10,000,000 shares of our Common Stock (the “MHFLP EPA Warrant Shares”) to the Selling Stockholder as a commitment fee. The MHFLP Warrant has a term of five years from the date of issuance and currently has an exercise price (repriced) at $0.04 per share. The exercise of the MHFLP Warrant is subject to the Beneficial Ownership Limitation and is exercisable immediately; upon presentation of an exercise notice, the Company is obligated to issue the corresponding number of shares.
We also entered into a registration rights agreement (the “Registration Rights Agreement”) with MHFLP pursuant to which we agreed to file a Registration Statement to register the resale of the Put Shares, and the resale of shares by MHFLP underlying a Common Stock Purchase Warrant (MHFLP Warrant). Pursuant to the Registration Rights Agreement, we agreed to (i) file the Registration Statement within 120 calendar days from the Closing Date, (ii) use reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933, as amended, as promptly as possible after the filing thereof, and (iii) use its reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Put Shares have been sold thereunder or pursuant to Rule 144.
The 40,000,000 shares pursuant to the MHFLP EPA, and the 10,000,000 shares issuable upon exercise of the MHFLP EPA Warrant are being registered under the Registration Statement of which this Prospectus forms a part for resale by MHFLP, which agreed to limiting its ownership to no more than 4.99% of the issued and outstanding shares, at any one time.
Securities Purchase Agreement
On May 20, 2022, we entered into a Securities Purchase Agreement (“SPA”) and Senior Secured Promissory Note with MHFLP, whereby in consideration of $370,000, less $37,000 discount fee; less $26,640 to J.H. Darbie and Company, pursuant to a finder’s fee agreement, and $5,000 for legal expenses, we issued to MHFLP a convertible promissory note (“MHFLP Note”) in the principal amount of $370,000. Further, in conjunction with the MHFLP Note, the Company agreed to issue a series of five-year warrants for the purchase of a cumulative 19,000,000 shares of our Common Stock (the “MHFLP SPA Warrants”), all exercisable at $0.04 per share (the “MHFLP SPA Warrant Shares”) as a result of the impact an anti-dilution clause whereby if at any time while the warrants are outstanding, the Company shall sell or grant any option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue any common stock or securities priced at less than the exercise price of the warrants, then the Company is obligated to notify the warrant holder and to adjust the warrant exercise price by reducing, at the option of the Holder and only reduced to equal the issuance price or the new issuance such that the number of Warrant Shares issuable shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment (for the avoidance of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment). On June 6, 2022, the Company issued shares under a consulting agreement to Beyond priced at $0.04 per share thus triggering a repricing of the share purchase warrants originally issued under the SPA to an exercise price of $0.04 per share.
The principal amount of the MHFLP Note and all interest accrued thereon is payable on May 20, 2023. The MHFLP Note provides for interest at the rate of 12% per annum, payable at maturity, and is convertible into our Common Stock at a price of $0.01 per share, or 37,000,000 common shares (the “MHFLP Note Shares”) subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. Holder shall be entitled to deduct $1,750.00 from the conversion amount in each Notice of Conversion to cover Holder’s fees associated with each Notice of Conversion.
We also entered into a registration rights agreement (the “Registration Rights Agreement”) with MHFLP pursuant to which we agreed to file a Registration Statement to register the underlying MHFLP Note Shares, and the MHFLP SPA Warrant Shares. Pursuant to the Registration Rights Agreement, we agreed to (i) file the Registration Statement within 120 calendar days from the Closing Date, (ii) use reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933, as amended, as promptly as possible after the filing thereof, and (iii) use its reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Put Shares have been sold thereunder or pursuant to Rule 144.
The 37,000,000 MHFLP Note Shares issuable upon conversion of the MHFLP Note and the 19,000,000 common shares issuable upon exercise of the MHFLP SPA Warrants are being registered under the Registration Statement of which this Prospectus forms a part for resale by MHFLP, which agreed to limiting its ownership to no more than 4.99% of the issued and outstanding shares, at any one time.
Further, the Company is registering 4,920,000 shares of common stock (the MHLFP Commitment Shares), on behalf of the selling shareholder, pursuant to the SPA which shares were issued as a commitment fee to MHLFP.
Finally, the Company is registering 7,500,000 shares of common stock, on behalf of the selling shareholder, Michael Kahiri, pursuant to a consulting agreement between the Company and Beyond Media SEZC a company of which Mr. Kahiri is the sole shareholder.
Use of Proceeds
We intend to use the proceeds from the Equity Line and any cash received upon exercise of the warrants, unless the warrant holder elects to use the cashless exercise provision in which case we will not receive any proceeds for the warrants exercised, for general corporate and working capital purposes and other purposes that the Board of Directors deems to be in the best interest of the Company.
We intend to raise additional capital through equity and debt financings as needed, though there cannot be any assurance that such funds will be available to us on acceptable terms, on an acceptable schedule, or at all.
Our independent registered public accountant has issued an audit opinion for the year ended December 31, 2021, which includes a statement expressing substantial doubt as to our ability to continue as a going concern. Accordingly, any investment in the shares offered hereby involves a high degree of risk and you should only purchase shares if you can afford a loss of your entire investment.
Our common stock is quoted on the OTC Pink Sheets under the symbol “GSPT.” The closing price of our common stock as reported on the OTC Pink Sheets on September 14, 2022, was $0.017 per share.
You should rely only on the information contained in this prospectus. We have not authorized any persons to provide you with information different from that contained in this prospectus. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. We are a smaller reporting company, as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such we may take advantage of reduced reporting burdens. Investing in our common stock involves risk. Please see “Risk Factors” beginning on page 13.
THE PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS, INCLUDING THE SECTION ENTITLED “RISK FACTORS” BEGINNING ON PAGE 13 BEFORE BUYING ANY SHARES OF OUR COMMON STOCK.
NEITHEIR THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is September 15, 2022
You should rely only on the information contained or incorporated by reference to this prospectus in deciding whether to purchase our Common Stock. We have not authorized anyone to provide you with information different from that contained in this prospectus. Under no circumstances should the delivery to you of this prospectus or any sale made pursuant to this prospectus create any implication that the information contained in this prospectus is correct as of any time after the date of this prospectus. To the extent that any facts or events arising after the date of this prospectus, individually or in the aggregate, represent a fundamental change in the information presented in this prospectus, the prospectus will be updated to the extent required by law.
TABLE OF CONTENTS
This prospectus is part of a Registration Statement we filed with the Securities and Exchange Commission (the “SEC.”) Under this registration process, the selling stockholders may, from time to time, offer and sell up to 118,420,000 shares of our common stock, as described in this prospectus, in one or more offerings. This prospectus provides you with a general description of the securities the selling stockholders may offer. You should read this prospectus carefully before making an investment decision.
You may only rely on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with additional or different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the shares of our common stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances or any jurisdiction in which such offer or solicitation is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus regardless of the time of delivery of this prospectus or any sale of our common stock. The rules of the SEC may require us to update this prospectus in the future.
The SEC allows us to incorporate by reference information that we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. You should rely only on the information incorporated by reference or set forth in this prospectus or any prospectus supplement.
DEALER PROSPECTUS DELIVERY OBLIGATION
Until September [ ], 2024, all dealers that effect transactions in these securities, whether or not participating in this Offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the ”Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the ”Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” and “continue” or the negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees of future performance. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of their dates.
We cannot predict all the risks and uncertainties that may impact our business, financial condition or results of operations. Accordingly, the forward-looking statements in this prospectus should not be regarded as representations that the results or conditions described in such statements will occur or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this prospectus and include information concerning possible or projected future results of our operations, including statements about potential acquisition or merger targets, strategies or plans; business strategies; prospects; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results; and any other statements that are not historical facts.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to a variety of factors and risks, including, but not limited to, those set forth under “Risk Factors” starting on page 13 of this prospectus.
You should read these risk factors and the other cautionary statements made in the Company’s filings as being applicable to all related forward-looking statements wherever they appear in this prospectus. We cannot assure you that the forward-looking statements in this prospectus will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. You should read this prospectus completely. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
We caution investors not to place undue reliance on any forward-looking statement that speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described in this prospectus, as well as others that we may consider immaterial or do not anticipate at this time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. Our expectations reflected in our forward-looking statements can be affected by inaccurate assumptions that we might make or by known or unknown risks and uncertainties, including those described in this prospectus. These risks and uncertainties are not exclusive and further information concerning us and our business, including factors that potentially could materially affect our financial results or condition, may emerge from time to time.
For more information about the risks and uncertainties the Company faces, see the section “Risk Factors” in this prospectus. Forward-looking statements speak only as of the date they are made. The Company does not undertake and specifically declines any obligation to update any forward-looking statements or to publicly announce the results of any revisions to any statements to reflect new information or future events or developments. We advise investors to consult any further disclosures we may make on related subjects in our annual reports on Form 10-K and other reports that we file with or furnish to the SEC.
MARKET DATA
Market data and certain industry data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. To our knowledge, certain third-party industry data that includes projections for future periods does not take into account the effects of the worldwide coronavirus pandemic. Accordingly, those third-party projections may be overstated and should not be given undue weight. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the forecasts we cite. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.
ABOUT THIS PROSPECTUS
We have not authorized anyone to provide you with any information or to make any representation other than that contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared we may authorize to be delivered or made available to you. We do not take any responsibility for, and can provide no assurance as to the reliability of, any information that others may provide to you. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. You should also read and consider the information in the documents to which we have referred you under the caption “Where You Can Find More Information” in this prospectus.
For investors outside the United States: Neither we or the selling stockholders have done anything that would permit a public offering of the securities or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities and the distribution of this prospectus outside of the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus outside of the United States.
You should rely only on the information contained in this prospectus. Neither we, the selling stockholder have authorized any dealer, salesperson or other person to provide you with information concerning us, except for the information contained in this prospectus.
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate or plan to operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry, and assumptions based on such information and knowledge which we believe to be reasonable. Our management estimates have not been verified by any independent source, and we have not independently verified any third-party information. In addition, assumptions and estimates of our company’s and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors” beginning on page 13. These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Statement Regarding Forward-Looking Statements” on page 4 above.
PROSPECTUS SUMMARY
The following summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information you should consider before investing in our securities. Before deciding to invest in our securities, you should read this entire prospectus, including the discussion of “Risk Factors” and our consolidated financial statements and the related notes.
Throughout this prospectus, unless otherwise designated or the context suggests otherwise,
| • | all references to the ”Company,” “Golden Star,” ”Enigmai”, the ”registrant,” “we,” “our,” or ”us” in this prospectus mean Golden Star Enterprises Ltd.., a Delaware corporation, and its wholly owned subsidiary, Enigmai Ltd., an Israel corporate entity. |
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| • | “year” or ”fiscal year” means the Company’s fiscal year ending December 31st; and |
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| • | all dollar or $ references refer to United States dollars, unless otherwise indicated |
Our Company
Our History
On September 13, 1993, we were incorporated as Power Direct, Inc. on January 31, 2000, we effected a name change to 2U Online.com, , and further name changes to Golden Spirit Minerals Ltd. on October 8, 2003, Golden Spirit Mining Ltd. on October 19, 2004, Golden Spirit Gaming Ltd. on July 18, 2005, Golden Spirit Enterprises Ltd. on June 30, 2006, Terralene Fuels Corporation on August 29, 2011, and to Golden Star Enterprises Ltd., which is our current name on June 5, 2013. On October 27, 2020, the Company entered into an acquisition agreement with the shareholders of Enigmai Ltd., an enterprise software company established in 2009 which offers clients a workforce management system solution, whereby the Company acquired 100% of the issued and outstanding shares of Enigmai Ltd in exchange for 22,000,000 restricted common shares of the Company, of which 2,000,000 shares were a finder’s fee payment to third parties. The transaction closed effective October 31, 2020, and the Company administratively issued the shares on November 24, 2020, making Enigmai Ltd. a wholly owned subsidiary of the Company.
Overview
We conduct all of the operations currently through Enigmai, our wholly owned subsidiary based in Israel, which was established in early 2009 and has since developed an advanced workforce management system for scheduled environments. Enigmai helps organizations implement their vision, integrating with existing systems and software. Enigmai offers a visible, detailed, aware organizational system, which considers all relevant factors and provides a service appreciated by both managers and employees (the “Enigmai Business Suite”)
The Enigmai Business Suite software is a fixed fee software – every client receives the same version. Customers pay a one-time fee for the Enigmai Business Suite software, and 12% annually for maintenance and support, which maintenance fee may fluctuate dependent on the client, the features requested, the number of seats and the geographical locations . Updates and new versions are included, and we charge a small one time set up fee.
Recent Developments
On January 14, 2022, we entered into a finder’s fee agreement with J.H. Darbie & Company (“Darbie”) whereby Darbie provided introduction services to qualified funders for the Company. In consideration for any closing introductions Darbie would receive a finder’s fee in cash equal to 8% of the gross proceeds of an equity/convertible debt transaction or 3% of the gross proceeds of a non-convertible debt transaction, plus equity in the form of common stock equal to 8% of the amount raised. We issued a total of 701,053 shares of restricted common stock to Darbie on May 20, 2022, and these shares are not a part of this prospectus offering.
On May 20, 2022, we entered into a Securities Purchase Agreement (“SPA”) and Senior Secured Promissory Note with MHFLP, whereby in consideration of $370,000, less $37,000 discount fee; less $26,640 to Darbie pursuant to the finder’s fee agreement, and $5,000 for legal expenses, we issued to MHFLP a convertible promissory note (“MHFLP Note”) in the principal amount of $370,000. Further, in conjunction with the MHFLP Note, the Company agreed to issue a series of five-year warrants for the purchase of a cumulative 19,000,000 shares of our Common Stock (the “MHFLP SPA Warrants”), all exercisable at $0.04 per share (the “MHFLP SPA Warrant Shares”) as a result of the impact an anti-dilution clause whereby if at any time while the warrants are outstanding, the Company shall sell or grant any option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue any common stock or securities priced at less than the exercise price of the warrants, then the Company is obligated to notify the warrant holder and to adjust the warrant exercise price by reducing, at the option of the Holder and only reduced to equal the issuance price or the new issuance such that the number of Warrant Shares issuable shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment (for the avoidance of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment). On June 6, 2022, the Company issued shares under a consulting agreement to Beyond priced at $0.04 per share thus triggering a repricing of the share purchase warrants originally issued under the SPA to an exercise price of $0.04 per share.
On May 27, 2022, we entered into a Equity Purchase Agreement with Mast Hill Fund, LP (“MHFLP”, or a “Selling Stockholder”), pursuant to which, upon the terms and subject to the conditions thereof, MHFLP is committed to purchase, on an unconditional basis, shares of our common stock (the “Put Shares”) at an aggregate price of up to $5,000,000 (the “Maximum Commitment Amount”) over the course of its term. The term of the Equity Purchase Agreement will end on the earlier of (i) the date on which such Selling Stockholder has purchased Common Stock pursuant to the Equity Purchase Agreement equal to the Maximum Commitment Amount, (ii) two years from the date this Registration Statement is deemed effective, or (iii) written notice of termination by us.
From time to time over the term of the Equity Purchase Agreement, commencing on the date on which a registration statement registering Put Shares becomes effective, we may, in our sole discretion, provide MHFLP with a put notice (each a “Put Notice”) to purchase a specified number of Put Shares (each a “Put Amount Requested”) subject to the limitations discussed below and contained in the Equity Purchase Agreement. Upon delivery of a Put Notice, we must deliver the Put Amount Requested as Deposit Withdrawal at Custodian (DWAC) shares to Selling Stockholder within five trading days.
The actual amount of proceeds we receive pursuant to each Put Notice (each, the “Put Amount”) is determined by multiplying the Put Amount Requested by the applicable purchase price. The purchase price for each of the Put Shares equals 70% of the “Market Price,” which is defined as the average of the two (2) lowest volume weighted average prices of our Common Stock during the Valuation Period. The Valuation Period is the seven (7) trading days immediately following the date MHFLP receives the Put Shares in its brokerage account.
In order to deliver a Put Notice, certain conditions set forth in the Equity Purchase Agreement must be met. In addition, we are prohibited from delivering a Put Notice if: (i) the sale of Put Shares pursuant to such Put Notice would cause us to issue and sell to Selling Stockholder, or the Selling Stockholder to acquire or purchase, a number of shares of our common stock that, when aggregated with all shares of Common Stock purchased by Selling Stockholder pursuant to all prior Put Notices issued under the Equity Purchase Agreement, would exceed the Maximum Commitment Amount; or (ii) the issuance of the Warrant Shares upon exercise of the Warrants would cause us to issue and sell to Selling Stockholder, or the Selling Stockholder to acquire or purchase, an aggregate number of shares of Common Stock that would result in Selling Stockholder beneficially owning more than 4.99% of the issued and outstanding shares of our common stock (the “Beneficial Ownership Limitation’).
In connection with the execution of the Equity Purchase Agreement, we issued a common stock purchase warrant (the “MHFLP EPA Warrant”) for the purchase of 10,000,000 shares of our Common Stock (the “MHFLP EPA Warrant Shares”) to the Selling Stockholder as a commitment fee. The MHFLP EPA Warrant has a term of five years from the date of issuance and has an exercise price of $0.04 per share. On June 6, 2022, the Company issued shares under a consulting agreement to Beyond priced at $0.04 per share thus triggering a repricing of the share purchase warrants originally issued under the SPA to an exercise price of $0.04 per share. The exercise of the MHFLP EPA Warrant is subject to the Beneficial Ownership Limitation and is exercisable immediately; upon presentation of an exercise notice, the Company is obligated to issue the corresponding number of shares.
We also entered into registration rights agreements (the “Registration Rights Agreements”) with MHFLP pursuant to which we agreed to file a Registration Statement to register the resale of the Put Shares, and the resale of shares by MHFLP underlying the MHFLP EPA Warrant, as well as the shares underlying the MHFLP Note, the MHFLP SPA Warrants and 4,920,000 shares of common stock issued to MHFLP as a commitment fee, pursuant to the SPA. Pursuant to the Registration Rights Agreements, we agreed to (i) file the Registration Statement within 120 calendar days from the Closing Date, (ii) use reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act of 1933, as amended, as promptly as possible after the filing thereof, and (iii) use its reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until all of the Put Shares have been sold thereunder or pursuant to Rule 144.
On June 6, 2022, the Company entered into a consulting agreement with Beyond Media SEZC (“Beyond”) whereby Beyond will provide consulting and investor relations service to the Company for a period of 12 months. Beyond directed the Company to issue the shares to its principal Michael Kahiri, who was issued a total of 7,500,000 shares of common stock valued at $0.04 per share ($300,000) under the contract on June 6, 2022.
Corporate Information
Our principal executive offices are located at 2803 Philadelphia Pike, Suite B #565, Claymont, DE 19703. Our telephone number is (888) 680-8033 and our website address is www.goldenstarenterprisesltd.com. The information contained on our website is not part of this prospectus.
SUMMARY OF THE OFFERING
| The Issuer | | Golden Star Enterprises Ltd. |
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| Number of Shares Currently Outstanding | | 107,416,146 Common Shares |
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| Securities being offered by selling stockholders | | A Selling Stockholder identified in this prospectus may offer and sell up to 40,000,000 shares of our common stock to be sold by Mast Hill Fund L.P. (MHFLP), a Delaware corporation, pursuant to the Equity Purchase Agreement. Further, the Company is registering 37,000,000 shares of common stock, on behalf of a Selling Stockholder, pursuant to a Securities Purchase Agreement and Promissory Note entered into with MHFLP, for which the Company has received the proceeds, and which MHFLP may sell. Further, the Company is registering 4,920,000 shares of common stock issued to MHFLP as a commitment fee in respect of the aforementioned Securities Purchase Agreement. Mast Hill Fund, L.P., will not hold more than 4.99% of the issued and outstanding shares of our Common Stock at any one time. Finally, the Company is registering 7,500,000 shares of common stock, on behalf of a Selling Stockholder, issued to Michael Kahiri, pursuant to a Consulting Agreement the Company entered into with Beyond Media SEZC. |
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| Description of Common Stock issuable upon the exercise of Common Stock Purchase Warrants Included in the registration statement by selling stockholders | | The Company is registering a cumulative 29,000,000 shares of common stock on behalf of a Selling Stockholder, pursuant to certain Common Stock Purchase Warrants, which allows for the purchase of common stock upon exercise of the warrants, issued to MHFLP, in conjunction with the Equity Purchase Agreement, and Securities Purchase Agreement, wherein MHFLP may purchase common stock at $0.04 per share. All common stock purchase warrants are exercisable immediately; upon presentation of an exercise notice, the Company is obligated to issue the corresponding number of shares. |
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| Offering Price | | The Selling Stockholders may sell all or a portion of the shares being offered pursuant to this prospectus following the effectiveness of this Form S-1 Registration Statement, or not at all. |
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| Public Market | | We are currently traded on the OTCPINK market under the symbol GSPT. We cannot give any assurance that the shares being offered will have a market value, or that they can be resold at the offered price if and when an active secondary market might develop. |
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| Duration of Offering | | The shares offered pursuant to “Put Notices” are offered for a period of twenty-four months following effectiveness of this Registration Statement, unless extended by our Board of Directors for an additional 90 days. |
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| Number of Shares Outstanding Before the Offering | | There are 107,416,146 shares of Common Stock issued and outstanding as of the date of this prospectus, 0 Stock Options granted as of the date of this prospectus, and 29,000,000 Warrants issued as of the date of this prospectus. |
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| Registration Costs | | We estimate our total costs relating to the registration herein to be approximately $50,000. |
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| Net Proceeds to the Company | | If the Company is successful in issuing all available “Put Notices” to Mast Hill Fund, LP, we will issue an estimated 40,000,000 shares of Common Stock, $0.0001 par value at an offering price equal to 70% of the volume weighted average price of the Company’s Common Stock on the Principal Market on the Trading Day immediately preceding the respective Put Date for the duration of the Offering (the “Offering”) for maximum net proceeds to the Company of $5,000,000 if all the shares are sold. |
| Use of Proceeds | | We will not receive any of the proceeds from the sale of the Common Stock registered hereunder. We will receive proceeds from MHFLP upon “Put Notices” presented to MHFLP by the Company, and pursuant to the Equity Purchase Agreement. We will also receive proceeds upon the exercise of the MHFLP Warrants, assuming they are not exercised on a “cashless” basis. We intend to use such proceeds, if any, for general corporate purposes and working capital requirements. |
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| Risk Factors | | An investment in our Common Stock involves a high degree of risk. You should carefully consider the risk factors set forth under the “Risk Factors” section herein and the other information contained in this prospectus before making an investment decision regarding our Common Stock. |
Summary Historical Financial Data
The following table summarizes our recent financial data. We have derived the following summary of our statements of operations data for the six months ended June 30, 2022, and 2021 from our unaudited condensed consolidated financial statements appearing elsewhere in this prospectus. We have derived the following summary of our statements of operations data for the fiscal years ended December 31, 2021, and 2020, and the following summary of our balance sheet data as of December 31, 2021 and 2020, from our audited consolidated financial statements appearing elsewhere in this prospectus. The following summary of our financial data set forth below should be read together with our financial statements and the related notes to those statements, as well as the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing elsewhere in this prospectus.
| | | Six Months Ended June 30 | | | Year Ended December 31, | |
| | | (Unaudited) | | | Audited | |
| | | 2022 | | | 2021 | | | 2021 | | | 2020 | |
| Statement of Operations Data: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Revenues | | $ | 22,836 | | | $ | 21,666 | | | $ | 45,075 | | | $ | 52,165 | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Cost of revenue | | | 1,370 | | | | 1,300 | | | | 2,705 | | | | 25,809 | |
| Professional fees | | | 51,272 | | | | 39,156 | | | | 112.172 | | | | 5,894 | |
| Consulting fees | | | 577,501 | | | | 254,519 | | | | 428,021 | | | | 72,272 | |
| Research and development | | | 88,398 | | | | - | | | | - | | | | - | |
| General and Administrative | | | 95,976 | | | | 122,277 | | | | 286,441 | | | | 6,832 | |
| Total operating expenses | | | 814,517 | | | | 417,252 | | | | 829,339 | | | | 110,807 | |
| Operating Loss | | | (791,681 | ) | | | (395,586 | ) | | | (784,264 | ) | | | (58,642 | ) |
| | | | | | | | | | | | | | | | | |
| Other income (expenses): | | | | | | | | | | | | | | | | |
| Loss on debt settlement | | | - | | | | (135,577 | | | | (135,577 | ) | | | - | |
| Interest expense | | | (1,880,808 | ) | | | (441,954 | ) | | | (1,254,863 | ) | | | (488,640 | ) |
| Unrealized gain (loss)on investment | | | (100,240 | ) | | | (468,100 | ) | | | (792,933 | ) | | | 988,684 | |
| Total other income (expense) | | | (1,981,046 | ) | | | (1,045,631 | ) | | | (2,183,373 | ) | | | 500,044 | |
| | | | | | | | | | | | | | | | | |
| Net Income (Loss) | | | (2,772,729 | ) | | | (1,441,217 | ) | | | (2,967,637 | ) | | | 441,402 | |
| | | | | | | | | | | | | | | | | |
| Other Comprehensive Income (Loss) | | | | | | | | | | | | | | | | |
| Foreign currency translation adjustment | | | 2,264 | | | | 77 | | | | (1,575 | ) | | | (407 | ) |
| Comprehensive Income (Loss) | | $ | (2,770,4655 | ) | | $ | (1,441,140 | ) | | $ | (2,969,212 | ) | | $ | 440,995 | |
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| Balance Sheet Data: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Current assets | | $ | 302,410 | | | | 99,471 | | | $ | 347,445 | | | $ | 1,091,154 | |
| Total Assets | | | 302,410 | | | | 99,794 | | | | 347,445 | | | | 1,091,154 | |
| Total Liabilities | | | 3,946,684 | | | | 1,131,839 | | | | 2,084,054 | | | | 601,572 | |
| Total stockholders’ equity | | | (3,644,274 | ) | | | (1,032,045 | ) | | | (1,736,609 | ) | | | 489,582 | |
RISK FACTORS
Investing in our shares involves significant risks. Before making an investment decision, you should consider carefully the risks, uncertainties and other factors and information relating to our business, condition and operating results, including those set forth below and those contained elsewhere in this prospectus. If any of the following risks were to occur, our business, affairs, assets, financial condition, results of operations, cash flows, liquidity and prospects could be materially and adversely affected, the trading price of our shares could decline, and you could lose all or part of your investment in our shares. When we say that something could have a material adverse effect on us or on our business, we mean that it could have one or more of these effects.
Risks Relating to Our Business
Our Executive Officers and Directors have additional business activities and as such are not devoting all of their time to us, which may result in periodic interruptions, or business failure.
Although we do not feel there is a conflict of interest, certain of our Directors and Officers operate other business ventures and must balance their time between running the public company and their outside business interests. While there are no set minimum hours that they are obligated to work our Company businesses Mr. Kling spends at least 80 hours a month on our Company business, Mr. Shefsky spends at least 50 hours per month and Ms. Muskal spends at least120 hours per month on our Company business. Our operations may be such that decisions need to occur at times when our directors or officers are unavailable, which may lead to the periodic interruption in the implementation of our business plan. Such delays could have a significant negative effect on the success of the business.
General inflation and increases in the minimum wage and general labor costs, could adversely affect our business, financial condition and results of operations.
Labor is a significant portion of our cost structure, and is subject to many external factors, including minimum wage laws, prevailing wage rates, unemployment levels, health insurance costs and other insurance costs and changes in employment and labor legislation or other workplace regulation. From time to time, legislative proposals are made to increase the minimum wage in Israel, as well as the minimum wage in the United States and Canada, where we may retain staff, and to reform entitlement programs, such as health insurance and paid leave programs. On April 1, 2022, the national minimum wage was increased from 5,300 shekels per month to 5,400 shekels per month in Israel. Despite the fact that we have limited personnel retained as employees and focus predominantly on agreements with independent contractors, we may determine to directly hire employees and this wage increase may also impact on the fees our contractors charge us. This increase will mostly likely contribute to the overall increase in prevailing wage rates and increase in current general levels of inflation. As minimum wage rates increase or related laws and regulations change, we will need to increase not only the wage rates of our minimum wage employees, if any, but also the wages paid to our other hourly or salaried employees. Increases in the cost of our labor could have an adverse effect on our business, financial condition and results of operations, or if we fail to pay such higher wages, we could suffer increased employee turnover. Increases in labor costs generally could force us to increase prices for our customers, which could adversely impact our sales. For some customers with multi-year fixed priced contracts, increases in the minimum wage could decrease our profit margins or result in losses and could have a material adverse effect on our business, financial condition and results of operations.
We have been and could continue to be negatively impacted by the novel coronavirus pandemic (COVID-19) and related governmental actions and orders and market effects.
The coronavirus pandemic (COVID-19) and related economic downturn continues to pose various and interrelated risks to our customers, our employees, our vendors and the communities in which we operate, which have all negatively impacted, and may continue to negatively impact, our business. From March 24, 2020, to current, customers have responded with varying levels of project postponements, particularly in our segment. Our level of customer engagement in licensing our software has varied with the ebb and flow of the initial virus and the subsequent variants and outbreaks. In addition, our business, financial condition and results of operations could be materially adversely affected by future outbreaks of COVID-19 generally or in our facilities. We are also likely to be impacted further by decreased customer demand as a result of a reduction in customer spending or as a result of government-imposed restrictions on businesses. If the pandemic or its recovery continues to reduce customer’s budgets and restrict business operations, the pandemic may have a material adverse effect on our business, results of operations, financial condition and cash flows and adversely impact the trading price of our common stock.
If we are unable to continue to attract new customers and increase market awareness of our company and solutions, our revenue growth could be slower than we expect or could decline.
We believe that our future growth depends in part upon increasing our customer base. Our ability to achieve significant growth in revenue in the future will depend, in part, upon continually attracting new customers and obtaining subscription renewals to our solutions from those customers. Market awareness of our capabilities and solutions is essential to our ability to generate new leads for expanding our business and our continued growth. If we fail to sufficiently invest in our marketing programs or they are unsuccessful in attracting new customers by creating market awareness of our company and solutions, our business may be harmed.
If our existing customers fail to renew their support agreements, or if customers do not license updated products on terms favorable to us, our revenues could be adversely affected.
We intend to derive a significant portion of our overall revenues from maintenance services and software subscriptions, and we depend on our installed customer base for future revenue from maintenance services and software subscriptions and licenses of updated products. Currently we charge our customers monthly recurring fees per seat, an onetime implementation fee, a training fee and any fees related to special developments, as well as monthly maintenance fees. The IT industry generally has been experiencing increasing pricing pressure from customers when purchasing or renewing support agreements. Moreover, the trend towards consolidation in certain industries that we serve, such as financial services, could result in a reduction of the software under agreement and put pressure on our maintenance and support terms with customers who have merged. Given this environment, there can be no assurance that our current customers will renew their maintenance agreements or agree to the same terms when they renew, which could result in our reducing or losing maintenance fees. If our existing customers fail to renew their maintenance agreements, or if we are unable to generate additional maintenance fees through the licensing of updated products to existing or new customers, our business and future operating results could be adversely affected.
Reduced IT or enterprise software spending may adversely impact our business.
Our business depends on the overall demand for IT and enterprise software spend and on the economic health of our current and prospective customers. Any meaningful reduction in IT or enterprise software spending or weakness in the economic health of our current and prospective customers could harm our business in a number of ways, including longer sales cycles and lower prices for our solutions.
Current and future competitors could have a significant impact on our ability to generate future revenues and profits.
The markets for our products are intensely competitive and are subject to rapid technological change and other pressures created by changes in our industry. The convergence of many technologies has resulted in unforeseen competitors arising from companies that were traditionally not viewed as threats to our marketplace. We expect competition to increase and intensify in the future as the pace of technological change and adaptation quickens, and as additional companies enter our markets, including those competitors who offer similar products and services to ours, but offer them through a different form of delivery. Numerous releases of competitive products have occurred in recent history and are expected to continue in the future. We may not be able to compete effectively with current competitors and potential entrants into our marketplace. We could lose market share if our current or prospective competitors: (i) introduce new competitive products, (ii) add new functionality to existing products, (iii) acquire competitive products, (iv) reduce prices, or (v) form strategic alliances with other companies. If other businesses were to engage in aggressive pricing policies with respect to competing products, or if the dynamics in our marketplace resulted in increased bargaining power by the consumers of our products and services, we would need to lower the prices we charge for the products we offer. This could result in lower revenues or reduced margins, either of which could materially and adversely affect our business and operating results. Additionally, if prospective consumers choose other methods, different from those that we offer, our business and operating results could also be materially and adversely affected.
Consolidation in the industry, particularly by large, well-capitalized companies, could place pressure on our operating margins which could, in turn, have a material adverse effect on our business.
Acquisitions by large, well-capitalized technology companies have changed the marketplace for our goods and services by replacing competitors that are comparable in size to our company with companies that have more resources at their disposal to compete with us in the marketplace. In addition, other large corporations with considerable financial resources either have products that compete with the products we offer or have the ability to encroach on our competitive position within our marketplace. These companies have considerable financial resources, channel influence, and broad geographic reach; thus, they can engage in competition with our products and services on the basis of sales price, marketing, services, or support. They also have the ability to introduce items that compete with our maturing products and services. The threat posed by larger competitors and their ability to use their better economies of scale to sell competing products and services at a lower cost may materially reduce the profit margins we earn on the goods and services we provide to the marketplace. Any material reduction in our profit margin may have a material adverse effect on the operations or finances of our business, which could hinder our ability to raise capital in the public markets at opportune times for strategic acquisitions or general operational purposes, which may prevent effective strategic growth or improved economies of scale or put us at a disadvantage to our better-capitalized competitors.
We must manage our internal resources during periods of company growth, or our operating results could be adversely affected.
If we are successful with our growth plans, any growth will place significant strains on our administrative and operational resources, and increase demands on our internal systems, procedures and controls. Our administrative infrastructure, systems, procedures and controls may not adequately support our operations. In addition, our management may not be able to achieve a rapid, effective execution of the product and business initiatives necessary to successfully implement our operational and competitive strategy. If we are unable to manage growth effectively, our operating results will likely suffer which may, in turn, adversely affect our business.
Risks Related to Product Development
We need to continue to develop new technologically-advanced products that successfully integrate with the software products and enhancements used by our customers.
Our success depends upon our ability to design, develop, test, market, license, and support new software products and enhancements of current products on a timely basis in response to both competitive threats and marketplace demands. Recent examples of significant trends in the software industry include cloud computing, mobility, social media, networking, browser, and software as a service. In addition, software products and enhancements must remain compatible with standard platforms and file formats. We may be required to integrate software licensed or acquired from third parties with our proprietary software to create or improve our products. If we are unable to achieve a successful integration with third-party software, we may not be successful in developing and marketing our new software products and enhancements. If we are unable to successfully integrate third-party software to develop new software products and enhancements to existing products, or to complete products currently under development which we license or acquire from third parties, our operating results will materially suffer. In addition, if the integrated or new products or enhancements do not achieve acceptance by the marketplace, our operating results will materially suffer. Also, if new industry standards emerge that we do not anticipate or adapt to, our software products could be rendered obsolete and, as a result, our business and operating results, as well as our ability to compete in the marketplace, would be materially harmed.
If our software products and services do not gain market acceptance, our operating results may be negatively affected.
We intend to pursue our strategy of growing the capabilities of our software offerings through our proprietary research and the development of new product offerings. In response to customer demand, it is important to our success that we continue: (i) to enhance our products, and (ii) to seek to set the standard for call center management software in the corporate market. The primary market for our software and services is rapidly evolving, due to the nature of the rapidly changing software industry, which means that the level of acceptance of products and services that have been released recently or that are planned for future release by the marketplace is not certain. If the markets for our products and services fail to develop, develop more slowly than expected or become subject to increased competition, our business may suffer. As a result, we may be unable to: (i) successfully market our current products and services, (ii) develop new software products, services and enhancements to current products and services, (iii) complete customer installations on a timely basis, or (iv) complete products and services currently under development. In addition, increased competition could put significant pricing pressures on our products, which could negatively impact our margins and profitability. If our products and services are not accepted by our customers or by other businesses in the marketplace, our business and operating results will be materially affected.
Our investment in our current research and development efforts may not provide a sufficient, timely return.
The development of our software products is a costly, complex, and time-consuming process, and the investment in software product development often involves a long wait until a return is achieved on such an investment. When cash is available, we make and will continue to make significant investments in software research and development and related product opportunities. Investments in new technology and processes are inherently speculative. Commercial success depends on many factors including the degree of innovation of the products developed through our research and development efforts, sufficient support from our strategic partners, and effective distribution and marketing. Accelerated product introductions and short product life cycles require high levels of expenditures for research and development. These expenditures may adversely affect our operating results if they are not offset by increased revenues. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts in order to maintain our competitive position. However, significant revenues from new product and service investments may not be achieved for a number of years, if at all. Moreover, new products and services may not be profitable, and even if they are profitable, operating margins for new products and businesses may not be as high as the margins we have experienced for our current or historical products and services.
Software development is a long, expensive, and uncertain process, and we may terminate one or more of our development programs.
We may determine that certain software product candidates or programs do not have sufficient potential to warrant the continued allocation of resources. Accordingly, we may elect to terminate one or more of our programs for such product candidates. If we terminate a product in development in which we have invested significant resources, our prospects may suffer, as we will have expended resources on a project that does not provide a return on our investment and we may have missed the opportunity to have allocated those resources to potentially more productive uses, and this may negatively impact our business operating results or financial condition.
Our software products may contain defects that could harm our reputation, be costly to correct, delay revenues, and expose us to litigation.
Our software products are highly complex and sophisticated and, from time to time, may contain design defects or software errors that are difficult to detect and correct. Errors may be found in new software products or improvements to existing products after delivery to our customers. If these defects are discovered, we may not be able to successfully correct such defects in a timely manner. In addition, despite the tests we conduct on all of our products, we may not be able to fully simulate the environment in which our products will operate and, as a result, we may be unable to adequately detect the design defects or software errors which may become apparent only after the products are installed in an end-user’s network. The occurrence of errors and failures in our products could result in the delay or the denial of market acceptance of our products and alleviating such errors and failures may require us to make significant expenditure of our resources. The harm to our reputation resulting from product errors and failures may be materially damaging. Our agreements with our strategic partners and end-users typically contain provisions designed to limit our exposure to claims. These agreements regularly contain terms such as the exclusion of all implied warranties and the limitation of the availability of consequential or incidental damages. However, such provisions may not effectively protect us against claims and the attendant liabilities and costs associated with such claims. Accordingly, any such claim could negatively affect our business, operating results or financial condition.
The loss of licenses to use third-party software or the lack of support or enhancement of such software could adversely affect our business.
We currently depend upon a limited number of third-party software products. If such software products were not available, we might experience delays or increased costs in the development of our products. In certain instances, we rely on software products that we license from third parties, including software that is integrated with internally developed software, and which is used in our products to perform key functions. These third-party software licenses may not continue to be available to us on commercially reasonable terms, and the related software may not continue to be appropriately supported, maintained, or enhanced by the licensors. The loss by us of the license to use, or the inability by licensors to support, maintain, and enhance any of such software, could result in increased costs or in delays or reductions in product shipments until equivalent software is developed or licensed and integrated with internally developed software. Such increased costs or delays or reductions in product shipments could adversely affect our business.
Financial Risks
We need to be able to maintain an effective system of internal controls, in order to be able to report our financial results accurately and timely and prevent fraud.
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. We outsource our financial reporting through a company that provides that staff, however the work is concentrated in a few individuals. Further, our responsibility to provide the information is concentrated in one or two individuals in our Company. Any future weaknesses in our internal controls and procedures over financial reporting could result in material misstatements in our consolidated financial statements not being prevented or detected. We may experience difficulties or delays in completing remediation or may not be able to successfully remediate material weaknesses at all. Any material weakness or unsuccessful remediation could affect our ability to file periodic reports on a timely basis and investor confidence in the accuracy and completeness of our consolidated financial statements, which in turn could harm our business and have an adverse effect on our stock price and our ability to raise additional funds.
We may not be able to generate sufficient cash to service any indebtedness or contingent transaction consideration that we may incur from time to time, which could force us to sell assets, cease operations, or take other detrimental actions for our business.
Our ability to make scheduled payments on or to refinance any debt or contingent transaction obligations that we have or may incur depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, and other factors beyond our control. We currently have principal balances on demand loans and convertible notes totaling $1,039,477 accruing interest at between 8 and 12 percent per annum. Our ability to meet our capital needs in the future will depend on many factors, including maintaining and enhancing our operating cash flow, successfully managing the introduction of our new software, successfully retaining and growing our client base in the midst of general economic uncertainty, and managing the continuing effects of the COVID-19 pandemic on our business. We cannot ensure that we will be able to achieve a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on any indebtedness or the contingent transaction consideration.
If our cash flows and capital resources are at any time insufficient to fund our obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital, restructure or refinance our indebtedness, or reduce or cease operations. There can be no assurance that additional capital or debt financing will be available to us at any time. Even if additional capital is available, we may not be able to obtain debt or equity financing on terms favorable to us. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to reduce or curtail our operations.
The terms of our promissory notes will restrict our financing flexibility.
The terms of promissory notes we issued in 2022 contain standard negative covenants customary for transactions of this type. These negative covenants may preclude or restrict our ability to undertake future debt and convertible debt financings without the prior approval of holders of the previous notes and the terms also have anti-dilution provisions that will impact on any financings undertaken. The events of default are also customary for transactions of this type, including default in timely payment of principal or interest, failure to observe or perform any covenant or agreement contained in the convertible note and other transaction documents, the commencement of bankruptcy or insolvency proceedings, and failure to timely file Exchange Act filings.
If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors,
resulting in a decline in our stock price.
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” in this prospectus, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price. Significant items subject to estimates and assumptions include timing of recognition of revenue on software service renewals and expenses related thereto.
The loss of a major customer or the failure to collect a large account receivable could negatively affect our results of operations and financial condition.
Revenues from a limited number of customers have accounted for a substantial percentage of our total revenues. As we work to complete the release of our updated software offering in SAAS format, we have depended on long term contracts with two key customer accounts in each of fiscal 2022, 2021 and 2020. The loss of one of our clients could materially affect our business and operating results.
A significant downturn in our business may not be immediately reflected in our operating results because of the way we recognize revenue.
We recognize revenue from software subscription agreements ratably over the terms of these agreements. As a result, a significant portion of the revenue we report in each quarter is generated from customer agreements entered into during previous periods, which is reflected as deferred revenue on our balance sheet. Consequently, a decline in new or renewed subscriptions, or a downgrade of renewed subscriptions to less-expensive editions, in any one quarter may not be fully reflected in our revenue in that quarter, and may negatively affect our revenue in future quarters. If contracts having significant value expire and are not renewed or replaced at the beginning of a quarter or are downgraded, our revenue may decline significantly in that quarter and subsequent quarters.
Legal and Regulatory Risks
We will be subject to the reporting requirements of federal securities laws, causing us to make significant compliance-related expenditures that may divert resources from other projects, thus impairing its ability to grow.
We will be subject to the information and reporting requirements of the Exchange Act, and other federal securities laws, including the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the Commission and furnishing audited reports to stockholders will cause our expenses to be higher than most other similarly sized companies that are privately held. As a public company, we expect these rules and regulations to continue to keep our compliance costs high in 2022 and beyond, and to make certain activities more time-consuming and costly. As a public company, we also expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.
The elimination of monetary liability against our directors, officers, agents and employees under Delaware law, and the existence of indemnification rights to such persons, may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, agents and employees.
Our articles of incorporation and bylaws contain provisions permitting us to eliminate the personal liability of our directors, officers, agents and employees to the Company and our stockholders for damages for breach of fiduciary duty to the extent provided by Delaware law. We may also have contractual indemnification obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in our incurring substantial expenditures to cover the cost of settlement or damage awards against directors, officers, agents and employees, which we may be unable to recoup. These provisions and resultant costs may also discourage our Company from bringing a lawsuit against certain individuals for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors, officers, agents and employees even though such actions, if successful, might otherwise benefit us and our stockholders.
Security breaches may harm our business.
Any security breaches, unauthorized access, unauthorized usage, virus or similar breach or disruption could result in loss of confidential information, damage to our reputation, early termination of our contracts, litigation, regulatory investigations or other liabilities. Our clients may use our products and services to handle personally identifiable information, sensitive personal information, protected health information, or information that is otherwise confidential. If our security measures or those of our third-party data centers are breached as a result of third-party action, employee error, malfeasance or otherwise and, as a result, someone obtains unauthorized access to customer data, our reputation could be damaged, our business may suffer and we could incur significant liability. Our system is install directly on the client network and is operated by the client thus there is some potential mitigation of this risk to us.
Both the United States and Israel have laws and regulations relating to data privacy, security, and retention and transmission of information. We have certain measures to protect our information systems against unauthorized access and disclosure of our confidential information and confidential information belonging to our customers. We have policies and procedures in place dealing with data security and records retention. However, there is no assurance that the security measures we have put in place will be effective in every case.
There has been an increase in the number of private privacy-related lawsuits filed against companies in recent years. There has also been an increase in the incidence of data breaches in public companies operating in the US, resulting in unfavorable publicity and high amounts of damages against the breached companies, including the cost of obtaining credit monitoring services for all persons whose information was compromised. In addition, we are unable to predict what additional legislation or regulation in the area of privacy of personal information could be enacted and what effect that could have on our operations and business. Concerns about our practices with regard to the collection, use, disclosure, or security of personal information or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business.
Breaches, or perceived breaches, in security could result in a negative impact for us and for our customers, potentially affecting our business, assets, revenues, brand, and reputation, and resulting in penalties, fines, litigation, and other potential liabilities, in each case depending upon the nature of the information disclosed. These risks to our business may increase as we expand the number of products and services we offer.
We may become involved in litigation that may materially adversely affect us.
From time to time in the ordinary course of our business, we may become involved in various legal proceedings, including commercial, product liability, employment, class action, and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. We provide workforce software solutions that we believe are critical to the operations of our customers’ businesses and provide benefits that may be difficult to quantify. Any failure of a customer’s system installed by us or of the services offered by us could result in a claim for substantial damages against us, regardless of our responsibility for the failure. Although we attempt to limit our contractual liability for damages resulting from negligent acts, errors, mistakes, or omissions in rendering our services, we cannot assure you that the limitations on liability we include in our agreements will be enforceable in all cases, or that those limitations on liability will otherwise protect us from liability for damages. We currently do not have any insurance coverage for liability and should be determine to acquire such insurance, there can be no assurance that any insurance coverage we would put in place will be adequate or that coverage will be available at acceptable costs. Such matters can be time-consuming, divert management’s attention and resources, and cause us to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such actions may have a material adverse effect on our business, operating results, or financial condition.
Any claim that we infringe on a third party’s intellectual property could materially increase costs and materially harm our ability to generate future revenues and profits.
Claims of infringement are becoming increasingly common as the software industry develops and as related legal protections, including patents are applied to software products. Although we are not aware of any infringement on the rights of third parties, third parties may assert infringement claims against us in the future. Although most of our technology is proprietary in nature, we do include certain third-party software in our products. In these cases, this software is licensed from the entity holding the intellectual property rights. Although we believe that we have secured proper licenses for all third-party software that is integrated into our products, third parties may assert infringement claims against us in the future. The third parties making these assertions and claims may include non-practicing entities (known as “patent trolls”) whose business model is to obtain patent-licensing revenues from operating companies, such as ours. Any such assertion, regardless of merit, may result in litigation or may require us to obtain a license for the intellectual property rights of third parties. Such licenses may not be available, or they may not be available on reasonable terms. In addition, such litigation could be time-consuming, disruptive to our ability to generate revenues or enter into new market opportunities, and may result in significantly increased costs as a result of our defense against those claims or our attempt to license the intellectual property rights or rework our products to avoid infringement of third-party rights to ensure they comply with judicial decisions. Our agreements with our partners and end-users typically contain provisions that require us to indemnify them, with certain limitations on the total amount of such indemnification, for damages sustained by them as a result of any infringement claims involving our products. Any of the foregoing results of an infringement claim could have a significant adverse impact on our business and operating results, as well as our ability to generate future revenues and profits.
Risks Relating to Our Offering and our Common Stock
Our existing stockholders may experience significant dilution from the sale of our common stock pursuant to the Mast Hill Fund, LP (MHFLP) Securities Purchase Agreement and the MHFLP Equity Purchase Agreement.
The sale of our common stock to MHFLP in accordance with the Securities Purchase and the Equity Purchase Agreements may have a dilutive impact on our shareholders. As a result, the market price of our common stock could decline.
The perceived risk of dilution may cause our stockholders to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our stock price could encourage investors to engage in short sales of our common stock. By increasing the number of shares offered for sale, material amounts of short selling could further contribute to progressive price declines in our common stock.
We are registering an aggregate of 77,000,000 new shares of common stock to be issued under the MHFLP Security Purchase Agreement and MHFLP Equity Purchase Agreement. The sale of such shares could depress the market price of our common stock.
We are registering an aggregate of 77,000,000 shares of common stock under the registration statement of which this prospectus forms pursuant to the MHFLP Equity Purchase Agreement and the MHFLP Security Purchase Agreement which does not include 4,920,000 Commitment Shares already issued and 29,000,000 common shares underlying share purchase warrants issuable under the terms of the MHFLP Equity Purchase Agreement and the MHFLP Security Purchase Agreement. Of the 77,000,000 shares being registered, 37,000,000 common shares are underlying a Convertible Note and Securities Purchase Agreement and 40,000,000 shares may be issued under the terms of the Equity Purchase Agreement. The sale of these shares into the public market by MHFLP could depress the market price of our common stock. As of September 14, 2022, there were 107,416,146 shares of our common stock issued and outstanding. While MHFLP is subject to certain percentage ownership rules at any given point in time, the sale of these shares could adversely affect the price of our common stock.
We are registering an aggregate of 29,000,000 shares of Common Stock pursuant to Certain Common Stock Purchase Warrants.
We are registering an aggregate of 29,000,000 shares of common stock to be issued pursuant to the exercise of Common Stock Purchase Warrants entered into with MHFLP in conjunction with the Equity Purchase Agreement and the Securities Purchase Agreement. Upon exercise of the Common Stock Purchase Warrants, the Company is obligated to issue shares pursuant to the exercise notice; the Common Stock Purchase Warrants may be exercised immediately and any exercise of the Common Stock Purchase Warrants, and any subsequent sale by the selling shareholder of the corresponding common stock could depress the market price of our common stock.
Unless we maintain an active trading market for our securities, investors may not be able to sell their shares.
We are a reporting company, and our common shares are quoted on the OTC Market Pink Sheets under the symbol “GSPT”. However, our trading market may not be maintained. Failure to maintain an active trading market will have a generally negative effect on the price of our common stock, and you may be unable to sell your common stock or any attempted sale of such common stock may have the effect of lowering the market price and therefore your investment could be a partial or complete loss.
Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.
Since our common stock is thinly traded its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including (but not necessarily limited to):
| • | the trading volume of our shares; |
| • | the number of securities analysts, market-makers and brokers following our common stock; |
| • | new products or services introduced or announced by us or our competitors; |
| • | actual or anticipated variations in quarterly operating results; |
| • | conditions or trends in our business industries; |
| • | announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; |
| • | additions or departures of key personnel; |
| • | sales of our common stock and |
| • | general stock market price and volume fluctuations of publicly traded, and particularly microcap, companies. |
Investors may have difficulty reselling shares of our common stock, either at or above the price they paid for our stock, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, there is a history of securities class action litigation following periods of volatility in the market price of a company’s securities. Although there is no such litigation currently pending or threatened against us, such a suit against us could result in the incursion of substantial legal fees, potential liabilities and the diversion of management’s attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the OTC Pink Sheets and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to potential manipulation by market-makers, short-sellers and option traders.
We are a start-up company with a limited operating history and may never be able to carry out our intended operations or achieve any significant revenues or profitability. We are subject to the risks encountered by early stage companies.
Because we have a limited operating history, you should consider and evaluate our operating prospectus in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets. For us, these risks include:
| • | risks that we may not have sufficient capital to achieve our growth strategy; |
| • | risks that we may not develop and market our proposed products in a manner that enables us to be profitable and meet our customers’ requirements; |
| • | risks that our growth strategy may not be successful; and |
| • | risks that fluctuations in our operating results will be significant relative to our revenues. |
These risks are described in more detail below. Our future growth will depend substantially on our ability to address these, and the other risks described in this prospectus. If we do not successfully address these risks, our business would be significantly harmed, and investors may lose their entire investment.
We are a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior December 31, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior December 31. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
We may not be able to further implement our business strategy unless sufficient funds are raised in this Offering under our Equity Purchase Agreement and the exercise of the warrants. Our inability to raise additional funds could cause investors to lose their investment. Additionally, we may have to seek additional capital through the sale of additional shares or equity securities, which would result in additional dilution to our stockholders.
We may not realize sufficient proceeds from this Offering to further business development, or to provide adequate cash flow for planned business activities. As at June 30, 2022, we had $95,951 cash on hand. We have generated limited revenue from our operations to date. At this rate, we expect that we will not be able to continue operations without obtaining additional funding or beginning to generate significant revenue. Accordingly, we anticipate that additional funding will be needed for general administrative expenses, business development, marketing costs and support materials.
If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
We have the ability to issue additional shares of our common stock and shares of preferred stock without asking for stockholder approval, which could cause your investment to be diluted.
Our Articles of Incorporation authorizes the Board of Directors to issue up to 500,000,000 shares of common stock . The power of the Board of Directors to issue shares of common stock or warrants or options to purchase shares of common stock is generally not subject to stockholder approval. Accordingly, any additional issuance of our common stock may have the effect of diluting your investment. Further, any issuance of preferred stock with voting rights, including weighted voting rights, may have the effect of limiting the voting power of holders of our common stock.
There is substantial doubt about our ability to continue as a going concern.
We have no certainty of achieving or growing revenues in the future and have a working capital deficit. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our ability to generate future revenues will depend on a number of factors, many of which are beyond our control. These factors include general economic conditions, market acceptance of our marketing platform, proposed products and competitive efforts. Due to these factors, we cannot anticipate with any degree of certainty what the revenues will be in future periods. As such, our independent registered public accounting firm have expressed substantial doubt about our ability to continue as a going concern. Their opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. You should consider our independent registered public accountant’s comments when determining if an investment in us is suitable.
You may have limited access to information regarding our business.
As of effectiveness of our registration statement of which this prospectus is a part, we will be required to file periodic reports with the SEC, which will be immediately available to the public for inspection and copying (see “Where You Can Find More Information” elsewhere in their prospectus). Except during the year that our registration statement becomes effective, these reporting obligations may be automatically suspended under Section 15(d) if we have less than 300 shareholders at the beginning of our fiscal year. We currently have fewer than 300 shareholders and if we continue to have fewer than 300 shareholders, we will be exempt from the filing requirements as required pursuant to Section 13 of the Securities Exchange Act and will not be required to file any periodic reports, including Form 10Q and 10K filings, with the SEC subsequent to the Form 10K required for the fiscal year in which our registration statement is effective. Further, disclosures in our Form 10K that we will be required to file for the fiscal year in which our registration statement is effective, is less extensive than the disclosures required of fully reporting companies. Specifically, we are not subject to disclose in our Form 10K risk factors, unresolved staff comments, or selected financial data, pursuant to Items 1A, 1B, 6, respectively. If the reports are not filed or are less extensive than those required of fully reporting companies, the investors will have reduced visibility as to the Company and its financial condition.
We may be exposed to potential risks resulting from new requirements under section 404 of the Sarbanes-Oxley Act of 2002.
In addition to the costs of compliance with having our shares listed on the OTCBB and/or OTC Markets, there are substantial penalties that could be imposed upon us if we fail to comply with all regulatory requirements. In particular, under Section 404 of the Sarbanes-Oxley Act of 2002, as a smaller reporting company, our management will be required to provide a report on the effectiveness of our internal controls over financial reporting, beginning with our second annual report, and we will not be required to provide an auditor’s attestation regarding such report. We have not assessed the effectiveness of our disclosure controls and procedures or our internal controls over financial reporting, and we expect to incur additional expenses and diversion of management’s time as a result of performing the system and process evaluation, testing and remediation required in order to comply with the management certification requirements. Additionally, investors should be aware of the risk that management may assess and render the Company’s internal controls ineffective, which could have a material adverse effect on the Company’s financial condition or result of operations.
Our Common Stock is currently deemed to be “penny stock”, which makes it more difficult for investors to sell their shares.
Our Common Stock is currently subject to the “penny stock” rules adopted under section 15(g) of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share. These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company remains subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
We may have to issue additional securities at prices which may result in substantial dilution to our stockholders.
If we raise additional funds through the sale of equity or convertible debt, our current stockholders’ percentage ownership will be reduced. In addition, these transactions may dilute the value of ordinary shares outstanding. We may have to issue securities that may have rights, preferences, and privileges senior to our common stock. We cannot provide assurance that we will be able to raise additional funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would have a material adverse effect on our business plans, prospects, results of operations, and financial condition.
Shares of our common stock that have not been registered under the Securities Act, regardless of whether such shares are restricted or unrestricted, are subject to resale restrictions imposed by Rule 144.
Pursuant to Rule 144 of the Securities Act, a “shell company” is defined as a company that has no or nominal operations, and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets. As such, we were a shell company pursuant to Rule 144 prior to 2012. Even though we are no longer a shell company, investors may be reluctant to invest in our securities because securities of a former shell company may not be as freely tradable as securities of companies that are not former “shell companies.” In addition, since we are a former shell company, shareholders with restricted securities cannot rely upon Rule 144 for sales of restricted securities in the event that we are not current in our filing obligations under the Exchange Act.
Our shares are quoted on the OTC Pink Sheets and are subject to limited trading, a high degree of volatility, and liquidity risk.
Our common stock is currently quoted on the OTC Pink Sheets. Shares of our common stock have had very limited and sporadic trading in the past. As such, we believe our stock price to be more volatile and the share liquidity characteristics to be of higher risk than if we were listed on one of the national exchanges. Due to this volatility, our stock price as quoted by the OTC Pink Sheets may not reflect an actual or perceived value of our common stock. In the past, several days have passed between trades in our common stock, meaning that at any given time, there may be few or no investors interested in purchasing our common stock at or near ask prices. This limited trading, volatility, and liquidity risk is attributable to the fact that we are a small company relatively unknown to stock analysts, brokers, and institutional or other investors. Finally, if our stock were no longer quoted on the OTC Pink Sheets, the ability to trade our stock would become even more limited and investors might not be able to sell their shares. Consequently, investors must be prepared to bear the economic risk of holding the securities for an indefinite period of time. There is no assurance that a more active market for our common stock will develop or be sustained, which limits the liquidity of our common stock, and could have a material adverse effect on the price of our common stock and our ability to raise capital.
The market price of our common stock may limit the appeal of certain alternative compensation structures that we might offer to the high-quality employees we seek to attract and retain.
If the market price of our common stock performs poorly, such performance may adversely affect our ability to retain or attract critical personnel. For example, if we were to offer options to purchase shares of our common stock as part of an employee’s compensation package, the attractiveness of such a compensation package would be highly dependent upon the performance of our common stock.
In addition, any changes made to any of our compensation practices which are made necessary by governmental regulations or competitive pressures could adversely affect our ability to retain and motivate existing personnel and recruit new personnel. For example, any limit to total compensation which may be prescribed by the government, or any significant increases in personal income tax levels in the United States, may hurt our ability to attract or retain our executive officers or other employees whose efforts are vital to our success.
Shares eligible for future sale may adversely affect the market price of our common stock.
From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 of the Securities Act, subject to certain limitations. Any substantial sale of our common stock pursuant to Rule 144 may have an adverse effect on the market price of our common stock.
The price of our common stock may fluctuate significantly and lead to losses by stockholders.
The common stock of public companies can experience extreme price and volume fluctuations. These fluctuations often have been unrelated or out of proportion to the operating performance of such companies. We expect our stock price to be similarly volatile. These broad market fluctuations may continue and could harm our stock price. Any negative change in the public’s perception of the prospects of our business or companies in our industry could also depress our stock price, regardless of our actual results. Factors affecting the trading price of our common stock may include:
| | ● | Variations in operating results; |
| | ● | Announcements of technological innovations, new products or product enhancements, strategic alliances, or significant agreements by us or by competitors; |
| | ● | Recruitment or departure of key personnel; |
| | ● | Litigation, legislation, regulation, or technological developments that adversely affect our business; and |
| | ● | Market conditions in our industry, the industries of our customers, and the economy as a whole. |
Further, the stock market in general, and securities of smaller companies in particular, can experience extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. You should also be aware that price volatility might be worse if the trading volume of our common stock is low. Occasionally, periods of volatility in the market price of a company’s securities may lead to the institution of securities class action litigation against a company. Due to the volatility of our stock price, we may be the target of such securities litigation in the future. Such legal action could result in substantial costs to defend our interests and a diversion of management’s attention and resources, each of which would have a material adverse effect on our business and operating results.
FINRA sales practice requirements may limit a shareholder’s ability to buy and sell our stock.
The Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Our common stock may be subject to the “penny stock” rules of the SEC, which makes transactions in our common stock more cumbersome and could adversely affect trading in our common stock.
Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain rules adopted by the SEC. Penny stocks generally are equity securities with a market price of less than $5.00 per share, subject to exceptions. The rules require that a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in connection with the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the rules generally require that before a transaction in a penny stock, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the liquidity of penny stocks. Recently, our common stock has fluctuated both above and below $5.00 per share, and as such the holders of our common stock or other of our securities may find it more difficult to sell their securities.
We have outstanding warrants that contain a “cashless exercise” feature.
As part of our offerings of equity and debt, we issued warrants to purchase an aggregate of 29,000,000 shares of common stock. The warrants have a cashless exercise feature giving the holders the option of not paying cash to exercise the warrants but gives the holder the right to surrender a portion of the warrants to us as full payment of the exercise price and receive shares equal to the difference between the exercise price and the price of the shares at the time of exercise. We would not receive any proceeds from the exercise of warrants issued to the holder, causing dilution to existing stockholders with no corresponding influx of capital. This may affect our ability to raise additional equity capital.
We do not expect to pay any dividends on our common stock for the foreseeable future.
We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. The declaration, payment, and amount of any future dividends, if any, will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors that the board of directors considers relevant. We currently are subject to loan covenants that would require consent from our lenders in order to pay any dividends prior to repayment of certain outstanding loans. In addition, any future credit facilities we enter into may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.
General Risks
Global economic conditions and uncertainty are likely to adversely affect our operating results or financing in ways that are hard to predict or to defend against.
Our overall performance depends on economic conditions. The United States’ and world economies are currently suffering from uncertainty, inflation, volatility, disruption, and other adverse conditions, primarily caused by global sanctions on Russia and the current outbreak of and containment strategies for the coronavirus disease (COVID-19), and those conditions will continue to adversely impact the business community and financial markets for some time. Moreover, instability in the global economy affects countries, including Israel and the United States, with varying levels of severity, which makes the impact on our business complex and unpredictable. During adverse economic conditions, many customers delay or reduce technology purchases. Contract negotiations are likely to become more protracted, or conditions could result in reductions in sales of our products, longer sales cycles, pressure on our margins, difficulties in collection of accounts receivable or delayed payments, increased default risks associated with our accounts receivable, slower adoption of new technologies, and increased price competition. In addition, a curtailment of the Israeli, United States and global credit markets could adversely impact our ability to complete sales of our products and services, including maintenance and support renewals. Any of these prolonged events, are likely to cause a curtailment in government or corporate spending and delay or decrease customer purchases, and adversely affect our business, financial condition, and results of operations.
Businesses and industries throughout the world are very tightly connected to each other. Thus, financial developments seemingly unrelated to us or to our industry may adversely affect us over the course of time. For example, credit contraction in financial markets may hurt our ability to access credit in the event that we require significant access to credit for other reasons. Similarly, volatility in our stock price could hurt our ability to raise capital for the financing of acquisitions or other reasons. Any of these events, or any other events caused by the current turmoil in domestic or international financial markets, may have a material adverse effect on our business, operating results, and financial condition.
If we are not able to attract and retain top employees and contractors, our ability to compete may be harmed.
Our performance is substantially dependent on the performance of our executive officers, key employees and outside contractors. The loss of the services of any of our executive officers or other key employees or our outside contractors could significantly harm our business. Our success is also highly dependent upon our continuing ability to identify, hire, train, retain, and motivate highly qualified management, technical, sales, and marketing personnel. In particular, the recruitment of top software developers and experienced salespeople will become critical to our success. Competition for such people is intense, substantial, and continuous, especially in the current environment of labor shortage, and we may not be able to attract, integrate, or retain highly qualified technical, sales, or managerial personnel in the future. In addition, in our effort to attract and retain critical personnel, we may experience increased compensation costs that are not offset by either improved productivity or higher prices for our products or services.
Our products rely on the stability of infrastructure software that, if not stable, could negatively impact the effectiveness or reliability of our products, resulting in harm to our reputation and business.
Our development of internet and intranet applications depends and will continue to depend on the stability, functionality, and scalability of the infrastructure software of the underlying internet and intranet. If weaknesses in such infrastructure exist, we may not be able to correct or compensate for such weaknesses. If we are unable to address weaknesses resulting from problems in the infrastructure software such that our products do not meet customer needs or expectations, our reputation and, consequently, our business may be significantly harmed.
In addition, our business and operations are highly automated, and a disruption or failure of our systems may delay our ability to complete sales and to provide services. A major disaster or other catastrophic event that results in the destruction or disruption of any of our critical business or information technology systems could severely affect our ability to conduct normal business operations, which may materially and adversely affect our future operating results.
Failure to protect our intellectual property could harm our ability to compete effectively.
We are highly dependent on our ability to protect our proprietary technology. We rely on a combination of intellectual property laws, trademark laws, as well as non-disclosure agreements and other contractual provisions to establish and maintain our proprietary rights. We intend to protect our rights vigorously; however, there can be no assurance that these measures will be successful. Enforcement of our intellectual property rights may be difficult or cost prohibitive. While U.S. copyright laws may provide meaningful protection against unauthorized duplication of software, software piracy has been, and is expected to be, a persistent problem for the software industry, and piracy of our products represents a loss of revenue to us. Certain of our license arrangements may require us to make a limited confidential disclosure of portions of the source code for our products, or to place such source code into escrow for the protection of another party. Although we will take considerable precautions, unauthorized third parties, including our competitors, may be able to: (i) copy certain portions of our products, or (ii) reverse engineer or obtain and use information that we regard as proprietary. Also, our competitors could independently develop technologies that are perceived to be substantially equivalent or superior to our technologies. Our competitive position may be adversely affected by our possible inability to effectively protect our intellectual property.
USE OF PROCEEDS
The selling stockholders are selling shares of common stock covered by this prospectus for their own accounts. We will not receive any proceeds from sale of the shares of common stock covered by this prospectus by the selling stockholders. We will pay for expenses of this offering. We will receive proceeds from the purchase of Shares, upon our Put Notices, by Mast Hill Fund L.P. (MHFLP) and pursuant to the Equity Purchase Agreement. To the extent that the selling stockholders exercise for cash all of the warrants covering the 29,000,000 shares of common stock issuable upon exercise of all of the warrants held by such selling stockholders, we may receive $1,160,000 from such exercises. The warrants may be exercised on a cashless basis, or they may expire without having been exercised. Even if some or all of these warrants are exercised for cash, we cannot predict when they will be so exercised and when we would receive the proceeds. We intend to use any proceeds we receive upon exercise of the warrants for cash general corporate and working capital purposes.
There can be no assurance that we will raise any funds through this Offering and if a limited amount of funds are raised, we will use such funds according to our best judgment. To the extent our offering proceeds do not cover any professional fees incurred by us, we anticipate paying for any such expenses from cash on hand or revenues we receive.
DETERMINATION OF OFFERING PRICE
The offering price and other terms and conditions relative to our shares have been arbitrarily determined by us and do not bear any relationship to assets, earnings, book value, or any other objective criteria of value. In addition, no investment banker, appraiser, or other independent third party has been consulted concerning the offering price for the shares, or the fairness of the offering price used for the shares.
DILUTION
The Company intends to sell up to 40,000,000 shares of common stock, to Mast Hill Fund LP, at a purchase price equal to 70% of the volume weighted average price of the Company’s Common Stock on the Principal Market on the Trading Day immediately preceding the respective Put Date for the duration of the Offering (the “Offering”) for a period of two years from the effective date of this prospectus, unless extended by our Board of Directors for up to an additional ninety (90) days. Once a “Put Notice” is presented to Mast Hill Fund LP, shares will be issued to Mast Hill Fund LP. The Company is registering these shares on behalf of the selling shareholder. The following table sets forth the number of shares of Common Stock being registered for sale, the total consideration paid and the price per share. The table assumes all 40,000,000 shares of Common Stock will be sold.
| | | Shares Issued | | | Total Consideration | | | | |
| | | Number of Shares | | | Percent | | | Amount | | | Percent | | | | Price Per Share |
| Purchasers of Shares | | | 40,000,000 | | | | 100 | % | | $ | 5,000,000 | | | | 100 | % | | $ | 0.125 | |
| Total | | | 40,000,000 | | | | 100 | % | | $ | 5,000,000 | | | | 100 | % | | | | |
The following table sets forth the difference between the offering price of the shares of our Common Stock being sold by the Company to Mast Hill Fund LP, and registered to Mast Hill Fund LP, the net tangible book value per share, and the net tangible book value per share after giving effect to the Offering by us, assuming that 100%, 75%, 50%, 25% and 10% of the offered shares are sold. Net tangible book value per share represents the amount of total tangible assets less total liabilities divided by the number of shares outstanding as of September 14, 2022 or 107,416,146 shares. Totals may vary due to rounding. Note - the table below does not reflect offering costs estimated to be $50,000 which will be borne by the Company and not deducted from gross proceeds.
| | 100% of offered shares are sold | | 75% of offered shares are sold | | 50% of offered shares are sold | | 25% of offered shares are sold | | 10% of offered shares are sold |
| Offering Price | $0.125 per share | | $0.125 per share | | $0.125 per share | | $0.125 per share | | $0.125 per share |
| Net tangible book value at June 30, 2022 | ($0.033) per share | | ($0.033) per share | | ($0.033) per share | | ($0.033) per share | | ($0.033) per share |
| Net tangible book value after giving effect to the Offering proceeds | $0.010 per share | | $0.001 per share | | $(0.008) per share | | $(0.020) per share | | $(0.027) per share |
| Increase in net tangible book value per share attributable to cash payments made by new investors | $0.043 per share | | $0.034 per share | | $0.025 per share | | $0.013 per share | | $0.006 per share |
| Per Share Dilution to New Investors | $0.115 per share | | $0.124 per share | | $0.133 per share | | $0.145 per share | | $0.152 per share |
| Percent Dilution to New Investors | 92% | | 99% | | 107% | | 116% | | 122% |
SELLING STOCKHOLDERS
The Selling Stockholders identified in this prospectus may offer and sell up to 40,000,000 shares of our common stock to be sold by MHFLP pursuant to the Equity Purchase Agreement. The 40,000,000 shares of common stock registered for resale by MHFLP represent approximately 37% of our current issued and outstanding shares of common stock, which totals 107,416,146 as of September 14, 2022, and will represent approximately 27% of the fully diluted outstanding common stock assuming all 40,000,000 shares are issued under this Offering. MHFLP are subject to restrictions on share ownership at any given point in time limiting their shareholdings to 4.99%.
MHFLP will be deemed to be an underwriter within the meaning of the Securities Act. Certain other Selling Stockholders may also be deemed to be underwriters. Any profits realized by such Selling Stockholders may be deemed to be underwriting commissions.
Information concerning the Selling Stockholders may change from time to time and, if necessary, we will amend or supplement this prospectus accordingly. We cannot give an estimate as to the number of shares of common stock that will actually be held by the Selling Stockholders upon termination of this Offering because the Selling Stockholders may offer some or all of the common stock under the offering contemplated by this prospectus or acquire additional shares of common stock. The total number of shares that may be sold hereunder will not exceed the number of shares offered hereby. Please read the section entitled “Plan of Distribution” in this prospectus.
The manner in which the Selling Stockholders acquired or will acquire shares of our common stock is discussed below under “The Offering.”
The following table sets forth the name of each Selling Stockholder, the number of shares of our common stock beneficially owned by such stockholder before this offering, the number of shares to be offered for such stockholder’s account and the number and (if one percent or more) the percentage of the class to be beneficially owned by such stockholder after completion of the offering. The number of shares owned are those beneficially owned, as determined under the rules of the SEC, and such information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares of our common stock as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days of June 30, 2022, through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement, and such shares are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding such options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other person. Beneficial ownership percentages are calculated based on 107,416,146 shares of our common stock outstanding as of September 14, 2022.
Unless otherwise set forth below, (a) the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the Selling Stockholder’s name, subject to community property laws, where applicable, and (b) no Selling Stockholder had any position, office or other material relationship within the past three years, with us or with any of our predecessors or affiliates. The number of shares of common stock shown as beneficially owned before the offering is based on information furnished to us or otherwise based on information available to us at the timing of the filing of the registration statement of which this prospectus forms a part.
| | | | | | | | | Number of Shares to be Owned by Selling Stockholder After the Offering and Percent of Total Issued and Outstanding Shares | |
| Name of Selling Stockholder | | Shares Owned by the Selling Stockholders before the Offering (1) | | | Shares of Common Stock Being Offered or Sold | | | # of Shares (2) | | | % of Class (2) | |
| Mast Hill Fund L.P. (3) | | | 0 | | | | 40,000,000 | | | | 40,000,000 | | | | N/A | |
| Mast Hill Fund L.P. (3)(4) | | | 0 | | | | 37,000,000 | | | | 37,000,000 | | | | N/A | |
| Mast Hill Fund L.P. (3)(5) | | | 0 | | | | 29,000,000 | | | | 29,000,000 | | | | N/A | |
| Mast Hill Fund L.P. (3)(6) | | | 4,920,000 | | | | 4,920,000 | | | | 4,920,000 | | | | N/A | |
| Michael Kahiri (7) | | | 7,500,000 | | | | 7,500,000 | | | | 7,500,000 | | | | N/A | |
(1) Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment power with respect to shares of common stock. Shares of common stock subject to options, warrants and convertible debentures currently exercisable or convertible, or exercisable or convertible within 60 days, are counted as outstanding. The actual number of shares of common stock issuable upon the conversion of the convertible debentures is subject to adjustment depending on, among other factors, the future market price of our common stock, and could be materially less or more than the number estimated in the table.
(2) Because the selling stockholders may offer and sell all or only some portion of the 40,000,000 shares of our common stock being offered pursuant to this prospectus under the Equity Purchase Agreement (“EPA”) and may acquire additional shares of our common stock in the future, we can only estimate the number and percentage of shares of our common stock that any of the selling stockholders will hold upon termination of the offering.
(3) Mast Hill Fund L.P. (“MHFLP”) are prohibited, in their respective agreements, from owning more than 4.99% of the issued and outstanding shares of common stock at any one time.
(4) The Company is registering 37,000,000 shares on behalf of MHFLP pursuant to a Securities Purchase Agreement (“SPA”) and Convertible Promissory Note (“Promissory Note”) which MHFLP has the right to immediately exercise to purchase 37,000,000 shares of common stock at $0.01 per share. Upon exercise of the Promissory Note, the Company is obligated to issue a corresponding number of shares.
(5) The Company is registering 29,000,000 shares on behalf of MHFLP pursuant to a certain Common Stock Purchase Warrants (the “MHFLP Warrants”) which MHFLP has the right to immediately exercise to purchase 29,000,000 shares of common stock at $0.04 per share. Upon exercise of the Warrants, the Company is obligated to issue a corresponding number of shares.
(6) The Company is registering 4,920,000 shares of common stock on behalf of the selling stockholder pursuant to the issuance of commitment shares in respect to the SPA;
(7) The Company is registering 7,500,000 shares of common stock on behalf of the selling stockholder pursuant to a Consulting Agreement with Beyond Media SEZC.
THE OFFERING
On May 27, 2022, we entered into an Equity Purchase Agreement (the “Equity Purchase Agreement”) with Mast Hill Fund, L.P. (“MHFLP”). Although we are not mandated to sell shares under the Equity Purchase Agreement, the Equity Purchase Agreement gives us the option to present “Put Notices” to MHFLP, up to $5,000,000 worth of our common stock over the period ending twenty-four months following the Effect of this Registration Statement. The $5,000,000 was stated as the total amount of available funding in the Equity Purchase Agreement because this was the maximum amount that MHFLP agreed to offer us in funding. There is no assurance that the market price of our common stock will increase in the future.
The purchase price of the common stock will be equal to 70% of the of the Company’s Common Stock on the Principal Market based on the lowest closing bid price of the Company’s Common Stock on the Principal Market during the fourteen (14) Trading Days immediately preceding the Put Date of the respective Put Notice for the duration of the Offering (the “Offering”) which is a period of two years from the effective date of this prospectus, unless extended by our Board of Directors for up to an additional ninety (90) days; there is an ownership limit for MHFLP of 4.99%.
On the Put Notice date, we are required to deliver Put shares to MHFLP in an amount (the “Estimated Put Shares”) determined by the amount of funds we request from MHFLP, and MHFLP is required to simultaneously deliver to us, the investment amount indicated on the Put Notice. Put Shares are limited to (i) a minimum amount not less than $50,000.00 and (ii) a maximum amount up to the lesser of (a) $100,000.00 or (b) 110% of the Average Daily Trading Value.
MHFLP is not permitted to engage in short sales involving our common stock during the commitment period ending twelve months following the Effect of this Registration Statement. In accordance with Regulation SHO however, sales of our common stock by MHFLP after delivery of a Put Notice of such number of shares reasonably expected to be purchased by MHFLP under a Put will not be deemed a short sale.
In addition, we must deliver the other required documents, instruments and writings required. MHFLP is not required to purchase the Put Shares unless:
| - | Our registration statement with respect to the resale of the shares of common stock delivered in connection with the applicable put shall have been declared effective; |
| - | We shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the registrable securities. |
| - | We shall have filed with the SEC in a timely manner all reports, notices and other documents required. |
As we draw down on the equity line of credit, shares of our common stock will be sold into the market by MHFLP. The sale of these shares could cause our stock price to decline. In turn, if our stock price declines and we issue more puts, more shares will come into the market, which could cause a further drop in our stock price. You should be aware that there is an inverse relationship between the market price of our common stock and the number of shares to be issued under the equity line of credit. We have no obligation to utilize the full amount available under the equity line of credit.
Neither the Equity Purchase Agreement nor any rights of ours, or MHFLP’s, thereunder may be assigned to any other person.
On May 27, 2022, the Company issued a Common Stock Purchase Warrant to MHFLP, pursuant to the Equity Purchase Agreement, to purchase 10,000,000 shares of common stock at $0.06 per share, which warrant has been repriced effective June 6, 2022, to $0.04 per share. The Warrant is exercisable immediately and the Company is obligated to issue the corresponding number of shares. The Company is registering the shares on behalf of the Selling Stockholder.
On May 20, 2022 the Company entered into a Securities Purchase Agreement and Promissory Note with MHFLP in the amount of $370,000, and issued a series of Common Stock Purchase Warrants to purchase as cumulative 19,000,000 common shares at $0.04 per share after the application of a pricing reset on June 6, 2022; the Company received the funds underlying the Note, and are registering the shares, on behalf of the Selling Stockholder, underlying both the Promissory Note and the Common Stock Purchase Warrants. MHFLP has the right to exercise the Warrants immediately; upon exercise, the Company is obligated to issue the corresponding number of shares to MHFLP. Pursuant to the aforementioned agreements the Company issued 4,920,000 shares to MHFLP as a commitment fee. The Company is registering the shares on behalf of the Selling Stockholder.
On June 6, 2022, the Company issued 7,500,000 common shares to Michael Kahiri, beneficial owner of Beyond Media SEZC in connection with a consulting agreement. The Company is registering the shares on behalf of the Selling Stockholder.
PLAN OF DISTRIBUTION
As of the date of this prospectus, we have 107,416,146 shares of Common Stock issued and outstanding. We are registering the resale of 40,000,000 shares of Common Stock issuable under an equity line in the amount of $5,000,000 (the “Equity Line”) established by the Equity Purchase Agreement entered into on May 27, 2022, between the Company and Mast Hill Fund, L.P. (“MHFLP” or a “Selling Stockholder”).
Additionally, we are registering 29,000,000 shares of common stock that can be purchased pursuant to Common Stock Purchase Warrants and that can be exercised immediately to purchase shares at $0.04 per share. Once the Company is presented with an exercise notice, the Company is obligated to issue a corresponding number of shares pursuant to the exercise notice.
We are also registering 37,000,000 shares of common stock that are required to be issued upon receipt of a notice of conversion of a Promissory Note issued to MHFLP on May 20, 2022, for which the Company has previously received net proceeds of $301,360. Once the Company is presented with a notice of conversion, the Company is obligated to issue a corresponding number of shares pursuant to the notice.
We are also registering 7,500,000 common shares for Selling Stockholders issued pursuant to a consulting agreement and 4,920,000 shares for Selling Stockholders issued as a commitment fee pursuant to a Securities Purchase Agreement with MHFLP.
In connection with the selling efforts in the Offering, neither our officers and directors, nor MHFLP, will register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the “safe harbor” provisions of SEC Rule 3a4-1, promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Generally speaking, Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an Offering of the issuer’s securities. None of our officers and directors are subject to any statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. None of our officers and directors will be compensated in connection with his participation in the Offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. None of our officers and directors has been within the past 12 months, a broker or dealer, and each of them is not, nor has been within the past 12 months, an associated person of a broker or dealer. At the end of the Offering, our officers and directors each will continue to primarily perform substantial duties for us, or on our behalf, other than in connection with transactions in securities.
In order to comply with the applicable securities laws of certain states, the securities will be offered or sold in those states only if they have been registered or qualified for sale; an exemption from such registration, or if qualification requirement is available and with which we have complied. In addition, and without limiting the foregoing, we will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions during the period of time when their Registration Statement is effective.
We are subject to Regulation M of the Securities Exchange Act of 1934. Regulation M governs activities of underwriters, issuers, selling security holders and others in connection with offerings of securities. Regulation M prohibits distribution participants and their affiliated purchasers from bidding for, purchasing or attempting to induce any person to bid for or purchase the securities being distributed. In connection with the offer and sale of the shares being offered, our officers and directors will comply with Regulation M.
In connection with the selling efforts in the Offering, neither our officers and directors, nor MHFLP, will register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the “safe harbor” provisions of SEC Rule 3a4-1, promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Generally speaking, Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an Offering of the issuer’s securities. None of our officers and directors are subject to any statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. None of our officers and directors will be compensated in connection with his participation in the Offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. None of our officers and directors has been within the past 12 months, a broker or dealer, and each of them is not, nor has been within the past 12 months, an associated person of a broker or dealer. At the end of the Offering, our officers and directors each will continue to primarily perform substantial duties for us, or on our behalf, other than in connection with transactions in securities.
In order to comply with the applicable securities laws of certain states, the securities will be offered or sold in those states only if they have been registered or qualified for sale; an exemption from such registration, or if qualification requirement is available and with which we have complied. In addition, and without limiting the foregoing, we will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions during the period of time when their Registration Statement is effective.
We are subject to Regulation M of the Securities Exchange Act of 1934. Regulation M governs activities of underwriters, issuers, selling security holders and others in connection with offerings of securities. Regulation M prohibits distribution participants and their affiliated purchasers from bidding for, purchasing or attempting to induce any person to bid for or purchase the securities being distributed. In connection with the offer and sale of the shares being offered, our officers and directors will comply with Regulation M.
Penny Stock Regulation
Our Common Shares are considered Penny Stocks. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, that:
| • | contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; |
| • | contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties; |
| • | contains a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the bid and ask price; |
| • | contains a toll-free telephone number for inquiries on disciplinary actions; |
| • | defines significant terms in the disclosure document or in the conduct of trading penny stocks; and, |
| • | contains such other information and is in such form (including language, type, size, and format) as the SEC shall require by rule or regulation. |
The broker-dealer also must provide the customer with the following, prior to proceeding with any transaction in a penny stock:
| • | bid and offer quotations for the penny stock; |
| • | details of the compensation of the broker-dealer and its salesperson in the transaction; |
| • | the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and, |
| • | monthly account statements showing the market value of each penny stock held in the customer’s account. |
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling those securities.
Offering Period and Expiration Date
This Offering will start on the date this Registration Statement is declared effective by the SEC and continue for a period of twenty-four months. We may extend the offering period for an additional 90 days, unless the Offering is completed or otherwise terminated by us.
DESCRIPTION OF SECURITIES
Common Stock
Our authorized capital stock includes 500,000,000 shares of Common Stock, $0.001 par value per Share. Immediately prior to this offering there are 107,416,146 shares of our Common Stock outstanding.
There are no provisions in our charter or Bylaws that would delay, defer or prevent a change in our control. However, there exists such provision in our charter that may make changes of control more difficult. Such provisions include the ability of our Board of Directors to issue a series of preferred stock and the limited ability of stockholders to call a special meeting. Special meetings of the shareholders may be called at any time by the President or by resolution of the Board of Directors, or by the President upon the request in writing of one or more stockholders owning shares in the aggregate entitled to cast at least a majority of the votes at the meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
The holders of our Common Stock have equal ratable rights to dividends from funds legally available if and when declared by our Board of Directors and are entitled to share ratably in all of our assets available for distribution to holders of Common Stock upon liquidation, dissolution or winding up of our affairs. Our Common Stock does not provide the right to preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights. Our Common Stockholders are entitled to one non-cumulative vote per share on all matters on which shareholders may vote. Holders of shares of our Common Stock do not have cumulative voting rights, which means that the holders voting for the election of directors, may cast such votes equal to the total number of shares owned by each shareholder for each of the duly nominated directors, if they so choose.
Dividends
At this time, we do not intend to pay out any cash dividends, now, or in the foreseeable future.
Warrants
There are currently Common Stock Purchase Warrants (Warrants) that are exercisable into 29,000,000 shares of common stock at the purchase price of $0.04 per share. These Warrants are exercisable immediately. Upon notice of exercise, the Company is obligated to issue the corresponding number of shares.
Options
There are no outstanding options to purchase our securities.
Transfer Agent and Registrar
Our transfer agent is VStock Transfer LLC, and is located at 18 Lafayette Place, Woodmere, NY 11598, its phone number is (212) 828-8436. The transfer agent is responsible for all record-keeping and administrative functions in connection with the common shares.
OUR BUSINESS
Company Overview
Golden Star Enterprises Ltd. is a Delaware holding company incorporated on September 13, 1993, with one wholly owned subsidiary, Enigmai Ltd., a company incorporated pursuant to the laws of Israel (“Enigmai”). All operations are undertaken through Enigmai.
On October 27, 2020, the Company entered into an acquisition agreement with the shareholders of Enigmai, an enterprise software company established in 2009 which offers clients a workforce management system solution. The Company acquired 100% of the issued and outstanding shares of Enigmai in exchange for 20,000,000 restricted common shares of the Company. The Company further agreed to pay a finder’s fee of 2,000,000 shares to third parties. The transaction closed effective October 31, 2020, and the Company administratively issued the shares on November 24, 2020, making Enigmai a wholly owned subsidiary of the Company.
Enigmai. has developed an advanced workforce management system for scheduled environments.
Vision
The call center of the past has received a technological makeover in the 21st century. Since callers may reach out to companies via channels other than the telephone (social media, web chats, etc.) the call center has been reimagined as a contact center, imbuing more modern needs that have been accelerated by the Covid-19 pandemic and whose challenges are mitigated with technology. The terms call center and contact center are used interchangeably throughout this report.
Workforce Management software, or WFM software, offers a set of integrated processes that enable organizations to optimize their employees’ productivity by effectively forecasting labor requirements and creating and managing staff schedules to accomplish a certain task on a day-to-day and hour-to-hour basis.
With the increasing competition in the business environment, organizations worldwide are rapidly implementing WFM software solutions into their systems. Resultantly, the WFM software market is garnering significant traction worldwide. According to Market Research Future analysis, the global workforce management market was valued at USD $7,964.36 million in 2020 and has been estimated to reach USD $20.828 million by 2026 at a CAGR of 19.75% during the forecast period, 2020–2026.
The market includes a variety of segments in addition to our focus (efficiencies for call centers) and these figures include the broader uses of WFM software, including those outside our niche. Two of the leaders in the production of WFM solutions platforms are the United States and Israel.
There are huge benefits of implementing workforce management software into business systems, such as ensuring the health and safety of the employees (by scheduling shifts that optimize employee rest periods), workforce planning and optimization, managing new ways of working, attracting and retaining employees by giving them more control, and forecasting and planning for the future.
Workforce management software helps to optimize workforce requirements, providing proper insight into employee costs and productivity, which then allows organizations to plan and optimize workforce deployment while maintaining the required levels of productivity. WFM software demonstrates an increase in customer satisfaction by improving the overall efficiency of the contact center, worker satisfaction, and an enhanced customer experience, benefiting our clients’ bottom lines.
Implementing a WFM software system also provides an efficient way to record remote employees’ working hours, track Flexi balances, time in lieu, and manage planned or unplanned absences.
WFM also helps employees manage their onsite or remote working hours through a fully automated system or even on a mobile-based app through clocking or hour-based email timesheets. Major users of WFM software are call centers and customer service centers.
The Covid-19 pandemic has forced call centers to shift to remote work, due to the necessity of not having staff confined to a workspace that can’t be socially distanced. As the Pandemic is mitigated in various locales, it appears that approximately 50 percent of companies that have call centers will continue the remote work trend per Shana Geraghty, PhD, in her publication, ”The Trend for Remote Employees.”
By 2025, 36.2 million Americans will be working remotely, an 87% increase from pre-pandemic levels, according to Upwork’s, “Future of Workforce Pulse Report” released in August of 2021. “Our research shows the long-lasting impact that remote work and Covid-19 are likely to have on how hiring managers think about their organizations,” says Upwork chief economist, Adam Ozimek, in a statement. “As businesses adapt and learn from this remote work experiment, many are altering their long-term plans to accommodate this way of working. “What’s interesting is that remote work is getting better for the vast majority of companies as they adapt to the new model,” Ozimek said. “Only 5% of respondents of the survey said it was getting worse.” That is to be expected, according to Ozimek, since companies and their employees had a substantial learning curve. “They were thrown into a whole new experiment when the pandemic began. Companies had to figure out the best technology to use for their remote workers, and employees had to figure out the best way to work at home and be efficient."
The Upwork study surveyed 1,000 small business owners, HR managers and CEOs across a wide spectrum of industries nationwide. It was conducted from Oct. 21 to Nov. 7 of 2020, more than six months since the Covid-19 pandemic forced millions of Americans to switch to remote work indefinitely. According to the survey, 41.8% of Americans are still working remotely.
Key findings from the survey include:
| 
| | Gradual return to work: Survey respondents estimate that 26.7% of the workforce will be fully remote by the end of 2021, suggesting that workers will slowly continue to come back to the office. |
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| | Gradual return to work: Survey respondents estimate that 26.7% of the workforce will be fully remote by the end of 2021, suggesting that workers will slowly continue to come back to the office. |
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| | | Source; Upwork’s Future of Workforce Pulse Report |
Our Software
Enigmai helps organizations implement their vision, integrating with existing systems and software by offering a visible, detailed, aware organizational system, which considers all relevant factors and provides a service appreciated by both managers and employees. The Enigmai solution for workforce management software in scheduled environments contains the following features:
| | · | 3rd Party Integration Connects with 3rd party systems and aggregates the data. |
| | · | KPI (Key Performance Indicator) Produces the KPI for employees and uses it to schedule based on employee performance. |
| | · | Scheduling Our unmatched, state-of-the-art automatic scheduling algorithms compute an enormous amount of parameters to deliver the best possible schedule to your business. |
| | · | Break Management Allows you to implement break management policies and allows the employees to connect and choose their breaks as they work in real time. |
| | · | Status Management Shows live statuses of employees, allowing you to track performance closely. |
| | · | SLA (Service Level Agreement) Keeps track of SLAs and ensures the agreements are met. |
The Enigmai Business Suite (“EBS”) software is a fixed fee software – every client receives the same version. Customers pay a one-time fee for the Enigmai Business Suite software, and 12% annually for maintenance and support. Updates and new versions are included and we charge a small one time set up fee.
Enigmai’s EBS software is built using Client-Server architecture. The Client is the software component responsible for the user interface and is accessible by the system users. The software was originally developed in 2010 using the latest available technology at that time. Over the years, new technologies have evolved and become the industry standard. Although the current software suite in use by existing customers performs seamlessly, Enigmai has opted to invest in enhancing the software suite, upgrading the Client interface to enhance functionality for existing customers while offering the latest technology to new customer accounts. The development project started in the summer of 2021 and involved a team of programmers, a quality assurance team, and a project management team. The development was completed and the Enigmai team has also completed the User Acceptance Tests (“UAT”) and is expecting to install the software during September 2022 at our first client’s facility..
During this phase, the WFM software will go under rigorous testing to ensure that the new Client interface development is complete and that it meets the expected performance protocols. After the UAT phase is complete, the Enigmai team will install the upgraded system for existing clients and commence marketing to our list of potential clients.
Enigmai is looking to commence the development of a mobile app to augment its existing desktop application. Through its customer meetings and trade show feedback, the Company has identified a strong demand for such an application, as more and more organizations would like their employees to be able to connect remotely to their WorkForce Management (WFM) systems.
In the last few months, the Enigmai team has been occupied with the re-development of our front-end system. Now that the front-end development is near completion, the team has commenced work on its planned mobile app design. The mobile app will be rolled out later this year and will provide Enigmai with another competitive advantage as we seek to expand outside of Israel and into new markets, including the North American market in 2022.
Upgrading to the latest technology will open opportunities that are not currently available for Enigmai with potential clients, and in order to satisfy the demand currently present in the marketplace.
Software and Services
While any manager running shifts can benefit from a workforce management system, EBS is most suitable for contact centers , proving invaluable for any big organization, since it can increase productivity while lowering operational costs.
The Market in General
According to Fortune Business Insights, a contact center enterprise with 5,000 employees and about $300 million in annual payroll can save approximately $6 million per year by implementing WFM software.
The workforce management market is segmented into vertical, organization size, deployment, component, and region. The component segment is sub-segmented into solutions and services. The solution segment accounts for the largest component segment, leading the market growth. The deployment segment is sub-segmented into on-premise and on-cloud. Of these, the cloud-based segment dominates the market.
The organization size segment is sub-divided into large enterprises and small & medium enterprises (SMEs).
Of these, the large enterprise segment spearheads the market share. The vertical segment is sub-segmented into defense, government, healthcare, retail, manufacturing, energy & utility, IT & telecommunication, BFSI (banking, financial services, and insurance), and others.
Among these, the retail segment is to have the lion’s share in the market. Recall, though, that our software can satisfy large-sized contact center needs, independent of industry.
In addition to the increasing number of enterprises adopting these solutions, the market growth also contributes to the rising adoption of employee monitoring solutions across the BFSI, IT & telecom, and retail industries.
Moreover, the rising demand for solutions to gain enhanced control over employees and increasing investments by enterprises in deploying modern time tracking tools to increase employee productivity escalates the workforce management software market growth. Besides, the proliferation of mobile devices in the working culture is encouraging businesses to invest in cloud based WFM solutions infrastructure, allowing employees to log in and access information anytime and anywhere.
The need is great to be able to define for a company and the industry the following:
| | · | Global Workforce Analytics Market, by type (solutions, services), by deployment (on-premise, on-cloud), by organization size (large, SME’s), and by industry (banking, insurance government, retail, logistics, healthcare, manufacturing). |
| | · | Global Mobile Workforce Management Market, by deployment (Cloud, On-Premise), by end-user (BFSI, communication, logistics, manufacturing, procurement), and by Tools (IOS, Android, MySQL.) Enigmai has demonstrated competence with cloud integrations for existing Israeli clients, as well as on-site implementations, which are a requirement in the BFSI vertical. |
| | · | Global Field Service Management Market Research Report Information by component (solutions, services), deployment (Cloud, On-Premise), organization size (small & medium enterprise, large enterprise), and by vertical (manufacturing). |
We believe we can offer case studies of demonstrated customer savings after implementation, our top selling feature.
It should be noted that EBS software satisfies demand in the large call center niche and is independent of any segmentation within that niche other than size. We believe our software has been shown to provide effective solutions for contact centers with greater than 250 seats, independent of industry, indicating a vast market within which new business may be developed in North America.
It is estimated that there are 41,500 contact centers in the United States, 2,905 of which have 250 or more seats.
35% of US contact centers are planning to upgrade or implement WFM software in the next 24 months.
Source: Babel Research, 2021
Our Targeted Markets
The Company recognizes that their major market is call and contact service centers in the global marketplace. With demonstrated proof of concept in Israel, now that Enigmai has been purchased by a US-based parent company and has secured a strategic partnership with AuroraView, the focus for the next two years is continued business development in the Israeli market, and a plan to expand into the North American marketplace focusing on contact centers with 250 or more seats.
Israel Market
A working business development model is already in operation in Israel, with that process remaining undisturbed.
Isracard, a Mastercard product, utilizes EBS software, lending credibility and proof of concept, particularly in the heavily regulated BFSI vertical market.
The country is prominent among the developing nations in high technology industries. The scarce natural resources and the high education level of the people were instrumental in the country getting a prominent role in high technology domains. The country, known as the second Silicon Valley, has achieved enviable success in the research and development of hi-tech industries like software, communication, and life sciences.
The stiff challenges that the country faces from scarce natural resources like water, cultivable land, and rainfall compelled them to go for high technology industries and to depend on exports and outsourcing jobs. Israel has carved a niche in providing total solutions to a variety of agricultural and industrial needs of various countries the world over.
The call center jobs in Israel have emerged as one of the potential foreign exchange earning industries. The annual growth rate of the call center industry in the country is more than 20% per annum according to the Israeli News Agency 2019 report on calls centers.
The country known for its quality and commitment to providing services is distinct from the other outsourcing destinations of Europe, North America, and Asia. The highly motivated, educated, and quality-conscious labor force is the major reason for its success in the outsourcing industry. The country provides a total solution for the call center and customer service center covering a large gamut of operations right from call center service to database management.
There is no doubt that Tel Aviv and Jerusalem are the optimal places for American and European companies to outsource their work. It is a scenario that takes place every day in the United States. A consumer needs a service center and calls the toll-free number. They are greeted by a friendly informative call center worker speaking in fluent, unaccented English.
According to Statistica Reports Apr. 2021 call centers in Israel in 2018 accounted for approximately $284 million in annual revenues and that number is growing at 20% per annum which is consistent with the Israel News report. Thus, it is estimated that sales in call centers in Israel in 2021 would be $495 million.
North America and the USA
Those 2,905 large-sized contact centers in the US represent 1,575,000 worker seats. Capturing even a small segment of this market will be a profitable endeavor for Enigmai.
Integrator contact centers, or those that sell outsourced call center seats to end-user clients, represent a unique niche we’d like to pursue due to relative ease of scaling in the new-to-us North American market. No fewer than 30% of all US contact centers represent outsourced activity, demonstrating an abundance of prospects. Further, nearly one in ten contact centers are still using either pen and paper or whiteboards to schedule staff. 33% of the call centers are generating revenue of less than 500 million dollars, while the five largest call centers in the US employ 40,000-47,000 employees each.
America’s largest companies are racing to overhaul customer service operations that are ill-equipped to convert employees to a work-from-home (WFH) environment amid the pandemic.
Many customers who call the hotlines of airlines, retailers, and financial services firms, among others, encounter hours-long wait times, hearing recorded messages saying help is currently unavailable. In one example, American Express’s Platinum Concierge feature has experienced previously unheard of wait times and service failures in summer 2021, antithetical to their full-service platform advertised by the brand. Some companies including AmEx ask that customers manage their issues online or suggest that they hold off on seeking assistance altogether, leading to decreased customer satisfaction.
Companies trying to convert employees to WFH, both in the U.S. and abroad, must determine ways to ensure security of networks and phone lines in an age where cybersecurity is essential. Some of the most-needed services, such as banking and healthcare, involve especially sensitive information that is protected by law.
Businesses are scrambling for temp workers and using bots to help filter callers who need a live person from those who can be helped in other ways, exposing parent companies to untold risk that Enigmai’s EBS software mitigates.
“At every company…all the call-center folks are getting an email from the CEO saying, ‘What’s the plan if I have to vacate’” workers from the office, said Pat Gibbons, marketing chief for customer-service consulting firm Walker Information Inc. Mr. Gibbons said he had stopped taking on new clients to free up resources for existing ones.
Due to the pandemic, opportunities in the US and North American markets have never been better. So far, human contact is in short supply. The login page of American Express Co. is topped with a message, in red letters, warning of long wait times and encouraging people to “use our digital tools. “British Airways’ customer-service line to manage flight reservations has played a message to call back later or visit the company’s website. At the height of the pandemic in 2020, the toll-free number for Procter & Gamble Co.’s Charmin brand toilet paper tells people looking for bathroom tissue that the company is working “as fast as humanly possible” to supply retailers and ends with, “We hope you are able to find it in stores soon,” before disconnecting.
“You have these big rooms with 1,000 people sitting a foot and a half from each other, and the moment something like [Covid-19] pops out, you’ve got to thin them out,” said Rick Bloom, CEO of Support.com, a Sunnyvale, Calif., firm that provides customer-service software and staff for companies who outsource and is hiring hundreds of workers to keep up with demand. The challenges in monitoring a haphazardly converted workforce to a WFH environment provides challenges that our EBS software can solve.
Internet providers face an influx of demand as American workers and school children shift to working and learning online, respectively. Airlines, which are sustaining losses as flights are grounded worldwide, are being inundated with calls from customers needing flight changes, refunds, or help getting home, indicating immense growth in call center seats, and demonstrating increased opportunities to offer EBS software to companies that are seeking solutions.
Javon Johnson, a professor at the University of Nevada, Las Vegas, recently drove to the airport to speak to a United Airlines Holdings Inc.’s customer-service agent in person after efforts to recover $2,000 spent on canceled flights proved fruitless.
Companies that equip call centers with technical infrastructure and cloud services say the deluge of calls to consumer-facing businesses began with travelers and has shifted to consumers calling makers of in-demand products such as toilet paper and diapers, investors calling financial institutions, and patients calling health systems and insurers, among others.
In many ways, this search for inexpensive overseas labor has backfired on companies. While outsourcing contact centers overseas for less expensive labor has been a trend in recent decades, Enigmai doesn’t see this as a threat, as customer demand in recent years for native English speakers is forcing US companies to bring their outsourced call centers back onshore stateside.
Recently, customers have made more and more frequent complaints about overseas call centers being inadequate. Not only have customers complained directly to companies, but they have also posted public criticism on social media.
Recently, Ohio Senator Brown decided that enough is enough. He and several other Midwestern senators are fighting to keep call center jobs in the US. Senator Brown introduced a bill that would make companies give callers the option to request to speak with a native speaker in the United States. He feels this will help keep jobs in America and give customers the quality call center service they want. This translates into increased business development opportunities for Enigmai.
Call centers are slowly coming back to US soils, much to the delight of consumers. For instance, many upstart call centers only hire American workers. With advancements in technology and increased efficiency, the cost differential between operating out of the US and operating overseas is no longer as large as it once was. This is allowing companies to bring their centers back to the US. Considering the Pandemic will now allow employees to work from home, call centers are becoming an attractive alternative from commuting for 1-2 hours for an 8-hour shift.
Our Marketing Plan and Sales Strategy
Business development strategies in Israel have been effective, with strong leads for potential clients. Revenue from this market will support ongoing operations during ramp-up in the North American market. The Israeli marketing strategy has proven effective, and will continue in the background during this expansion. The marketing plan is focused on our entry into the United States via our strategic US partner, AuroraView.
Strategic Partnership
AuroraView (AV) is a Redmond, WA-based IT consulting and implementation provider with a wealth of experience providing support and onboarding software solutions for contact center clients.
Enigmai has entered into a collaborative agreement with AV in which AV implements and supports our EBS WFM software to end-user clients for a pass-through fee.
AV has a business development mechanism and key sales personnel in place to bring clients to us. In return, AV collects implementation and IT support revenue, as well as revenue-sharing on our recurring revenue model. After deducting AV’s service cost, service profit will be split between AV and Enigmai. Where AV brings the client, they will further receive 35% of the client licensing fee.
Our first strategy is to collaborate with AV sales personnel to target particular contact centers with 250+ seats that currently do not have WFM software, or are dissatisfied with their current provider. We are seeking enterprise clients that will give us credibility in the new market, as well as integrator companies that have a larger reach. Potential year one targets include:
Progressive Insurance Contact Center | Austin, TX | 2,000 seats
| | · | T-Mobile Contact Center | Albuquerque, NM | 1,529 seats |
| | · | Call Center Management (integrator) | Culver City, CA | 850 seats |
| | · | CallZilla (integrator) | Miramar, FL | 300 seats |
| | · | ONVAIO | Mountain View, CA | estimated 300 seats |
| | · | Call Centers 24x7 | Port Angeles, CA | 260 seats |
There are two types of call center operations being targeted above: enterprise companies, which have their own in-house call centers; and integrator companies, who operate their own call center services for any number of companies who prefer to outsource their call center operations rather than run them in-house. The integrator companies have a distinct advantage for Enigmai in that no matter how many companies and employees said integrator company contracts with, Enigmai only has to engage with the integrator and not each of the integrator’s clients. This can significantly increase the number of licenses that can be issued simultaneously compared to a single call center operation.
US Sales Professional
In the third and fourth quarters of 2022, we plan to aggressively recruit a business development professional with deep connections in the industry.
The largest proliferation of call centers is concentrated in Texas (710 as of 2018), with Florida a close second with 637 centers. Georgia has 352 centers. it makes strategic sense to have our sales professional based in one of these three states, though that is not a firm requirement.
Our business development professional will be the US face of our company and we will promote him/her as an industry authority by ghostwriting articles and creating video content for our blog that he will post on LinkedIn to be seen as an industry authority, further promoting our brand to industry insiders. Via established relationships and strategic networking, our sales professional will uncover prospects’ pain points in order to provide them with solutions inherent in our EBS software.
Industry Association – NACC
In fiscal 2022 we plan to join the National Association of Call Centers, or NACC, an industry-specific group with call center and vendor members.
A corporate sponsorship costs $8,750 annually. With 8,000 contact center professionals from analyst to executive to CEO/president, we plan to invest in membership and advertising opportunities, as well as attending regional and national conferences once they return to in-person meetings and our salesman has been recruited.
NACC will be a crucial element of brand awareness as we enter the US market. Over 5,300 of 8,000 total NACC members are connected to call centers with 250 or more seats, so advertising to this group will be a most concentrated effort. Email blasts to members costs $3,300. At $1,100 a monthly newsletter banner can link back to our website as a call to action. We can also supersize our advertising by adding an informative article along with banner for $2,200 more per issue. There is an option to sponsor NACC research for $12,500, though this is not on the immediate horizon. Another opportunity may be to provide a member webinar hosted by NACC executive director containing content we provide, at a cost of $12,500 per webinar with NACC marketing support.
Web Presence
An overhaul of the Enigmai website is underway, slated to be completed by the fourth quarter of fiscal 2022. While our new website will be optimized for search, we don’t anticipate driving new business by Google search or social media. Our social media and web presence will merely be landing spots for our prospects to do more homework after our sales professional is hired and NACC advertising is underway.
Potential Media Advertisement
After hiring our US business development professional, there is the potential to advertise to our ideal clients via their potential media channels, with our first two targets as the NPR station and sports talk radio local to our salesman’s first prospect city. These advertisements can be pricey depending on market, time of ad placement and the number of spots (range of $3,000 to $20,000 per quarter.) If this tactic is implemented, we will A|B test both stations for results. This less direct form of advertisement is intended to supplement an aggressive prospecting strategy to be implemented by our new recruit.
Our Marketplace Strengths and Weaknesses
Please review our section on Risk Factors starting on page 13 for more information about the risks in regard to our management identified strengths and weaknesses and the opportunities and threats to our product and our markets.
| | · | Owned by a public holding company |
| | · | We currently have 2 large successful clients in Israel |
| | · | Adaptable product with exclusive capability |
| | · | We have entrepreneurial management |
| | · | We have sourced talented developers and programmers |
| | · | We have developed a focused sales strategy to market our products |
| | · | Need to convert to a mobile platform |
| | · | Ownership change |
| | · | Limited staff - uses subcontractors |
| | · | No staffing growth plan in place |
| | · | None of the original programmers are involved any longer with the Company |
| | · | For all practical purposes - considered as a start-up |
| | · | Social media is not up to date |
| | · | The website doesn’t track and serves as a customer landing site, not capturing information unless someone fills out the information request |
| | · | Website appears outdated |
| | · | Impact on two emerging markets |
| | · | Bones of software are excellent - can create better opportunities with a mobile integration |
| | · | Integrate programs such as payroll/tax credit programs as an add-on |
| | · | Call centers and customer service centers are ever-expanding |
| | · | 50% of existing customers in our industry are not happy with their current support and software |
| | · | Due to the COVID-19 pandemic, there are more stay-at-home teams, new opportunities |
| | · | Another pandemic |
| | · | Competition from major players |
| | · | Not enough developers/programmers to keep abreast of modifications and changes |
| | · | May grow too quickly and not be able to keep up with client demand |
| | · | Planning fluidity software appears to require customization for each client |
| | · | Overall economy |
Competition and Market Position
The market for our products is competitive, and we expect that competition will continue to intensify as the WFM markets evolve and potentially consolidate. We believe that the trend toward electronic WFM by the use of mobile technology, and particularly cloud solutions, was accelerated by the COVID-19 pandemic.
We believe the primary competitors of our WFM the following Top 5 Competitors - Major WFM Vendors
The information below on market size/share is from 2019 but the article was published Feb. 2021 & the competitors are listed in order of market share,
Kronos is the #1 provider for WFM applications - https://www.appsruntheworld.com/top-10-workforce-management-vendors-market-forecast-and-customer-wins
| | 1. | Kronos & Ultimate Software (the 2 companies merged, now called UKG or Ultimate Kronos Group, before Ultimate Software the 2nd most popular behind Kronos) |
| | 1. | primarily targets small/midsize businesses and specific industries like education - https://www.kronosglobal.de/resource/download/1270, market share of 18.2% in 2019 |
| | · | Regarding Kronos software |
| | · | “Training required to effectively use the applications...business owners must allow supervisory staff the time to learn the program or hire” outside help to “provide in-service training” |
| | · | Search and research options available as part of the Kronos programs can be overwhelming and the information produced creates a essentially a “potential data minefield for staff investigating narrow questions.” - https://smallbusiness.chron.com/pros-cons-kronos-39358.html |
| | · | Customer service and interface are lacking |
| | · | No Personal Time Off (PTO) calendar |
| | · | Menu is difficult to navigate - https://www.capterra.com/p/480/UKG-Pro/reviews/ |
| | · | Reporting isn’t user friendly, especially if not tech savvy |
| | · | Poor customer service, the wait for help with the reporting team is long and sales reps. don’t always follow up - https://www.trustradius.com/products/adp-workforce-now/reviews?qs=pros-and-cons |
| | · | Needs more integration |
| | · | Search tool needs improvement |
| | · | The time off balance can be unclear |
| | · | The system can’t handle multiple transactions with the same effective date - https://www.trustradius.com/products/workday-hcm/reviews?qs=pros-and-cons |
| | · | System is complex, makes it difficult to understand all of the functionalities |
| | · | System slows down if multiple data configuration are active |
| | · | Customer Service lacks full understanding of the software’s functionalities - https://www.trustradius.com/products/sap-successfactors/reviews?qs=pros-and-cons |
| | · | 80% of users mention that navigating the system is tedious |
| | · | “suffers from glitches..combined with poor navigation slows work down and impacts productivity” |
| | · | “Infrequent updates and an outdated UI further decrease efficiency” |
You may find this info at - https://www.selecthub.com/workforce-management-software/oracle-workforce-management
Our Source for top 5 competitors: https://www.appsruntheworld.com/top-10-workforce-management-vendors-market-forecast-and-customer-wins
According to Grand View Research, in terms of market concentration, the workforce management software market is more fragmented than consolidated. Although there are corporations like IBM and SAP which are present in the industry, it’s evident that there is space for competitors like Enigmai to seize the opportunity to be innovative and establish themselves alongside these large companies.
Existing Customers
Two of Enigmai’s largest clients include:
| | · | Isracard - among the largest Credit Card companies in Israel branded by Mastercard (500 seats) |
| | · | Clal - One of the largest Insurance companies in Israel (700 seats) |
Intellectual Property
Our software and most of the underlying technologies are built using a client-server architecture. Our proprietary algorithms (which is the most sensitive part of the software) are stored separately and only accessible by select team members. We rely on a combination of code segregation, individual access management, copyright, trademark laws, non-disclosure agreements and other contractual provisions to establish and maintain our proprietary intellectual property rights.
Customers license the right to use our software products on a non-exclusive basis.
While we believe that our intellectual property as a whole is valuable and our ability to maintain and protect our intellectual property rights is important to our success, we also believe that our business as a whole is not materially dependent on any particular trademark, license, or other intellectual property right.
Software Development
We design, develop, test, market, license, and support new software products and enhancements of current products. We continuously monitor our software products and enhancements to remain compatible with standard platforms and file formats.
Government Regulation
We do not believe that we are subject to any governmental regulations or approval requirements affecting our products or services. Complying with the regulations and requirements applicable to our business does not entail a significant cost or burden. We believe that we are in compliance in all material respects with all applicable governmental regulations.
Human Resources
As of June 30, 2022 we have one employee and have consulting agreements with two of our officers. Enigmai has signed an agreement with Aurora View to provide support service for existing clients and software development services. The size of the team is adjusted based on the project we are working on and the work load
Personal relationships with our existing customers are an important part of our business, and our customers have come to rely on the personal service and knowledge of our workforce across all functional areas. When selecting talent, we consider education, experience, diversity, and the likelihood that a candidate will espouse our values of integrity, collaboration, dedication, creativity, and superior customer service.
We are committed to fostering a diverse and inclusive workforce that attracts and retains exceptional talent. In addition, we pride ourselves on an open culture that respects co-workers, values employees’ health and well-being and fosters professional development.
DESCRIPTION OF PROPERTY
The Company’s corporate office is at 2803 Philadelphia Pike, Suite B #565, Claymont, DE 19703, which space is provided free of charge by one of our officers for executive management. Our subsidiary, Enigmai Ltd. occupies shared office facilities 156 Menachem Begin Rd., H Tower recital, 18th Floor, Tel Aviv, Israel, which is provided free of charge by the Company’s legal counsel.
Additional space is expected to be required as we expand our operations. We do not foresee any significant difficulties in obtaining any required additional space. We currently do not own any real property.
MARKET INFORMATION REGARDING COMMON STOCK AND DIVIDENDS
Our common stock is quoted on the OTC Pink Sheers under the symbol “GSPT.” The closing price of our common stock as reported on the OTC Pink Sheers on September 14, 2022, was $0.017 per share.
As of June 30, 2022, we had 165 stockholders of record. Such number of record stockholders does not include additional stockholders whose shares are held in street or nominee name by banks, brokerage firms, and other institutions on their behalf.
Dividends may be declared and paid out of legally available funds at the discretion of our board of directors (“Board of Directors,” or “Board”). We have never declared or paid any cash dividends on our common stock. We do not anticipate or contemplate paying dividends on our common stock in the foreseeable future. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors. We currently intend to utilize all available funds to develop our business.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of financial conditions and results of operations of the Company for the fiscal years ended December 31, 2021 and 2020, and the fiscal quarter ended March 31, 2022, should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this prospectus. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods. Any forward-looking statements in this discussion and analysis should be read in conjunction with the information set forth in “Note Regarding Forward-Looking Statements” elsewhere herein. In this prospectus, we sometimes refer to the twelve-month period ended December 31, 2021 as 2021, to the twelve month period ended December 31, 2020 as 2020, to the six month period ended June 30, 2022 as the second quarter 2022, and to the six month period ended June 30, 2021 as the second quarter 2021.
Results of Operations
Comparison of the fiscal year ended December 31, 2021 and 2020.
The following table summarizes the results of our operations:
| | | For Years Ended | |
| | | December 31, | |
| | | 2021 | | | 2020 | |
| | | | | | | |
| Revenue | | $ | 45,075 | | | $ | 52,165 | |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| Cost of revenue | | | 2,705 | | | | 25,809 | |
| Professional fees | | | 112,172 | | | | 5,894 | |
| Consulting fees | | | 428,021 | | | | 72,272 | |
| General and administrative | | | 286,441 | | | | 6,832 | |
| Total operating expenses | | | 829,339 | | | | 110,807 | |
| | | | | | | | | |
| Operating loss | | | (784,264 | ) | | | (58,642 | ) |
| | | | | | | | | |
| Other income (expense) | | | | | | | | |
| Loss on debt settlement | | | (135,577 | ) | | | - | |
| Interest expense | | | (1,254,863 | ) | | | (488,640 | ) |
| Unrealized gain (loss) on investment | | | (792,933 | ) | | | 988,684 | |
| Total other income (expense) | | | (2,183,373 | ) | | | 500,044 | |
| | | | | | | | | |
| Net Income (Loss) | | $ | (2,967,637 | ) | | $ | 441,402 | |
| | | | | | | | | |
| Other comprehensive income (loss) | | | | | | | | |
| Net Income (Loss) | | $ | (2,967,637 | ) | | $ | 441,402 | |
| Foreign currency translation adjustment | | | (1,575 | ) | | | (407 | ) |
| Comprehensive income (loss) | | $ | (2,969,212 | ) | | $ | 440,995 | |
Revenue
We reported revenues of $45,075 and $52,165 in the fiscal years ended December 31, 2021 and 2020, respectively and associated costs of revenue of $2,705 and $25,809, respectively. Costs of revenue decreased substantially from fiscal 2020 to fiscal 2021 as a result of the termination of certain employment contracts upon acquisition of the operating subsidiary, Enigmai.
Operating Expenses
Total operating expenses for the fiscal year ended December 31, 2021, were $829,339 as compared to $110,807 for the fiscal year ended December 31, 2020. The Company incurred $112,172 and $5,894 in professional fees, $428,021 and $72,272 in consulting fees, and $286,441 and $6,832 for general and administrative fees. Year over year expenses increased substantially for the fiscal year ended December 31, 2021, due to the acquisition and operations of our wholly owned subsidiary, Enigmai. The acquisition occurred effective November 24, 2020, and therefore there were limited operations to December 31, 2020. Consulting fees for December 31, 2021, include $293,894 in management fees paid by way of stock based compensation to our President and CEO ($10,845 - December 31, 2020). General and administrative expenses include office and sundry expense, transfer agent costs, marketing, advertising, and promotional expenses.
Other expense
Other expense reported for the fiscal years ended December 31, 2021 totaled $2,183,373 as compared to reported other income for the fiscal year ended December 31, 2020 of $500,044.
During the fiscal year ended December 31, 2021 and 2020, other expenses includes interest expenses of $1,254,863 (December 31, 2020 -$488,640) consisting of amortization of debt discount of $1,246,933 (December 31, 2020 -$488,640) and interest expenses of $7,930 (December 31, 2020 – Nil) and a loss on debt settlement of $135,577 (December 31, 2020 – Nil). Further, during December 31, 2021, the Company reported an unrealized loss on investment of $792,933 as compared to a gain on investment of $988,684 at December 31, 2020, related to the valuation of our ownership of certain marketable securities.
We had a net loss of $2,967,637 for the fiscal year ended December 31, 2021, compared to net income of $441,402 for the fiscal year ended December 31, 2020.
Statement of Cash Flows
Fiscal years ended December 31, 2021, and 2020
The following table summarizes our cash flows for the fiscal years ended December 31, 2021, and 2020
| Statements of Cash Flows | | 2021 | | | 2020 | |
| Net cash used in operating activities | | | (219,392 | ) | | | (36,620 | ) |
| Net cash provided by/(used in) investing activities | | | - | | | | - | |
| Net cash provided by financing activities | | | 258,482 | | | | 2,737 | |
| Effect of foreign exchange | | | (824 | ) | | | 1,268 | |
| Net increase (decrease) in cash | | | 38,266 | | | | (32,615 | ) |
Cash Used in Operating Activities
Cash used in operating activities for the fiscal year ended December 31, 2021, was $219,392 as compared to $36,620 for the fiscal year ended December 31, 2020.
Cash used in operating activities for the fiscal year ended December 31, 2021, was primarily the result of our net loss of $2,967,637 offset by non-cash items including amortization of debt discount of $1,246,933, stock based compensation of $484,248, a loss on debt settlement of $135,577 and an unrealized loss on investment in securities of $792,933. Changes in operating activities in the fiscal year ended December 31, 2021, included an increase in accounts receivable of $1,580, an increase in in prepaid expenses of $9,200, an increase in unearned revenue of $48,950, and an increase in accounts payable and accrued liabilities of $50,384.
Cash used in operating activities for the fiscal year ended December 31, 2020, was primarily the result of a loss of $441,402 offset by non-cash items including amortization of debt discount of $488,640, stock based compensation of $33,322 and an unrealized gain on investment in securities of $988,684. Changes in operating activities in the fiscal year ended December 31, 2020 included a decrease in prepaid expenses of $2,018, a decrease in deferred revenue of $20,173 and an increase to accounts payable of $6,855.
Cash Provided by Financing Activities
During the fiscal year ended December 31, 2021, financing activities provided cash of $258,482 as compared to 2,737 in fiscal 2020. Results included $134,774 in proceeds from convertible notes in fiscal 2021 as compared to Nil in the same comparative period in fiscal 2020, proceeds from demand loans of $69,000 at December 31, 2021 as compared to Nil in the year ended December 31, 2020 and advances from related parties of $54,708 for the fiscal year ended December 31, 2021, compared to $6,684 at December 31, 2020. During the fiscal year ended December 31, 2020, we repaid $3,947 to related party loans with no comparable repayment at December 31, 2021.
Comparison of the three and six months ended June 30, 2022 and 2021.
Results of Operations
Comparison of three months ended June 30, 2022 and 2021
The following table summarizes the results of our operations:
| | | Three Months Ended | |
| | | June 30, | |
| | | 2022 | | | 2021 | |
| | | | | | | |
| REVENUES | | $ | 10,887 | | | $ | 10,859 | |
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Cost of revenue | | | 653 | | | | 650 | |
| Professional fees | | | 28,200 | | | | 19,419 | |
| Consulting fees | | | 443,635 | | | | 115,066 | |
| Research and development | | | 47,702 | | | | - | |
| General and administrative | | | 49,410 | | | | 58,791 | |
| Total operating expenses | | | 569,600 | | | | 193,926 | |
| | | | | | | | | |
| (Loss) from operations | | | (558,713 | ) | | | (183,067 | ) |
| | | | | | | | | |
| Other income (expense) | | | | | | | | |
| Loss on debt settlement | | | - | | | | - | |
| Interest expense | | | (1,183,240 | ) | | | (426,015 | ) |
| Unrealized loss on investment | | | (46,810 | ) | | | 137,120 | |
| Total other income (expense) | | | (1,230,050 | ) | | | (288,895 | ) |
| | | | | | | | | |
| Net income (loss) | | $ | (1,788,763 | ) | | $ | (471,962 | ) |
Revenue
We reported revenues of $10,887 and $10,859 in the three months ended June 30, 2022 and 2021, respectively and associated costs of revenue of $653 and $650, respectively.
Operating Expenses
Total operating expenses for the three months ended June 30, 2022, were $569,600 as compared to $193,926 for the three months ended June 30, 2021. During the three months ended June 30, 2022 and 2021 we reported $28,200 and $19,419 in professional fees, $443,635 and $115,066 in consulting fees, and $49,410 and $58,791 for general and administrative fees, respectively. Period over period expenses increased substantially for the three months ended June 30, 2022 due to an increase in consulting expenses paid by the issuance of shares to a third party investor relations consultant totaling $300,000 and as a result of an increase in research and development expenses from $Nil to $47,702. General and administrative expenses include office and sundry expense, transfer agent costs, marketing, advertising, and promotional expenses.
Other expense
Other expense reported for the three months ended June 30, 2022, totaled $1,230,050 as compared to $288,895 for the three months ended June 30, 2021.
During the three months ended June 30, 2022 and 2021, other expenses includes interest expenses of $1,183,240 (June 30, 2021 - $426,015) consisting of amortization of debt discount and accrued interest expenses. Further, during the three months ended June 30, 2022 the Company reported an unrealized loss on investment of $46,810 as compared to a gain on investment at June 30, 2021 of $137,120, related to the valuation of our ownership of certain marketable securities.
We had a net loss of $1,788,763 at June 30, 2022 as compared to a net loss of $471,962 for the three months ended June 30, 2021.
Results of Operations
Comparison of six months ended June 30, 2022 and 2021
The following table summarizes the results of our operations:
| | | Six Months Ended | |
| | | June 30, | |
| | | 2022 | | | 2021 | |
| | | | | | | |
| REVENUES | | $ | 22,836 | | | $ | 21,666 | |
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Cost of revenue | | | 1,370 | | | | 1,300 | |
| Professional fees | | | 51,272 | | | | 39,156 | |
| Consulting fees | | | 577,501 | | | | 254,519 | |
| Research and development | | | 88,398 | | | | - | |
| General and administrative | | | 95,976 | | | | 122,277 | |
| Total operating expenses | | | 814,517 | | | | 417,252 | |
| | | | | | | | | |
| (Loss) from operations | | | (791,681 | ) | | | (395,586 | ) |
| | | | | | | | | |
| Other income (expense) | | | | | | | | |
| Loss on debt settlement | | | - | | | | (135,577 | ) |
| Interest expense | | | (1,880,808 | ) | | | (441,954 | ) |
| Unrealized loss on investment | | | (100,240 | ) | | | (468,100 | ) |
| Total other income (expense) | | | (1,981,048 | ) | | | (1,045,631 | ) |
| | | | | | | | | |
| Net income (loss) | | $ | (2,772,729 | ) | | $ | (1,441,217 | ) |
Revenue
We reported revenues of $22,836 and $21,666 in the six months ended June 30, 2022 and 2021, respectively and associated costs of revenue of $1,370 and $1,300, respectively.
Operating Expenses
Total operating expenses for the six months ended June 30, 2022, were $814,517 as compared to $417,252 for the six months ended June 30, 2021. During the six months ended June 30, 2022 and 2021 we reported $51,272 and $39,156 in professional fees, $577,501 and $254,519 in consulting fees, and $95,976 and $122,277 for general and administrative fees, respectively. Period over period expenses increased substantially for the six months ended June 30, 2022 due to an increase in consulting expenses paid by the issuance of shares to a third party investor relations consultant totaling $300,000 and as a result of an increase in research and development expenses from $Nil to $88,398. General and administrative expenses experienced a decline period over period as we reduced our overhead in Israel, and include office and sundry expense, transfer agent costs, marketing, advertising, and promotional expenses.
Other expense
Other expense reported for the six months ended June 30, 2022, totaled $1,981,048 as compared to $1,045,631 for the six months ended June 30, 2021.
During the six months ended June 30, 2022 and 2021, other expenses includes interest expenses of $1,880,808 (June 30, 2021 - $441,954) consisting of amortization of debt discount, financing costs and accrued interest expenses. Further, during the six months ended June 30, 2021, the Company recorded a loss on debt settlement of $135,577 with no comparative expense in the current three months ended June 30, 2022. The Company reported an unrealized loss on investment of $100, 240 as compared to a loss on investment at June 30, 2021 of $468,100, related to the valuation of our ownership of certain marketable securities.
We had a net loss of $2,772,729 at June 30, 2022 as compared to a net loss of $1,441,217 for the six months ended June 30, 2021.
Statement of Cash Flows
Six months ended June 30, 2022
The following table summarizes our cash flows for the fiscal years ended December 31, 2021, and 2020
| Statements of Cash Flows | | 2022 | | | 2021 | |
| Net cash used in operating activities | | | (253,165 | ) | | | (23,930 | ) |
| Net cash provided by/(used in) investing activities | | | - | | | | - | |
| Net cash provided by financing activities | | | 309,774 | | | | 120,613 | |
| Effect of foreign exchange | | | (2,451 | ) | | | (739 | ) |
| Net increase in cash | | | 54,158 | | | | 95,944 | |
Cash Used in Operating Activities
Cash used in operating activities for the six months ended June 30, 2022 was $253,165 as compared to $23,930 for the fiscal six months ended June 30, 2021.
Cash used in operating activities for the six months ended June 30, 2022 was primarily the result of our net loss of $2,772,729 offset by non-cash items including amortization of debt discount of $1,302,195, stock based compensation of $267,732, shares issued for a consulting agreement of $300,000, shares issued as financing costs of $563,600, warrant repricing effect of $20, and an unrealized loss on investment in securities of $100,240. Changes in operating activities in the six months ended June 30, 2022 included an increase in accounts receivable of $1,511, an increase in in prepaid expenses of $3,925, a decrease in unearned revenue of $817, and a decrease in accounts payable and accrued liabilities of $10,992.
Cash used in operating activities for the six months ended June 30, 2021 was primarily the result of our net loss of $1,441,217 offset by non-cash items including amortization of debt discount of $440,053, stock based compensation of $252,443, a loss on debt settlement of $135,577 and an unrealized loss on investment in securities of $468,100. Changes in operating activities in the six months ended June 30, 2021 included an decrease in in prepaid expenses of $121, an increase in unearned revenue of $69,645, and an increase in accounts payable and accrued liabilities of $51,348.
Cash Provided by Financing Activities
During the six months ended June 30, 2022, financing activities provided cash of $309,774 as compared to $120,613 in the six months ended June 30, 2021. Results included $76,194 in proceeds from convertible notes in fiscal 2021 as compared to $366,360 in the six months ended June 30, 2022, advances from related parties of $2,045 for the six months ended June 30, 2022, compared to $48,419 for the six months ended June 30, 2021, offset by repayments to related parties of $58,631 and $4,000 in the six months ended June 30, 2022 and 2021, respectively.
Plan of Operation:
We have developed an advanced workforce management system for scheduled environments which we currently market in Israel and plan to market in the U.S. and globally. To date we have generated modest revenues from operations, and while we have various contracts in place for future development, there is no assurance of future revenues.
Liquidity and Capital Resources
The Company has been in the start-up phase and has generated modest revenues from its operations with ongoing operational losses to date, and while we have customer contracts in place currently, there is no assurance of future revenues. As of June 30, 2022, the Company had a working capital deficit of $3,644,274 with approximately $95,951 of cash on hand and an accumulated deficit of $5,303,466. During the six months ended June 30, 2022 the Company received net proceeds of $301,360 from a securities purchase agreement and convertible note with an investor, as well as $65,000 under certain convertible loan treaty agreements from third party investors. There can be no assurance further funding will be available under the agreement. The Company has also entered into an equity purchase agreement to raise up to $5,000,000 with respect to the sale of certain shares to be registered in consideration for put notices under an equity line. The Company anticipates a need for a further $5,000,000 in fiscal 2022 and 2023 to meet its upgraded software infrastructure requirements and for marketing of its WFM software and has filed this registration statements on Form S-1 to facilitate this requirement. The issuance of additional securities may result in significant dilution in the equity interests of our current stockholders. Obtaining loans, assuming these loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available for use when needed or, if available, that it can be obtained on commercially reasonable terms.
Covid-19 Pandemic
The recent COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may severely impact the Company’s ability to raise additional capital and to pursue certain planned business activities. The Company may be required to cease operations if it is unable to finance its’ operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is highly uncertain and subject to change. Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to estimate the effects of the COVID-19 outbreak on its operations or financial condition in the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or continue to implement its planned business objectives to obtain profitable operations.
Going Concern
During the six months ended June 30, 2022, the Company reported a loss of $2,772,729 as compared to loss of $1,441,217 for the same period ended June 30, 2021; cash used in operations totaled $253,165 for the six months ended June 30, 2022, as compared to cash used in operations of $23,930 for the same period ended June 30, 2021. At June 30, 2022, the Company had negative working capital of $3,644,274. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company’s existing business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. There are no assurances that the Company will be able to meet its obligations, raise funds or continue to implement its planned business objectives to obtain profitable operations.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
These critical accounting policies and estimates by our management should be read in conjunction with Note 2 Summary of Significant Accounting Policies to the Audited Consolidated Financial Statements for the years ended December 31, 2021 and 2020, and the three and six months ended June 30, 2022 and 2021.
The preparation of consolidated financial statements in accordance U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses in the reporting period. We regularly make estimates and assumptions that affect the reported amounts of assets and liabilities. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.
We consider the following accounting policies and estimates to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment:
| | ● | Foreign currency translation |
| | ● | Revenue Recognition |
| | ● | Convertible Debt and Beneficial Conversion Features |
| | ● | Stock Settle Debt |
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel (“ILS”).
All transactions initiated in ILS are translated into U.S. dollars in accordance with Accounting Standards Codification (“ASC”) 830-30, “Translation of Financial Statements,” as follows:
| i) | assets and liabilities are translated at the closing rate at the date of the balance sheet, or |
1USD=3.5017 ILS (June 30, 2022) and 1USD=3.1125 ILS (December 31, 2021)
| ii) | income and expenses are translated at average exchange rates for six months ended June 30, or |
1USD=3.27116 ILS (in 2022) and 1USD=3.26923 ILS (in 2021);
| iii) | all resulting exchange differences are recognized as other comprehensive income, a separate component of equity. |
Adjustments arising from such translations are included in accumulated other comprehensive income (loss) in stockholders’ equity.
Revenue Recognition
The Company follows ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from software licensing agreements and contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. In each of the three and six months ended June 30, 2022, and 2021, the Company generated revenues from subscriptions to the Company’s workforce software, the ENIGMAI Business Suite. Customers pay a fixed fee for access to the software suite. Thereafter, customers pay 12% of the software cost annually for maintenance and support. Updates and new software versions are included in the maintenance costs. Set up fees and software costs are expensed when the software is operational for each client. Annual maintenance fees are generally charged in advance at the start of each contract year and amortized over the year. The Company also generates revenue from time to time from ad hoc service/software installation projects which are invoiced on completion. During the three and six months ended June 30, 2022, the Company recognized revenue of $10,887 and $22,836, respectively. Balances of deferred revenue at June 30, 2022 and December 31, 2021 totaled $43,438 and $49,738, respectively.
Convertible Debt and Stock Settled Debt
The Company adopted ASU 2020-06 effective January 1, 2022. In certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed discount to the trading price of the Company’s common shares as traded in the over-the-counter market. In these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed value transferred to the convertible note holder from the fixed discount conversion feature. As of June 30, 2022, and December 31, 2021, the Company had recorded within Convertible Notes, net of discount, the amount of $2,741,251 and $1,388,207 for the value of the stock settled debt for certain convertible notes.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), or ASU 2020-06. The guidance in ASU 2020-06 simplifies the accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this standard on January 1, 2022, using the modified retrospective approach. The adoption of ASU 2020-06 did not have a material impact on the Company’s condensed consolidated financial statements.
The following significant accounting changes occurred as result of the adoption of ASU 2020-06:
| Consolidated Balance Sheet | | December 31, 2021 As Reported | | | Effect of the Adoption of ASU 2020-06 | | | January 1, 2021 As Adjusted | |
| Convertible notes, net | | | 1,782,410 | | | | 394,203 | | | | 2,17,613 | |
| Additional paid-in-capital | | | 1,151,511 | | | | (394,203 | ) | | | 757,308 | |
The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Since inception, we have had no changes in or disagreements with our accountants. Our audited financial statements have been included in this prospectus in reliance upon Pinnacle Accountancy Group of Utah (a dba of Heaton & Company, PLLC), as experts in accounting and auditing.
DIRECTORS OFFICERS AND CONTROL PERSONS
We are dependent on the efforts and abilities of senior management. The interruption of services of senior management could have a material adverse effect on our operations, profits and future development if suitable replacements are not promptly obtained. No assurance can be given that each executive will remain with us. All of our officers and directors will hold office until their resignation or removal.
The following table sets forth the names and ages of our current directors and executive officers as well as the principal offices and positions held by each person. Our Board of Directors appoints our executive officers. Our directors serve until the earlier occurrence of the election of his or her successor at the next meeting of shareholders, death, resignation or removal by the Board of Directors. We have no promoters as Rule 405 of Regulation S-K defines that term.
| Name | | Age | | Title |
| | | | | |
| Eliav Kling | | 49 | | Chief Executive Officer, and Director |
| | | | | |
| Louis Shefsky | | 71 | | President, Secretary, Treasurer, Chief Financial Officer, and Director |
| | | | | |
| Eital Muskal | | 48 | | Vice President, Business Development |
Eliav Kling, Chief Executive Officer, and Director.
Mr. Kling joined the Company on November 4, 2020. Mr. Kling is an entrepreneur, business developer, and real estate investor with over 25 years of experience in the tech industry and business world. His years of experience and expertise in the corporate IT world is where he sharpened his analytical skills, crisis management, and remote team management. Since 2016, Mr. Kling has operated his own consulting firm, Kerra Real Estate Consulting Ltd. He received a BA in Computer Science from The Academic College of Tel Aviv in 2001 and a diploma in practical engineering - electronics and control systems from AMAL Handesaim BET Israel in 1992.
Louis Shefsky, President, Secretary, Treasurer, CFO and Director
Mr. Shefsky joined the Company on November 4, 2020. Mr. Shefsky is an entrepreneur and business executive with over 35 years of experience in the public markets who has been operating his own consulting company, Vantage Consulting, since 2006. His years of experience and expertise help him connect tech startups with the right investors.
Eital Muskal, Vice President
Ms. Muskal joined the Company on November 15, 2020. For the past two decades, Mrs. Muskal navigated her career as a lawyer and a senior business strategy specialist while assuming increased responsibilities and higher-level roles through different industries. She holds an L.L.B degree from the Netanya Academic College in Israel, 1998, and was the founder of a boutique law firm specializing in immigration and relocation processes where she developed complex business models to support Israeli companies in their expansion to North America. Since 2013, Mrs. Muskal has been self-employed holding positions as a strategy executive leading and implementing corporate growth initiatives. She has led the execution of business development plans for corporations in the private sector.
Family Relationships
There are no family relationships between any director or executive officer.
Director Independence
Our board of directors is currently composed of two members, neither of whom qualify as independent directors in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of her family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to our management and us.
Security Holders Recommendations to Board of Directors
We welcome comments and questions from our shareholders. Shareholders can direct communications to our Investor Relations team. However, while we appreciate all comments from shareholders, we may not be able to individually respond to all communications. We attempt to address shareholder questions and concerns in our press releases and documents filed with the SEC so that all shareholders have access to information about us at the same time. All communications addressed to our Director and Executive Officers will be reviewed by the appropriate Officer unless the communication is clearly frivolous.
Board Committees
We do not currently have any committees.
Our board is actively involved in our risk oversight function and collectively undertakes risk oversight as part of our monthly management meetings. This review of our risk tolerances includes, but is not limited to, financial, legal and operational risks and other risks concerning our reputation and ethical standards.
Given our size, we do not have a nominating committee or a diversity policy. Our entire board monitors and assesses the need for and qualifications of additional directors. We may adopt a diversity policy in the future in connection with our anticipated growth.
Long-Term Incentive Plans
We do not have a Long-Term Incentive Plan that involves ongoing Restricted Stock and Stock Option grants of which are performance based. We have not issued any Stock Option grants.
Promoters and Certain Control Persons
Involvement in Certain Legal Proceedings
During the past ten years, except as noted above, the officers and directors of the Company have not been the subject of the following events:
| 1. | A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
| 2. | Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities; |
| | i) | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
| | ii) iii) | Engaging in any type of business practice; or Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
| 4. | The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity; |
| 5. | Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| 6. | Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| 7. | Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| | i) | Any Federal or State securities or commodities law or regulation; or |
| | ii) | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or |
| | iii) | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| 8. | Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
EXECUTIVE COMPENSATION
As a “smaller reporting company” under SEC rules, our named executive officers (or NEOs) for our last completed fiscal year consisted of (i) our principal executive officer, and; (ii) our two most highly compensated executive officers, other than the principal executive officer. For the year ended December 31, 2021, our NEOs were the following individuals:
| | ● | Eliav Kling, our current Chief Executive Officer; |
| | | |
| | ● | Louis Shefsky our current President, Secretary. Treasurer and Chief Financial Officer |
| | | |
| | ● | Eital Muskal, our current Vice President of Business Development. |
Summary Compensation Table
The following table sets forth certain information relating to the total compensation earned for services rendered to us in all capacities by our NEOs for 2021 and 2020.
| Name & Principal Position | | Year | | Salary ($) | | | Stock Awards ($) | | | Option Awards(1) ($) | | | All Other Compensation ($) | | | Total ($) | |
| Eliav Kling | | 2021 | | | - | | | | 150,000 | (1) | | | - | | | | - | | | | 150,000 | |
| Chief Executive Officer | | 2020 | | | - | | | | - | | | | - | | | | - | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Louis Shefsky | | 2021 | | | - | | | | 143,894 | (2) | | | - | | | | - | | | | 143,894 | |
| President, Secretary, Treasurer, Chief Financial Officer | | 2020 | | | - | | | | 10,645 | (2) | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Eital Muskal | | 2021 | | | 79,366 | | | | 56,227 | (3) | | | - | | | | - | | | | - | |
| Vice President, Business Development | | 2020 | | | - | | | | - | | | | - | | | | - | | | | - | |
(1) On January 1, 2021, the Company and its CEO and director, Eliav Kling, entered into a compensation agreement for a term of one year, ending December 31, 2021, pursuant to which the Company agreed to compensation of $150,000 in the form of 10,714,286 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.014 per share.
(2) On December 1, 2020, the Company entered into a compensation agreement with Louis Shefsky, a director and officer of the Company, pursuant to which the Company issued a total of 8,975,000 unregistered, restricted shares of common stock, valued at $130,138. The term of the contract was from December 1, 2020 to November 30, 2021. A total of $10,645 was expensed during fiscal 2020 and the remaining $119,293 in fiscal 2021. On December 1, 2021, the Company entered into a new one-year compensation agreement with Mr. Shefsky under which the Company issued a total of 1,054,339 shares of unregistered, restricted common stock at $0.28 per share for a total value of $295,215. The term of the contract was from December 1, 2021 to November 30, 2022. In respect to this contract a total of $24,601 was expensed in fiscal 2021.
(3) On November 15, 2020, the Company entered into an employment agreement with Eital Muskal as VP of Strategy and Business Development for Enigmai Ltd., the Company’s wholly owned subsidiary. Under the terms of the employment agreement, Ms. Muskal receives compensation of $160,000 Canadian dollars per annum (approximately US$126,000), with the initial payments commencing February 2021, paid as follows: cash consideration of CDN$100,000 and CDN$60,000 in consideration by way of the issuance of shares of the common stock of the Company which shall be paid quarterly, based on a 10% discount to the 10 day average trading price at the time of issuance in year one, and a discount of 15% in year two, and using the applicable rate of exchange from Canadian to US dollars at the valuation date. During fiscal 2021 Ms. Eital received a total of 395,812 shares including a bonus, valued at $56,227.
Employment Agreements with our Executive Officers
Pension Benefits
We do not current have any pension benefit plans.
Employment Agreements with our Executive Officers
Eital Muskal
On November 15, 2020, the Company entered into an employment agreement with Eital Muskal as VP of Strategy and Business Development for Enigmai Ltd., the Company’s wholly owned subsidiary. Under the terms of the employment agreement, Ms. Muskal receives compensation of $160,000 Canadian dollars per annum (approximately US$126,000), paid as follows: cash consideration of CDN$100,000 and CDN$60,000 in consideration by way of the issuance of shares of the common stock of the Company which shall be paid quarterly, based on a 10% discount to the 10 day average trading price at the time of issuance and using the applicable rate of exchange from Canadian to US dollars at the valuation date. On February 15, 2021, May 15, 2021, August 15, 2021, and November 15, 2021, respectively a total of 304,165, 26,266, 8,989, and 31,750 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares. At the end of the term of the contract, the Company agreed to issue a bonus to its VP Business Development and Strategy in the amount of CDN$10,000 paid by the issuance of 24,642 shares of common stock at a discount of 10% to the market price on the date of issue. Further, on expiry, the Company and the consultant agreed to extend the contract for a further year and amend the terms of the employment agreement to provide those shares issued as compensation under the terms of the agreement shall be issued at a 15% discount to market, on the same terms and conditions, with the contract terminating on November 15, 2022. On February 15, 2022, 171,354 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares. On May 15, 2022, 335,261 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares.
Eliav Kling
On January 1, 2021, the Company and its CEO and director, Eliav Kling, entered into a compensation agreement for a term of one year, ending December 31, 2021, pursuant to which the Company agreed to compensation of $150,000 in the form of 10,714,286 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.014 per share, which amount has been amortized over the term of the contract.
On January 1, 2022, the Company and its CEO and director, Eliav Kling entered into a compensation agreement for a term of one year, ending December 31, 2022, pursuant to which the Company issued 1,216,545 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.1498 per share, which amount will be amortized over the term of the contract.
Louis Shefsky
On December 1, 2020, the Company entered into a compensation agreement with Louis Shefsky, a director and officer of the Company, pursuant to which the Company issued a total of 8,975,000 unregistered, restricted shares of common stock, valued at $130,138., which amount was amortized over the term of the contract. The term of the contract was from December 1, 2020 to November 30, 2021.
On December 1, 2021, the Company entered into a new one-year compensation agreement with Mr. Shefsky under which the company issued a total of 1,054,339 shares of unregistered, restricted common stock at $0.28 per share for a total value of $295,215, which amount will be amortized over the term of the contract The term of the contract was from December 1, 2021 to November 30, 2022.
Director Compensation
Currently, there is no compensation in any form including payments of cash or in equity paid for services rendered as Directors. Additionally, no award of salary or equity has been accrued as payable for any director for any current or prior service. At this time no other plan for compensation has been developed for either salary or equity compensation. It is contemplated that the registrant would develop and approve a plan as soon as it has adequate resources to do so. Any future plans would be commensurate with the service provided and not exceed any industry standard for the size and performance of comparable companies in the same industry.
Directors may be compensated for out-of-pocket expenses associated with attending Board of Directors’ meetings.
There is no compensation disclosed on the Director Compensation Table below as the Directors of the Company received no compensation as Directors; instead, any compensation received is shown in the Executive Compensation Summary Table above for those Officers who happen also to be Directors of ours.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table reflects the beneficial ownership of the Company’s common stock by all our executive officers and directors, and by each stockholder who beneficially owns more than 5% of the Company’s common stock, as of June 30, 2022 based on 107,416,146 shares issued and outstanding.
The information provided in the table below is based on our records, information filed with OTC Markets and information provided by our directors and executive officers. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Golden Star Enterprises Ltd.,
| Name of Beneficial Owner | | Number of Shares Beneficially Owned | | | Percentage of Shares Outstanding (1) | |
| DIRECTORS AND OFFICERS | | | | | | |
| Eliav Kling | | | 11,930,831 | | | | 11.1 | % |
| Louis Shefsky | | | 10,029,339 | | | | 9.3 | % |
| Eital Muskal | | | 902,427 | | | | 0.84 | % |
| | | | | | | | | |
| Officers and Directors as a Group (3 Persons) | | | 22,862,597 | | | | 21.24 | % |
| | | | | | | | | |
| HOLDERS OF MORE THAN 5% BENEFICIAL OWNERSHIP | | | | | | | | |
| Ofir Herzas | | | 8,000,000 | | | | 7.4 | % |
| Michael Kahiri | | | 7,500,000 | | | | 6.98 | % |
Under Rule 13d-3 promulgated under the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR END
The Company does not currently have any stock option plans.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The Company does not currently have any equity compensation plans.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a summary of the related person transactions that the Company has participated in at any time during each of the previous three fiscal years.
On November 4, 2020, the then Board of Directors and officers resigned, and Eliav Kling and Louis Shefsky were appointed to the Board of Directors and as officers of the Company, thus effecting a change in control of the Company. Ms. Eital Muskal was appointed Vice President of Strategy and Business development on November 15, 2020.
Louis Shefsky
On December 1, 2020, the Company entered into a compensation agreement with Louis Shefsky, a director and officer of the Company, pursuant to which the Company issued a total of 8,975,000 unregistered, restricted shares of common stock, valued at $130,138. The term of the contract was from December 1, 2020 to November 30, 2021. During the fiscal year ended December 31, 2020, the Company recorded expenses of $10,845 and deferred compensation of $119,293 which amount was expensed in fiscal 2021.
On December 1, 2021, the Company entered into a new one-year compensation agreement with Mr. Shefsky under which the company issued a total of 1,054,339 shares of unregistered, restricted common stock at $0.28 per share for a total value of $295,215. During the year ended December 31, 2021, the Company recorded expense of $24,601 and deferred compensation of $270,614 which is recorded on the balance sheet as deferred compensation to be amortized over fiscal 2022 until the end of the contract term.
During the three and six months ended June 30, 2022, the Company recorded expense of $73,803 and $147,606, respectively pursuant to the terms of the consulting agreements. During the three and six months ended June 30, 2021, the Company recorded expense of $32,535 and $65,070, respectively pursuant to the terms of the consulting agreements. At June 30, 2022, there remained deferred compensation of $123,008 which is recorded on the balance sheet as deferred compensation to be amortized over fiscal 2022 until the end of the contract term.
Eliav Kling
During the fiscal year ended December 31, 2020, Mr. Kling, a director and officer of the Company advanced a total of $1,534 to the Company for operational expenses. During the fiscal year ended December 31, 2021, Mr. Kling further advanced a total of $55,077 to the Company for operational expenses. During the six months ended June 30, 2022, Mr. Kling further advanced a total of $2,045 to the Company for operational expenses and was repaid in cash in the amount of $58,631. As at June 30, 2022 and December 31, 2021, Mr. Kling was owed a total of $26 and $56,361, respectively. The amount is reflected in the financial statements as due to related parties.
On January 1, 2021, the Company and its CEO and director, Eliav Kling, entered into a compensation agreement for a term of one year, ending December 31, 2021, pursuant to which the Company agreed to compensation of $150,000 in the form of 10,714,286 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.014 per share, all of which was expensed in fiscal 2021.
On January 1, 2022, the Company and its CEO and director, Eliav Kling entered into a compensation agreement for a term of one year, ending December 31, 2022, pursuant to which the Company issued 1,216,545 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.1498 per share. During the three and six months ended June 30, 2022, the Company recorded expense of $45,561 and $91,122, respectively pursuant to the terms of the consulting agreement. During the three and six months ended June 30, 2021, the Company recorded expense of $37,500 and $75,000, respectively pursuant to the terms of the consulting agreement. At June 30, 2022 there remained deferred compensation of $91,116 which is recorded on the balance sheet as deferred compensation to be amortized over fiscal 2022 until the end of the contract term.
Ofir Hersaz
On each of December 31, 2021 and December 31, 2020, respectively, Mr. Hersaz, a former director of the Company’s subsidiary and 8% shareholder of the Company, was owed $2,301 (6,381 NIS) and $2,542 (7,381 NIS), which amounts are reflected on the financial statements as due to related parties. Amounts owing to Mr. Hersaz were reduced by $241 (1,000 ILS) during the year ended December 31, 2021.
At June 30, 2022, Mr. Hersaz was owed $1,825 (6,381 ILS) which amount is reflected on the financial statements as due to related parties.
Eital Muskal
On November 15, 2020, the Company entered into an employment agreement with Eital Muskal as VP of Strategy and Business Development for Enigmai Ltd., the Company’s wholly owned subsidiary. Under the terms of the employment agreement, Ms. Muskal receives compensation of $160,000 Canadian dollars per annum (approximately US$126,000), paid as follows: cash consideration of CDN$100,000 and CDN$60,000 in consideration by way of the issuance of shares of the common stock of the Company which shall be paid quarterly, based on a 10% discount to the 10 day average trading price at the time of issuance and using the applicable rate of exchange from Canadian to US dollars at the valuation date. On February 15, 2021, May 15, 2021, August 15, 2021, and November 15, 2021, respectively a total of 304,165, 26,266, 8,989, and 31,750 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares. At the end of the term of the contract, the Company agreed to issue a bonus to its VP Business Development and Strategy in the amount of CDN$10,000 paid by the issuance of 24,642 shares of common stock at a discount of 10% to the market price on the date of issue. Further, on expiry, the Company and the consultant agreed to extend the contract for a further year and amend the terms of the employment agreement to provide those shares issued as compensation under the terms of the agreement shall be issued at a 15% discount to market, on the same terms and conditions, with the contract terminating on November 15, 2022. On February 15, 2022, 171,354 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares. On May 15, 2022, 335,261 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares.
RECENT SALES OF UNREGISTERED SECURITIES
Between January 1, 2019 and December 31, 2021, and through June 30, 2022, we have issued the following securities.
| | (1) | There were no stock transactions during the fiscal year ended December 31, 2019. |
| | | |
| | (2) | On October 27, 2020, a creditor of the Company assigned a total of $50,000 of outstanding debt payable to two third parties. Concurrently these parties elected to convert the debt into 7,407,408 shares of common stock at $0.00675 per share. The shares were administratively issued subsequent to December 31, 2020. |
| | (3) | On October 31, 2020, a total of 22,000,000 shares were issued pursuant to the acquisition agreement with Enigmai of which 20,000,000 shares were issued to the shareholders of Enigmai and their assigns, and 2,000,000 shares were issued to third parties as finders fees. |
| | | |
| | (4) | On December 1, 2020, 18,275,000 unregistered, restricted shares of common stock were issued to certain consultants pursuant to a series of consulting agreements with the Company, including Louis Shefsky, an officer and director of the Company, who received 8,975,000 common shares |
| | | |
| | (5) | Effective January 1, 2021, 10,714,286 unregistered, restricted shares of common stock were issued by the Company to its CEO and director, Eliav Kling, pursuant to an executive compensation agreement. |
| | | |
| | (6) | On March 3, 2021, 4,108,400 shares of common stock were issued to settle certain debt. |
| | | |
| | (7) | On June 15, 2021, 13,025,762 shares of common stock were issued to settle certain debt. |
| | | |
| | (8) | On August 15, 2021, 80,000 unregistered, restricted shares of common stock were issued by the Company to consultants pursuant to advisory agreements. |
| | | |
| | (9) | During the year ended December 31, 2021, 395,812 unregistered, restricted shares of common stock |
| | | |
| | were | issued to an employee pursuant to an employment agreement. |
| | | |
| | (10) | Effective December 1, 2021, 1,054,339 unregistered, restricted shares of common stock were issued by the Company to its President and director, Louis Shefsky, pursuant to an executive compensation agreement. |
| | | |
| | (11) | Effective January 1, 2022, 1,216,545 unregistered, restricted shares of common stock were issued by the Company to its CEO and director, Eliav Kling, pursuant to an executive compensation agreement. |
| | | |
| | (12) | During the six months ended June 30, 2022, a total of 506,615 unregistered, restricted shares of common stock valued at $23,404 were issued to an employee pursuant to an employment agreement. |
| | | |
| | (13) | During the six months ended June 30, 2022, a total of 4,650,000 unregistered, restricted shares of common stock issued to consultants in December 2020 were cancelled without consideration. |
| | | |
| | (14) | On May 20, 2022, 4,920,000 unregistered, restricted shares of common stock valued at $186,960 were issued to Mast Hill Fund L.P. under the Security Purchase Agreement as commitment shares which we have including in financing costs. |
| | | |
| | (15) | On May 20, 2022, 701,053 unregistered, restricted shares of common stock valued at $26,640 were issued to J.H. Darbie in regard to an agreement to introduce a financier for the Company, we have booked the issuance as financing costs. |
| | | |
| | (16) | On June 6, 2022, 7,500,000 unregistered, restricted shares of common stock valued at $300,000 were issued to Michael Kahiri pursuant to consulting agreement with the Company and valued at the fair market value on the date of issue, or $0.04 per share. |
All of the shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended, as it was a transaction by an issuer not involving a public offering; all of the shares contain a restrictive legend on the share certificate stating that the securities have not been registered under the Act and setting forth, or referring to the restrictions on transferability and sale of the securities.
FINANCIAL STATEMENTS
GOLDEN STAR ENTERPRISES LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2022 and 2021
(Unaudited)
(Stated in US Dollars)
Index to Unaudited Condensed Consolidated Financial Statements
GOLDEN STAR ENTERPRISES LTD.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | June 30, | | | December 31, | |
| | | 2022 | | | 2021 | |
| ASSETS | | | | | | |
| | | | | | | |
| CURRENT ASSETS: | | | | | | |
| Cash | | $ | 95,951 | | | $ | 41,793 | |
| Accounts receivable | | | - | | | | 1,606 | |
| Prepaid expenses | | | 1,121 | | | | 851 | |
| Other receivable | | | 11,006 | | | | 8,623 | |
| Marketable securities | | | 194,332 | | | | 294,572 | |
| Total current assets | | | 302,410 | | | | 347,445 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 302,410 | | | $ | 347,445 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 89,474 | | | $ | 124,244 | |
| Due to related parties | | | 1,851 | | | | 58,662 | |
| Deferred revenue | | | 43,438 | | | | 49,738 | |
| Demand loans | | | 69,000 | | | | 69,000 | |
| Convertible notes | | | 3,742,921 | | | | 1,782,410 | |
| Total current liabilities | | | 3,946,684 | | | | 2,084,054 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 3,946,684 | | | | 2,084,054 | |
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| STOCKHOLDERS’ DEFICIT | | | | | | | | |
| Common stock, $0.0001 par value, 500,000,000 shares authorized, 107,416,146 and 97,221,933, issued and outstanding as at June 30, 2022 and December 31, 2021, respectively | | | 10,742 | | | | 9,722 | |
| Additional paid-in capital | | | 1,927,798 | | | | 1,151,511 | |
| Deferred stock-based compensation | | | (279,367 | ) | | | (364,860 | ) |
| Accumulated deficit | | | (5,303,466 | ) | | | (2,530,737 | ) |
| Accumulated other comprehensive loss | | | 19 | | | | (2,245 | ) |
| Total stockholders’ deficit | | | (3,644,274 | ) | | | (1,736,609 | ) |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | $ | 302,410 | | | $ | 347,445 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
GOLDEN STAR ENTERPRISES LTD.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | | | | | | | | | | | |
| REVENUES | | $ | 10,887 | | | $ | 10,859 | | | $ | 22,836 | | | $ | 21,666 | |
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Cost of revenue | | | 653 | | | | 650 | | | | 1,370 | | | | 1,300 | |
| Professional fees | | | 28,200 | | | | 19,419 | | | | 51,272 | | | | 39,156 | |
| Consulting fees | | | 443,635 | | | | 115,066 | | | | 577,501 | | | | 254,519 | |
| Research and development | | | 47,702 | | | | - | | | | 88,398 | | | | - | |
| General and administrative | | | 49,410 | | | | 58,791 | | | | 95,976 | | | | 122,277 | |
| Total operating expenses | | | 569,600 | | | | 193,926 | | | | 814,517 | | | | 417,252 | |
| | | | | | | | | | | | | | | | | |
| (Loss) from operations | | | (558,713 | ) | | | (183,067 | ) | | | (791,681 | ) | | | (395,586 | ) |
| | | | | | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Loss on debt settlement | | | - | | | | - | | | | - | | | | (135,577 | ) |
| Interest expense | | | (1,183,240 | ) | | | (426,015 | ) | | | (1,880,808 | ) | | | (441,954 | ) |
| Unrealized loss on investment | | | (46,810 | ) | | | 137,120 | | | | (100,240 | ) | | | (468,100 | ) |
| Total other income (expense) | | | (1,230,050 | ) | | | (288,895 | ) | | | (1,981,048 | ) | | | (1,045,631 | ) |
| | | | | | | | | | | | | | | | | |
| Net income (loss) | | $ | (1,788,763 | ) | | $ | (471,962 | ) | | $ | (2,772,729 | ) | | $ | (1,441,217 | ) |
| | | | | | | | | | | | | | | | | |
| Other comprehensive loss | | | | | | | | | | | | | | | | |
| Net Loss | | $ | (1,788,763 | ) | | | (471,962 | ) | | $ | (2,772,729 | ) | | $ | (1,441,217 | ) |
| Foreign currency translation adjustment | | | 1,673 | | | | 27 | | | | 2,264 | | | | 77 | |
| Comprehensive loss | | $ | (1,787,090 | ) | | $ | (471,935 | ) | | $ | (2,770,465 | ) | | $ | (1,441,140 | ) |
| | | | | | | | | | | | | | | | | |
| Basic and diluted net loss per common share | | $ | (0.02 | ) | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.02 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average shares, basic and diluted | | | 101,220,384 | | | | 85,130,566 | | | | 99,865,329 | | | | 82,512,550 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
GOLDEN STAR ENTERPRISES LTD.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
(Unaudited)
| | | Common Stock | | | Additional | | | | | | | | | Accumulated Other | | | Total | |
| | | Shares | | | Amount ($) | | | Paid-in Capital ($) | | | Deferred Compensation ($) | | | Accumulated Deficit ($) | | | Comprehensive Loss ($) | | | Stockholders’ Deficit ($) | |
| Balance, December 31, 2021 | | | 97,221,933 | | | | 9,722 | | | | 1,151,511 | | | | (364,860 | ) | | | (2,530,737 | ) | | | (2,245 | ) | | | (1,736,609 | ) |
| Opening balance adjustment due to the adoption of ASU 2020-06 | | | - | | | | - | | | | (394,203 | ) | | | - | | | | - | | | | - | | | | (394,203 | ) |
| Share issuance under employment agreement | | | 171,354 | | | | 17 | | | | 11,772 | | | | - | | | | - | | | | - | | | | 11,789 | |
| Stock awards to consultants and management | | | 1,216,545 | | | | 122 | | | | 182,117 | | | | (182,239 | ) | | | - | | | | - | | | | - | |
| Amortization of deferred stock-based compensation | | | - | | | | - | | | | - | | | | 133,866 | | | | - | | | | - | | | | 133,866 | |
| Unrealized gain on foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | - | | | | 591 | | | | 591 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (983,966 | ) | | | - | | | | (983,966 | ) |
| Balance, March 31, 2022 | | | 98,609,832 | | | | 9,861 | | | | 951,197 | | | | (413,233 | ) | | | (3,514,703 | ) | | | (1,654 | ) | | | (2,968,532 | ) |
| Share issuance under employment agreement | | | 335,261 | | | | 34 | | | | 11,581 | | | | - | | | | - | | | | - | | | | 11,615 | |
| Share issuance as financing cost | | | 5,621,053 | | | | 562 | | | | 213,038 | | | | - | | | | - | | | | - | | | | 213,600 | |
| Shares issuance under consulting agreement | | | 7,500,000 | | | | 750 | | | | 299,250 | | | | - | | | | - | | | | - | | | | 300,000 | |
| Shares cancellation | | | (4,650,000 | ) | | | (465 | ) | | | 465 | | | | - | | | | - | | | | - | | | | - | |
| Amortization of deferred stock-based compensation | | | - | | | | - | | | | - | | | | 133,866 | | | | - | | | | - | | | | 133,866 | |
| Warrants issued under stock purchase agreement | | | - | | | | - | | | | 102,247 | | | | - | | | | - | | | | - | | | | 102,247 | |
| Warrants issued under equity purchase agreement | | | | | | | | | | | 350,000 | | | | | | | | | | | | | | | | 350,000 | |
| Warrants repricing | | | - | | | | - | | | | 20 | | | | - | | | | - | | | | - | | | | 20 | |
| Unrealized gain on foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,673 | | | | 1,673 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (1,788,763 | ) | | | - | | | | (1,788,763 | ) |
| Balance, June 30, 2022 | | | 107,416,146 | | | | 10,742 | | | | 1,927,798 | | | | (279,367 | ) | | | (5,303,466 | ) | | | 19 | | | | (3,644,274 | ) |
| | | Common Stock | | | Additional | | | | | | Accumulated | | | Accumulated Other | | | Total | |
| | | Shares | | | Amount ($) | | | Paid-in Capital ($) | | | Deferred Compensation ($) | | | Earnings (Deficit) ($) | | | Comprehensive Loss ($) | | | Stockholders’ Deficit ($) | |
| Balance, December 31, 2020 | | | 67,843,334 | | | | 6,784 | | | | 278,234 | | | | (231,666 | ) | | | 436,900 | | | | (670 | ) | | | 489,582 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Share issuance for debt conversion | | | 4,108,400 | | | | 411 | | | | 163,925 | | | | - | | | | - | | | | - | | | | 164,336 | |
| Share issuance under employment agreement | | | 304,165 | | | | 30 | | | | 11,865 | | | | - | | | | - | | | | - | | | | 11,895 | |
| Stock awards to consultants and management | | | 10,714,286 | | | | 1,072 | | | | 148,928 | | | | (150,000 | ) | | | - | | | | - | | | | - | |
| Amortization of deferred stock-based compensation | | | - | | | | - | | | | - | | | | 137,462 | | | | - | | | | - | | | | 137,462 | |
| Unrealized gain on foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | - | | | | 50 | | | | 50 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (969,255 | ) | | | - | | | | (969,255 | ) |
| Balance, March 31, 2021 | | | 82,970,185 | | | | 8,297 | | | | 602,952 | | | | (244,204 | ) | | | (532,355 | ) | | | (620 | ) | | | (165,930 | ) |
| Share issuance for debt conversion | | | 13,025,762 | | | | 1,302 | | | | 93,135 | | | | - | | | | - | | | | - | | | | 94,437 | |
| Share issuance under employment agreement | | | 26,266 | | | | 3 | | | | 12,384 | | | | - | | | | - | | | | - | | | | 12,387 | |
| Amortization of deferred stock-based compensation | | | - | | | | - | | | | - | | | | 114,981 | | | | - | | | | - | | | | 114,981 | |
| Unrealized gain on foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | - | | | | 27 | | | | 27 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (471,962 | ) | | | - | | | | (471,962 | ) |
| Balance, June 30, 2021 | | | 96,022,213 | | | | 9,602 | | | | 708,371 | | | | (129,223 | ) | | | (1,004,317 | ) | | | (593 | ) | | | (416,060 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
GOLDEN STAR ENTERPRISES LTD.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | For Six Months Ended | |
| | | June 30, | |
| | | 2022 | | | 2021 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
| Net loss | | $ | (2,772,729 | ) | | $ | (1,441,217 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Shares issued as financing costs | | | 563,600 | | | | - | |
| Warrants repricing | | | 20 | | | | | |
| Shares issued for consulting agreement | | | 300,000 | | | | - | |
| Loss on debt settlement | | | - | | | | 135,577 | |
| Amortization of debt discount | | | 1,302,195 | | | | 440,053 | |
| Stock-based compensation | | | 267,732 | | | | 252,443 | |
| Unrealized loss on investment | | | 100,240 | | | | 468,100 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Increase in accounts receivable | | | 1,511 | | | | - | |
| Increase in prepaid expenses and other receivables | | | (3,925 | ) | | | 121 | |
| Decrease in unearned revenue | | | (817 | ) | | | 69,645 | |
| Increase in accounts payable and accrued liabilities | | | (10,992 | ) | | | 51,348 | |
| Net cash used in in operating activities | | | (253,165 | ) | | | (23,930 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Advances (repayment) from related party | | | 2,045 | | | | 48,419 | |
| Repayments to related party | | | (58,631 | ) | | | (4,000 | ) |
| Proceeds from convertible notes, net | | | 366,360 | | | | 76,194 | |
| Net cash provided by financing activities | | | 309,774 | | | | 120,613 | |
| | | | | | | | | |
| Foreign exchange effect on cash | | | (2,451 | ) | | | (739 | ) |
| Net increase (decrease) in cash | | | 54,158 | | | | 95,944 | |
| Cash at beginning of period | | | 41,793 | | | | 3,527 | |
| Cash at the end of the period | | $ | 95,951 | | | $ | 99,471 | |
| | | | | | | | | |
| Supplemental Disclosure of Cash Flows Information: | | | | | | | | |
| Cash paid for interest | | $ | - | | | $ | - | |
| Cash paid for income taxes | | $ | - | | | $ | - | |
| | | | | | | | | |
| Non-cash Investing and Financing Activities: | | | | | | | | |
| Advances from third party settled with convertible notes | | $ | - | | | $ | 28,759 | |
| Advances from third party transferred to convertible notes | | $ | - | | | $ | 6,500 | |
| Shares issued to settle convertible notes | | $ | - | | | $ | 28,759 | |
| Stock-settled debt liability | | $ | 128,625 | | | $ | 3,738,794 | |
| Stock award under deferred compensation | | $ | 182,239 | | | $ | 150,000 | |
| Shares issued under accounts payable and accrued liabilities | | $ | 23,404 | | | $ | 24,282 | |
| Warrants issued under stock purchase agreement | | $ | 102,247 | | | $ | - | |
| Warrants issued under equity purchase agreement | | $ | 350,000 | | | $ | - | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 1 – Organization and Description of Business
Golden Star Enterprises Ltd. (the “Company”) was incorporated on September 13, 1993, in the State of Delaware as Power Direct, Inc. On January 31, 2000, the Company changed its name to 2U Online.com Inc. On October 8, 2003, the Company changed its name to Golden Spirit Minerals Ltd. On October 19, 2004, the Company changed its name to Golden Spirit Mining Ltd. On July 18, 2005, the Company changed its name to Golden Spirit Gaming Ltd. On June 30, 2006, the Company changes its name to Golden Spirit Enterprises Ltd. On August 29, 2011, the Company changed its name to Terralene Fuels Corporation. On June 5, 2013, the Company changed its name to Golden Star Enterprises Ltd.
On October 27, 2020, the Company entered into an acquisition agreement with the shareholders of Enigmai Ltd., an operating enterprise software company established in 2009 that offers clients a workforce management system solution, whereby the Company acquired 100% of the issued and outstanding shares of Enigmai Ltd in exchange for 20,000,000 restricted common shares of the Company (the “Share Exchange”). The Company further agreed to pay a finder’s fee of 2,000,000 shares to third parties. The transaction closed effective October 31, 2020, and the Company administratively issued the shares on November 24, 2020, making Enigmai Ltd. a wholly owned subsidiary of the Company.
On November 4, 2020, the then Board of Directors and officers resigned, and Eliav Kling and Louis Shefsky were appointed to the Board of Directors and as officers of the Company, thus effecting a change in control of the Company.
During the six months ended June 30, 2022 the Company entered into certain financing agreements (Note 6) in order to continue to implement its ongoing plans to upgrade its workforce management software suite, including an equity purchase agreement to raise up to $5,000,000 for which the Company is currently preparing a Form S-1 Registration Statement for submission to the Securities and Exchange Commission (“SEC”) (Note 9). .
Going Concern
During the six months ended June 30, 2022, the Company reported a loss of $2,772,729 as compared to loss of $1,441,217 for the same period ended June 30, 2021; cash used in operations totaled $253,165 for the six months ended June 30, 2022, as compared to cash used in operations of $23,930 for the same period ended June 30, 2021. At June 30, 2022, the Company had negative working capital of $3,644,274. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company’s existing business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The recent COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may severely impact the Company’s ability to raise additional capital and to pursue certain planned business activities. The Company may be required to cease operations if it is unable to finance its’ operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is highly uncertain and subject to change. Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to estimate the effects of the COVID-19 outbreak on its operations or financial condition in the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or continue to implement its planned business objectives to obtain profitable operations.
The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited December 31, 2021 consolidated financial statements filed on OTC Markets on June 7, 2022.
As discussed in Note 2, Recent Accounting Standards, to the Consolidated Financial Statements, the Company adopted Accounting Standards Update No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), effective January 1, 2022. Comparative prior period Consolidated Financial Statements have not been restated for ASU 2020-06 but are not effected comparable to the current period Consolidated Financial Statements.
Year End
The Company has selected December 31 as its year end.
Principals of Consolidation
The consolidated financial statements include the accounts of Golden Star Enterprises Ltd. and its 100% controlled subsidiary, Enigmai Ltd. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to estimates and assumptions include timing of recognition of revenue on software service renewals and expenses related thereto. Actual results could differ from those estimates.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel (“ILS”).
All transactions initiated in ILS are translated into U.S. dollars in accordance with Accounting Standards Codification (“ASC”) 830-30, “Translation of Financial Statements,” as follows:
| i) | assets and liabilities are translated at the closing rate at the date of the balance sheet, or |
1USD=3.5017 ILS (June 30, 2022) and 1USD=3.1125 ILS (December 31, 2021)
| ii) | income and expenses are translated at average exchange rates for six months ended June 30, or |
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 2 – Summary of Significant Accounting Policies (continued)
Foreign Currency Translation (cont’d)
1USD=3.27116 ILS (in 2022) and 1USD=3.26923 ILS (in 2021);
| iii) | all resulting exchange differences are recognized as other comprehensive income, a separate component of equity. |
Adjustments arising from such translations are included in accumulated other comprehensive income (loss) in stockholders’ equity.
Cash and Cash Equivalents
For financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments with a maturity of three (3) months or less at the time of purchase.
Marketable Securities
The Company’s investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations. The Company’s marketable equity securities are measured at fair value with unrealized gains and losses reported in other income (expense), net (“OI&E”). If there is a permanent decline in the market value of the securities, this permanent market value adjustment is taken into income in the period.
Stock-based Compensation
We account for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation. Under the fair value recognition provision of this guidance, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period (typically the vesting period) and reduced for actual forfeitures in the period they occur. Stock-based compensation is included as consulting fees in our condensed consolidated statements of operations and comprehensive loss.
Revenue Recognition
The Company follows ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from software licensing agreements and contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
In each of the three and six months ended June 30, 2022, and 2021, the Company generated revenues from subscriptions to the Company’s workforce software, the ENIGMAI Business Suite. Customers pay a fixed fee for access to the software suite. Thereafter, customers pay 12% of the software cost annually for maintenance and support. Updates and new software versions are included in the maintenance costs. Set up fees and software costs are expensed when the software is operational for each client. Annual maintenance fees are generally charged in advance at the start of each contract year and amortized over the year. The Company also generates revenue from time to time from ad hoc service/software installation projects which are invoiced on completion. During the three and six months ended June 30, 2022, the Company recognized revenue of $10,887 and $22,836, respectively. Balances of deferred revenue at June 30, 2022 and December 31, 2021 totaled $43,438 and $49,738, respectively.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 2 – Summary of Significant Accounting Policies (continued)
Disaggregated Revenues
Total revenues, consisting of disaggregated sales across each revenue component were as follows:
| Revenue by channel during the three months ended June 30: |
| | | | | | | | | | | | | |
| | | 2022 $ | | | 2022 % | | | 2021 $ | | | 2021 % | |
| | | | | | | | | | | | | |
| Software subscription | | $ | 9,580 | | | | 88 | % | | $ | 9,556 | | | | 88 | % |
| Maintenance fees | | | 1,306 | | | | 12 | % | | | 1,303 | | | | 12 | % |
| Service/Software installation | | | - | | | | 0 | % | | | - | | | | 0 | % |
| TOTAL | | $ | 10,887 | | | | 100 | % | | $ | 10,959 | | | | 100 | % |
| Revenue by channel during the six months ended June 30: |
| | | | | | | | | | | | | |
| | | 2022 $ | | | 2022 % | | | 2021 $ | | | 2021 % | |
| | | | | | | | | | | | | |
| Software subscription | | $ | 20,095 | | | | 88 | % | | $ | 19,066 | | | | 88 | % |
| Maintenance fees | | | 2,740 | | | | 12 | % | | | 2,600 | | | | 12 | % |
| Service/Software installation | | | - | | | | 0 | % | | | - | | | | 0 | % |
| TOTAL | | $ | 22,836 | | | | 100 | % | | $ | 21,666 | | | | 100 | % |
Concentration of Credit Risks
Concentration of Major Customers
For the three and six months ended June 30, 2022, and 2021, the Company received 100% of its revenue from two customers.
Convertible Debt and Stock Settled Debt
The Company adopted ASU 2020-06 effective January 1, 2022. In certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed discount to the trading price of the Company’s common shares as traded in the over-the-counter market. In these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed value transferred to the convertible note holder from the fixed discount conversion feature. As of June 30, 2022, and December 31, 2021, the Company had recorded within Convertible Notes, net of discount, the amount of $2,741,251 and $1,388,207 for the value of the stock settled debt for certain convertible notes (see Note 6).
Original Issue Discount and Debt Issue Costs
If debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 2 – Summary of Significant Accounting Policies (continued)
Original Issue Discount and Debt Issue Costs (cont’d)
The Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt on the statement of operations as amortization of debt discount.
Income Taxes
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 net operating loss and credit carry forwards. Deferred tax assets and liabilities are measured at rates expected to apply to taxable income in the years in which those temporary differences and carry forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A valuation allowance is recorded when it is not more likely than not that all or a portion of the net deferred tax assets will be realized.
Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations and comprehensive income (loss). Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of certain convertible notes payable.
The table below reflects the potentially dilutive securities outstanding during each reporting period:
| | | Six Months Ended June 30, 2022 | | | Six Months Ended June 30, 2021 | |
| Share purchase warrants | | | 19,000,000 | | | | - | |
| Equity agreement share purchase warrants | | | 10,000,000 | | | | - | |
| Convertible notes | | | 101,686,528 | | | | 58,182,528 | |
| Total | | | 130,686,528 | | | | 58,182,528 | |
Recently issued accounting pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), or ASU 2020-06. The guidance in ASU 2020-06 simplifies the accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this standard on January 1, 2022, using the modified retrospective approach. The adoption of ASU 2020-06 did not have a material impact on the Company’s condensed consolidated financial statements.
The following significant accounting changes occurred as result of the adoption of ASU 2020-06:
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Recently issued accounting pronouncements (Cont’d)
| Consolidated Balance Sheet | | December 31, 2021 As Reported | | | Effect of the Adoption of ASU 2020-06 | | | January 1, 2021 As Adjusted | |
| Convertible notes, net | | | 1,782,410 | | | | 394,203 | | | | 2,17,613 | |
| Additional paid-in-capital | | | 1,151,511 | | | | (394,203 | ) | | | 757,308 | |
The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
Note 3 – Marketable Securities
As at June 30, 2022 and December 31, 2021, marketable securities consisted of the following:
| | | June 30, 2022 | | | December 31, 2021 | |
| 4,728,283 shares of Wee-Cig International Corp. (“WCIG”) | | $ | 194,332 | | | $ | 294,572 | |
| 35,187 shares of Bravo Enterprises Ltd. | | | - | | | | - | |
| Total | | $ | 194,332 | | | $ | 294,572 | |
During the three and six months ended June 30, 2022, the Company recorded an unrealized loss of $46,810 and $100,240, respectively, on the change in fair market value of these investments. During the three and six months ended June 30, 2021, the Company recorded an unrealized gain of $137,120 and an unrealized loss $468,100, respectively, on the change in fair market value of these investments.
Note 4 – Revenue Contracts
During the year ended December 31, 2021, the Company renegotiated two revenue contracts as follows:
Revenue contract 1:
On March 3, 2021, the Company entered into a three-year contract for the Enigmai Business Suite commencing January 1, 2021, and terminating December 31, 2023, whereunder the Customer agreed to remit the entire contract amount of 232,213 Israeli Shekels (Approx. US$71,150) in advance to secure a fixed annual rate for the term of the contract. The contract was paid in May 2021. The Company recorded revenue of 19,351 Israeli Shekels (Approx. US$5,779) and 38,702 Israeli Shekels (Approx. US$11,831) in respect to services provided for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, and December 31, 2021, 116,107 Israeli Shekels (Approx. US$33,157) and 154,809 Israeli Shekels (Approx. US$49,738) has been recorded as deferred revenue and will be reflected as revenue in future periods.
Revenue contract 2:
On February 14, 2021, the Company entered into a three-year contract for the Enigmai Business Suite commencing January 1, 2021, and terminating December 31, 2023, whereunder the Customer agreed to annual payments in advance of 64,000 Israeli Shekels (Approx. US$19,600) in year one and 72,000 Israeli Shekels (Approx. US$22,100) in each of years two and three of the contract. The first-year fee under the contract was paid in May 2021. The second-year fee under the contract was paid in April 2022. The Company recorded revenue of 18,000 Israeli Shekels (Approx. US$5,375) and 36,000 Israeli Shekels (Approx. US$11,005) in respect to services provided for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, and December 31, 2021, 36,000 Israeli Shekels (Approx. US$10,281) and 0 Israeli Shekels has been recorded as deferred revenue and will be reflected as revenue in future periods.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 5– Deferred Stock-based Compensation
On December 1, 2020, the Company entered into certain consulting agreements with five consultants to the Company, including one member of management pursuant to which the Company issued a total of 18,275,000 unregistered, restricted shares of common stock, valued at $264,988. Included in the cumulative shares issued are a total of 8,975,000 unregistered, restricted shares of common stock issued to Mr. Louis Shefsky, the Company’s President and Secretary, at fair market value of $0.0145 per share. Each of the consulting contracts had a term of six months, save the contract with Mr. Shefsky, which had a term of one year, and each of the aforementioned contracts were expensed over their respective term.
During the six months ended June 30, 2022, a total of 4,650,000 unregistered, restricted shares of common stock issued to two of the aforementioned consultants were voluntarily returned to the Company and cancelled without consideration.
On January 1, 2021, the Company and its CEO and director, Eliav Kling, entered into a compensation agreement for a term of one year, ending December 31, 2021, pursuant to which the Company agreed to compensation of $150,000 in the form of 10,714,286 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.014 per share.
On August 15, 2021, the Company entered into advisory agreements with two consultants each with a term of two years, pursuant to which the Company issued a total of 80,000 unregistered, restricted shares of common stock, valued at $116,000.
On December 1, 2021, the Company entered into a compensation agreement for a term of one year with its President and Secretary, Louis Shefsky pursuant to which the Company issued a total of 1,054,339 unregistered, restricted shares of common stock, valued at $295,215.
On January 1, 2022, the Company and its CEO and director, Eliav Kling, entered into a compensation agreement for a term of one year, ending December 31, 2022, pursuant to which the Company agreed to compensation in the form of 1,216,545 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.1498 per share.
During the three months ended June 30, 2022, and 2021, $133,866 and $114,981 was expensed, respectively. During the six months ended June 30, 2022, and 2021, $267,732 and $252,443 was expensed, respectively.
As of June 30, 2022, and December 31, 2021, the unamortized portion of the deferred compensation agreements totaled $279,367 and $364,860, respectively.
Note 6 – Debt
Convertible Notes:
The Company has the following convertible notes outstanding as of June 30, 2022 and December 31, 2021:
| | | June 30, | | | December 31, | |
| | | 2022 | | | 2021 | |
| Loan treaty agreements, net of discount | | $ | 2,741,251 | | | $ | 1,388,207 | |
| Security purchase agreement, net of discount | | | 213,264 | | | | - | |
| Other convertible note | | | 788,406 | | | | 394,203 | |
| Total convertible notes | | $ | 3,742,921 | | | $ | 1,782,410 | |
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 6 – Debt (continued)
Loan Treaty Agreements
On March 8, 2021, the Company entered into two Loan Treaty Agreements with two third parties (“Treaty Agreement”) whereby each lender has agreed to provide a loan in the amount of up to $250,000 in tranches over a period of one year from time to time as agreed between the lender and the Company. Each amount deposited has a term of 12 months for repayment and shall bear an interest rate of 8% per annum. In addition, at the option of the Lender, the loan amount or any portion thereof is convertible into restricted, unregistered shares of the Common Stock of the Company at a fixed rate of $0.02 per share, being a 50% discount to the market price of the shares of the Company as published on OTC Markets as of the date of this Agreement, provided that at no time may the Lender hold more than 9.99% of the outstanding Common Stock of the Company. Each promissory note issued hereunder, or part thereof, may be converted into unrestricted common shares at the one-year anniversary of the deposit of the funds to the Company. During the fiscal year ended December 31, 2021, the two third parties who had funded $45,093 and $46,101, respectively, under their Treaty Agreements assigned their Treaty Agreements to a third party who consolidated the two agreements into one Treaty Agreement and funded an additional $50,080.
During the six months ended June 30, 2021, the Company received an aggregate amount of $46,934. The Company recorded $191,112 as the liability on stock settled debt associated with the funding tranches which amount is amortized over the term of the notes.
During the six months ended June 30, 2022, the Company received additional aggregate proceeds of $65,000, of which $40,000 was received from an additional lender on the same terms and conditions as the prior Treaty Agreements. The Company recorded $128,625 as the liability on stock settled debt associated with the funding tranches which amount is amortized over the term of the notes.
The carrying value of the tranches is as follows:
| | | June 30, | | | December 31, | |
| | | 2022 | | | 2021 | |
| Principal issued | | $ | 206,274 | | | $ | 141,274 | |
| Stock-settled liability | | | 2,952,743 | | | | 2,824,118 | |
| | | | 3,159,017 | | | | 2,965,392 | |
| Unamortized debt discount | | | (417,766 | ) | | | (1,577,185 | ) |
| Total convertible notes | | $ | 2,741,251 | | | $ | 1,388,207 | |
The interest expenses for the tranches are as follows:
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| Interest expense on notes | | $ | 4,114 | | | $ | 1,189 | | | $ | 7,268 | | | $ | 1,901 | |
| Amortization of debt discount | | | 594,992 | | | | 424,826 | | | | 1,288,044 | | | | 440,053 | |
| Total: | | $ | 599,106 | | | $ | 426,015 | | | $ | 1,295,312 | | | $ | 441,954 | |
As of June 30, 2022, the unpaid interest balance was $12,803 (December 31, 2021 - $5,535) which amount is included in Accounts payable and accrued liabilities.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 6 – Debt (continued)
Security Purchase Agreement with Warrant
On May 20, 2022, the Company entered into a Security Purchase Agreement (‘SPA”) with an investor for the purchase and issuance of a 12% senior secured promissory note (the “Note”) in the principal amount of $370,000 with gross proceeds to the Company of $333,000, after deducting a 10% Original Issue Discount (“OID”). The Term of the Note is twelve months. The conversion rate of the Note is $0.01 per share. The Company agreed to pay a finder’s fee in respect of the Note in the amount of $26,640 and legal fees of $5,000. Net funds of $301,360 were allocated to be expended for operating costs including the further execution of the Company’s business plan.Further, in conjunction with the Note, the Company agreed to issue a series of five-year warrants with exercise terms as follows: 15,000,000 shares at $0.04 per share; 2,000,000 shares at $0.10 per share; 1,000,000 shares at $0.20 per share and 1,000,000 shares at $0.50 per share. In addition, the warrants issued under the SPA have an anti-dilution clause whereby if at any time while the warrants are outstanding, the Company shall sell or grant any option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue any common stock or securities priced at less than the exercise price of the warrants, then the Company is obligated to notify the warrant holder and to adjust the warrant exercise price by reducing, at the option of the Holder and only reduced to equal the issuance price or the new issuance such that the number of Warrant Shares issuable shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment (for the avoidance of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment).
In accordance with ASC 470 – Debt, the gross proceeds of $370,000 were allocated based on the relative fair values of the convertible notes and the warrants of $267,753 and $102,247, respectively. The Warrant was valued at $102,247 and was recorded as a debt discount which is being amortized over the life of the Note. In addition, the Note had and OID and related legal fees in the cumulative amount of $68,640 which was recorded as a debt discount which is also being amortized over the life of the Note. The total debt discount was $170,887.
The carrying value of convertible note is as follows:
| | | June 30, | | | December 31, | |
| | | 2022 | | | 2021 | |
| Principal issued | | $ | 370,000 | | | $ | - | |
| | | | | | | | | |
| Unamortized debt discount | | | (156,735 | ) | | | - | |
| Total convertible notes | | $ | 213,264 | | | $ | - | |
The interest expenses for the tranches are as follows:
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| Interest expense on notes | | $ | 4,987 | | | $ | - | | | $ | 4,987 | | | $ | - | |
| Amortization of debt discount | | | 14,151 | | | | - | | | | 14,151 | | | | - | |
| Total: | | $ | 19,138 | | | $ | - | | | $ | 19,138 | | | $ | - | |
On June 6, 2022, the Company issued shares under a consulting agreement priced at $0.04 per share thus triggering a repricing the share purchase warrants issued under the SPA to an exercise price of $0.04 per share (Note 8).
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 6 – Debt (continued)
Other Convertible Notes
The Company acquired total debt in the form of advances from third parties in the aggregate amount of $517,215 as a result of a reverse acquisition during the year ended December 31, 2020.
On November 16, 2020, certain of these third party debt holders entered into convertible notes with the Company in respect to debt totaling $488,640 whereunder the Holder has the right, in its sole discretion, at any time, with three (3) days written notice, to convert any part of the notes into shares of the Company’s common stock at a conversion rate of a 50% discount to the market close on the last trading day prior to the date of the convertible notes; i.e. November 13, 2020 which was $0.00725 per share. As of December 31, 2020, the unamortized balance of the beneficial conversion feature was $nil and the principal amount payable under the notes was $488,640. During the year ended December 31, 2021, 13,025,762 shares were issued to settle debt in the amount of $94,437 reducing the principal balance payable to $394,203.
The Company adopted ASU 2020-06 effective as of January 1, 2022, using the modified retrospective method. The carrying value is as follows:
| | | June 30, | | | December 31, | |
| | | 2022 | | | 2021 | |
| Principal issued | | $ | 394,203 | | | $ | 394,203 | |
| Stock-settled liability | | | 394,203 | | | | - | |
| Total convertible notes | | $ | 788,406 | | | $ | 394,203 | |
Advances from Third Party:
During the three months ended March 31, 2021, a creditor of the Company making up total remaining advances of $28,759 from the cumulative $517,215 acquired on the reverse merger assigned their debt in full to a third party. Concurrently the assignee elected to convert the debt into 4,108,400 shares of common stock at $0.007 per share. The 4,108,400 shares of common stock issued had a total fair value of $164,336, which resulted in the Company recording a loss on debt settlement of $135,577. As a result of this conversion the debt balance of $28,759 was extinguished leaving a balance of $0.
Demand Loans:
On June 30, 2021, the Company issued a promissory note (the “Note”) to a third party in the principal amount of $19,000. The Note bears interest at the rate of 8% per annum and is due and payable by the Company upon demand from the debtor.
On August 20, 2021, the Company issued a promissory note (the “Note”) to a third party in the principal amount of $50,000. The Note bears interest at the rate of 8% per annum and is due and payable by the Company upon demand from the debtor.
We recorded interest expenses of $1,376 and $2,737 for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, the unpaid interest balance was $4,961 (December 31, 2021 - $2,224) which amount is included in Accounts payable and accrued liabilities, and the principal balance payable for loans due on demand was $69,000.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 7 – Equity Purchase Agreement
On May 27, 2022, the Company entered into an Equity Purchase Agreement (“EPA”) with Mast Hill Fund, L.P., wherein Mast Hill agreed to commit to the purchase of up to Five Million Dollars ($5,000,000) worth of the Company’s common stock at a price equal to 70% of the volume weighted average price of the Company’s Common Stock on the Principal Market on the Trading Day during the seven days preceding the respective Put Date for the duration of the Offering (the “Offering”) for a period of two years from the effective date of this prospectus, unless extended by our Board of Directors for up to an additional ninety (90) days. The Company has agreed to file a registration statement on Form S-1 in order to facilitate the EPA.
Note 8 – Capital Stock
The Company’s authorized capital is 500,000,000 common shares with a par value of $0.0001 per share.
Shares issued in the six months ended June 30, 2021:
Effective January 1, 2021, 10,714,286 unregistered, restricted shares of common stock were issued by the Company to its CEO and director, Eliav Kling, pursuant to an executive compensation agreement (Note 5).
During the six months ended June 30, 2021, a total of 330,431 unregistered, restricted shares of common stock valued at $24,383 were issued to an employee pursuant to an employment agreement (Note 9).
On March 3, 2021, 4,108,400 shares of common stock were issued to settle certain debt (Note 6).
On June 15, 2021, 13,025,762 shares of common stock were issued to settle certain debt (Note 6)
Shares issued in the six months ended June 30, 2022:
Effective January 1, 2022, 1,216,545 unregistered, restricted shares of common stock were issued by the Company to its CEO and director, Eliav Kling, pursuant to an executive compensation agreement (Note 5).
During the six months ended June 30, 2022, a total of 506,615 unregistered, restricted shares of common stock valued at $23,404 were issued to an employee pursuant to an employment agreement (Note 9).
During the six months ended June 30, 2022, a total of 4,650,000 unregistered, restricted shares of common stock issued to consultants in December 2020 were cancelled without consideration.
On May 20, 2022, 4,920,000 unregistered, restricted shares of common stock valued at $186,960 were issued to an investor under the Security Purchase Agreement as commitment shares which we have including in financing costs (Note 6).
On May 20, 2022, 701,053 unregistered, restricted shares of common stock valued at $26,640 were issued to a Broker in regard to an agreement to introduce a financier for the Company, we have booked the issuance as financing costs.
On June 6, 2022, 7,500,000 unregistered, restricted shares of common stock valued at $300,000 were issued to a consultant pursuant to consulting agreement with the Company and valued at the fair market value on the date of issue.
There were 107,416,146 and 97,221,933 shares of common stock issued and outstanding at June 30, 2022 and December 31, 2021, respectively.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 9 – Warrants
On May 20, 2022, the Company issued cumulative 19,000,000 warrants to a convertible note holder in conjunction with certain financing agreements (Note 6) with exercise terms as follows: 15,000,000 shares at $0.04 per share; 2,000,000 shares at $0.10 per share; 1,000,000 shares at $0.20 per share and 1,000,000 shares at $0.50 per share. The fair value of the warrants granted was estimated at $0.038 or $722,000 using the Black-Scholes pricing model.
On May 27, 2022, the Company issued 10,000,000 warrants to an investor conjunction with equity purchase agreements (Note 7) with exercise at $0.06 per share. The fair value of the warrants granted was estimated at $0.035 or $350,000 using the Black-Scholes pricing model.
Certain warrants above include dilution protection for the warrant holders, which could cause the exercise price to be reduced as a result of a financing event at a valuation below the exercise price in effect at the time. During the six months ended June 30, 2022, as a result of additional share issuances below the original exercise price of certain warrants, the warrant exercise price was downward adjusted for certain of the Warrants to $0.04 per share. The downward pricing adjustment on each of the modification dates did not result in any additional expense.
In accordance with authoritative accounting guidance, the fair value of the outstanding common stock purchase warrants was calculated using the Black-Scholes option-pricing model with the following assumptions at the measurement date(s):
| | | Measurement date | |
| Dividend yield | | | 0% | |
| Expected volatility | | | 351.08 ~ 515.59 | |
| Risk-free interest rate | | | 2.71 ~ 2.80% | |
| Expected life (years) | | | 5 years | |
| Stock Price | | | $0.0295 ~ $0.038 | |
| Exercise Price | | | $0.04-$0.50 | |
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at June 30, 2022 and December 31, 2021:
| Exercise Price | | | December 31, 2021 | | | Issued | | | Repricing | | | Exercised | | | June 30, 2022 | | | Expiration Date |
| $ | 0.04 | | | | - | | | | 15,000,000 | | | | | | | - | | | | 15,000,000 | | | May 20, 2027 |
| $ | 0.10 | | | | - | | | | 2,000,000 | | | | 0.04 | | | | - | | | | 2,000,000 | | | May 20, 2027 |
| $ | 0.20 | | | | - | | | | 1,000,000 | | | | 0.04 | | | | - | | | | 1,000,000 | | | May 20, 2027 |
| $ | 0.50 | | | | - | | | | 1,000,000 | | | | 0.04 | | | | - | | | | 1,000,000 | | | May 20, 2027 |
| $ | 0.06 | | | | - | | | | 10,000,000 | | | | 0.04 | | | | | | | | 10,000,000 | | | May 27, 2027 |
| | | | | | - | | | | 29,000,000 | | | | | | | | - | | | | 29,000,000 | | | |
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 9 – Warrants (continued)
A summary of the warrant activity for the period ended June 30, 2022, and December 31, 2021 is as follows:
| | | | | | Weighted- Average Exercise | | | Weighted- Average Remaining Contractual | | | Aggregate Intrinsic | |
| | | Shares | | | Price | | | Term | | | Value | |
| Outstanding at December 31, 2021 | | | - | | | $ | - | | | | - | | | $ | - | |
| Grants | | | 29,000,000 | | | | 0.04 | | | | 5 | | | | - | |
| Exercised | | | - | | | | | | | | | | | | - | |
| Expired | | | - | | | | | | | | | | | | - | |
| Outstanding at June 30, 2022 | | | 29,000,000 | | | $ | 0.04 | | | | 4.89 | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Exercisable at June 30, 2022 | | | 29,000,000 | | | $ | 0.04 | | | | 4.89 | | | $ | - | |
Note 10 – Commitments and Contingencies
On November 15, 2020, the Company entered into an employment agreement with Eital Muskal as VP of Strategy and Business Development for Enigmai Ltd., the Company’s wholly owned subsidiary. Under the terms of the employment agreement, Ms. Muskal receives compensation of $160,000 Canadian dollars per annum (approximately US$126,000), paid as follows: cash consideration of CDN$100,000 and CDN$60,000 in consideration by way of the issuance of shares of the common stock of the Company which shall be paid quarterly, based on a 10% discount to the 10 day average trading price at the time of issuance and using the applicable rate of exchange from Canadian to US dollars at the valuation date. On February 15, 2021, May 15, 2021, August 15, 2021, and November 15, 2021, respectively a total of 304,165, 26,266, 8,989, and 31,750 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares. At the end of the term of the contract, the Company agreed to issue a bonus to its VP Business Development and Strategy in the amount of CDN$10,000 paid by the issuance of 24,642 shares of common stock at a discount of 10% to the market price on the date of issue. Further, on expiry, the Company and the consultant agreed to extend the contract for a further year and amend the terms of the employment agreement to provide those shares issued as compensation under the terms of the agreement shall be issued at a 15% discount to market, on the same terms and conditions, with the contract terminating on November 15, 2022. On February 15, 2022, 171,354 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares. On May 15, 2022, 335,261 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares.
During the quarter ended September 30, 2021, the Company formed an Advisory Board and entered into Advisory agreements with two independent consultants. The Agreements have a term of two years from August 15, 2021 and provide that the advisors will provide advice and recommendations regarding the Company’s business strategy and corporate development. Under the terms of the agreements the Company issued the advisors a cumulative 80,000 shares of unregistered, restricted common stock in consideration for their services.
In December 2021, the Company filed a lawsuit in Israel against the original founders of Enigmai for Breach of Contract, and for damages in the amount of 559,977 NIS (approximately $179,845 USD). With the acquisition of Enigmai, the original founders of Enigmai agreed to assist the Company in its transition, and more specifically, with training on the use of its software, and performance of various services related to the upgrading of the product. During the month of October 2021, both original founders of Enigmai informed the Company that they would cease providing their services on October 31, 2021, contrary to agreed upon terms of the acquisition of Enigmai, wherein, the founders agreed to assist the Company until the transition was complete and all improvements, upgrades and training of the product was completed. The Company has not yet received a response to the claim filed in Israel. The lawsuit was filed in the regional court in Tel Aviv, and since the defendants (the original founders) failed to respond to the claim, the Company has filed for judgment without response. The Company as of the date of this filing is waiting for a ruling on the motion.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Note 11 – Related Party Transactions
Louis Shefsky
On December 1, 2020, the Company entered into a compensation agreement with Louis Shefsky, a director and officer of the Company, pursuant to which the Company issued a total of 8,975,000 unregistered, restricted shares of common stock, valued at $130,138. The term of the contract was from December 1, 2020 to November 30, 2021.
On December 1, 2021, the Company entered into a new one-year compensation agreement with Mr. Shefsky under which the Company issued a total of 1,054,339 shares of unregistered, restricted common stock at $0.28 per share for a total value of $295,215. The term of the contract was from December 1, 2021 to November 30, 2022.
During the three and six months ended June 30, 2022, the Company recorded expense of $73,803 and $147,606, respectively pursuant to the terms of the consulting agreements. During the three and six months ended June 30, 2021, the Company recorded expense of $32,535 and $65,070, respectively pursuant to the terms of the consulting agreements. At June 30, 2022, there remained deferred compensation of $123,008 which is recorded on the balance sheet as deferred compensation to be amortized over fiscal 2022 until the end of the contract term.
Eliav Kling
On January 1, 2021, the Company and its CEO and director, Eliav Kling, entered into a compensation agreement for a term of one year, ending December 31, 2021, pursuant to which the Company agreed to compensation of $150,000 in the form of 10,714,286 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.014 per share.
On January 1, 2022, the Company and its CEO and director, Eliav Kling entered into a compensation agreement for a term of one year, ending December 31, 2022, pursuant to which the Company issued 1,216,545 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.1498 per share.
During the three and six months ended June 30, 2022, the Company recorded expense of $45,561 and $91,122, respectively pursuant to the terms of the consulting agreement. During the three and six months ended June 30, 2021, the Company recorded expense of $37,500 and $75,000, respectively pursuant to the terms of the consulting agreement. At June 30, 2022 there remained deferred compensation of $91,116 which is recorded on the balance sheet as deferred compensation to be amortized over fiscal 2022 until the end of the contract term.
During the fiscal year ended December 31, 2020, Mr. Kling, a director and officer of the Company advanced a total of $1,534 to the Company for operational expenses. During the fiscal year ended December 31, 2021, Mr. Kling further advanced a total of $55,077 to the Company for operational expenses. During the six months ended June 30, 2022, Mr. Kling further advanced a total of $2,045 to the Company for operational expenses and was repaid in cash in the amount of $58,631. As at June 30, 2022 and December 31, 2021, Mr. Kling was owed a total of $26 and $56,361, respectively. The amount is reflected in the financial statements as due to related parties.
Ofir Hersaz
At June 30, 2022 and December 31, 2021, respectively, Mr. Hersaz, a former director of the Company’s subsidiary and over 8% shareholder of the Company, was owed $1,825 (6,381 ILS) and $2,301 (6,381 ILS) which amounts are reflected on the financial statements as due to related parties.
Note 12 - Subsequent Events
The Company has evaluated events for the period from June 30, 2022, through September 8, 2022, the date on which these financial statements were issued, and determined that there are no additional events requiring disclosure.
GOLDEN STAR ENTERPRISES LTD.
CONSOLIDATED FINANCIAL STATEMENTS
For Years ended December 31, 2021, and 2020
(Audited)
Prepared by Management
(Stated in US Dollars)
Index to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Golden Star Enterprises Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Golden Star Enterprises Ltd. (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity(deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has not generated revenues sufficient to cover operating expenses and has negative working capital which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Going Concern – Disclosure
The consolidated financial statements of the Company are prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. As noted in “Consideration of the Company’s Ability to Continue as a Going Concern” above, the Company has not generated revenues sufficient to cover its operating expenses and has a net working capital deficit. The Company has contractual obligations such as commitments for repayments of accounts payable and demand loans and convertible notes payable and accrued interest (collectively “obligations”). Currently management’s forecasts and related assumptions illustrate their ability to meet the obligations through management of expenditures, obtaining additional financing through loans from related and unrelated parties, and private placements of capital stock for additional funding to meet its operating needs. Should there be constraints on the ability to access financing through stock issuances, the Company will continue to manage cash outflows and meet the obligations through related and unrelated party loans.
We identified management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter. Management made judgments to conclude that it is probable that the Company’s plans will be effectively implemented and will provide the necessary cash flows to fund the Company’s obligations as they become due. Specifically, the judgments with the highest degree of impact and subjectivity in determining it is probable that the Company’s plans will be effectively implemented include its ability to manage expenditures, its access funding from the capital market, and obtain loans from related and unrelated parties. Auditing the judgments made by management required a high degree of auditor judgment and an increased extent of audit effort.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the following, among others: (i) evaluating the probability that the Company will be able to access funding from the capital market; (ii) evaluating the probability that the Company will be able to manage expenditures, and (iii) evaluating the probability that the Company will be able to obtain loans from related and unrelated parties.
/s/ Pinnacle Accountancy Group of Utah
We have served as the Company’s auditor since 2021.
Pinnacle Accountancy Group of Utah
(a dba of Heaton & Company, PLLC)
Farmington, Utah
May 24, 2022
GOLDEN STAR ENTERPRISES LTD.
Consolidated Balance Sheets
| | | December 31, | | | December 31, | |
| | | 2021 | | | 2020 | |
| ASSETS | | | | | | |
| | | | | | | |
| CURRENT ASSETS: | | | | | | |
| Cash | | $ | 41,793 | | | $ | 3,527 | |
| Accounts receivable | | | 1,606 | | | | - | |
| Prepaid expenses | | | 851 | | | | - | |
| Other receivable | | | 8,623 | | | | 122 | |
| Marketable securities | | | 294,572 | | | | 1,087,505 | |
| Total current assets | | | 347,445 | | | | 1,091,154 | |
| | | | | | | | | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 347,445 | | | $ | 1,091,154 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 124,244 | | | $ | 73,758 | |
| Due to third parties | | | - | | | | 35,259 | |
| Due to related parties | | | 58,662 | | | | 3,915 | |
| Deferred revenue | | | 49,738 | | | | - | |
| Demand loans | | | 69,000 | | | | - | |
| Convertible notes | | | 1,782,410 | | | | 488,640 | |
| Total current liabilities | | | 2,084,054 | | | | 601,572 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 2,084,054 | | | | 601,572 | |
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | |
| Common stock, $0.0001 par value, 500,000,000 shares authorized, 97,221,933 and 67,843,334, issued and outstanding | | | 9,722 | | | | 6,784 | |
| Additional paid-in capital | | | 1,151,511 | | | | 278,234 | |
| Deferred stock-based compensation | | | (364,860 | ) | | | (231,666 | ) |
| Accumulated earnings (deficit) | | | (2,530,737 | ) | | | 436,900 | |
| Accumulated other comprehensive loss | | | (2,245 | ) | | | (670 | ) |
| Total stockholders’ equity (deficit) | | | (1,736,609 | ) | | | 489,582 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | $ | 347,445 | | | $ | 1,091,154 | |
The accompanying notes are an integral part of these consolidated financial statements
GOLDEN STAR ENTERPRISES LTD.
Consolidated Statements of Operations and Comprehensive Income (Loss)
| | | For Years Ended | |
| | | December 31, | |
| | | 2021 | | | 2020 | |
| | | | | | | |
| Revenue | | $ | 45,075 | | | $ | 52,165 | |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| Cost of revenue | | | 2,705 | | | | 25,809 | |
| Professional fees | | | 112,172 | | | | 5,894 | |
| Consulting fees | | | 428,021 | | | | 72,272 | |
| General and administrative | | | 286,441 | | | | 6,832 | |
| Total operating expenses | | | 829,339 | | | | 110,807 | |
| | | | | | | | | |
| Operating loss | | | (784,264 | ) | | | (58,642 | ) |
| | | | | | | | | |
| Other income (expense) | | | | | | | | |
| Loss on debt settlement | | | (135,577 | ) | | | - | |
| Interest expense | | | (1,254,863 | ) | | | (488,640 | ) |
| Unrealized gain (loss) on investment | | | (792,933 | ) | | | 988,684 | |
| Total other income (expense) | | | (2,183,373 | ) | | | 500,044 | |
| | | | | | | | | |
| Net Income (Loss) | | $ | (2,967,637 | ) | | $ | 441,402 | |
| | | | | | | | | |
| Other comprehensive income (loss) | | | | | | | | |
| Net Income (Loss) | | $ | (2,967,637 | ) | | $ | 441,402 | |
| Foreign currency translation adjustment | | | (1,575 | ) | | | (407 | ) |
| Comprehensive income (loss) | | $ | (2,969,212 | ) | | $ | 440,995 | |
| | | | | | | | | |
| Basic and diluted net income (loss) per common share | | | | | | | | |
| Basic | | $ | (0.033 | ) | | $ | 0.022 | |
| Diluted | | $ | (0.033 | ) | | $ | 0.005 | |
| | | | | | | | | |
| Weighted average shares, basic and diluted | | | | | | | | |
| Basic | | | 89,450,311 | | | | 20,160,926 | |
| Diluted | | | 89,450,311 | | | | 87,559,547 | |
The accompanying notes are an integral part of these consolidated financial statements
GOLDEN STAR ENTERPRISES LTD.
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
| | | Common Stock | | | Additional | | | | | | Accumulated | | | Accumulated Other | | | Total Stockholders’ | |
| | | Shares | | | Amount ($) | | | Paid-in Capital ($) | | | Deferred Compensation ($) | | | Earnings (Deficit) ($) | | | Comprehensive Income (Loss) ($) | | | Equity(Deficit) ($) | |
| Balance, December 31, 2019 | | | 20,160,926 | | | | 2,016 | | | | (1,776 | ) | | | - | | | | (4,502 | ) | | | (263 | ) | | | (4,525 | ) |
| Recapitalization | | | 20,000,000 | | | | 2,000 | | | | (470,850 | ) | | | - | | | | - | | | | - | | | | (468,850 | ) |
| Share issuance for debt conversion | | | 7,407,408 | | | | 740 | | | | (740 | ) | | | - | | | | - | | | | - | | | | - | |
| Share issuance for finder’s fee | | | 2,000,000 | | | | 200 | | | | (200 | ) | | | - | | | | - | | | | - | | | | - | |
| Stock awards to consultants and management | | | 18,275,000 | | | | 1,828 | | | | 263,160 | | | | (264,988 | ) | | | - | | | | - | | | | - | |
| Amortization of deferred stock-based compensation | | | - | | | | - | | | | - | | | | 33,322 | | | | - | | | | - | | | | 33,322 | |
| Beneficial conversion feature associated with convertible notes | | | - | | | | - | | | | 488,640 | | | | - | | | | - | | | | - | | | | 488,640 | |
| Unrealized loss on foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | - | | | | (407 | ) | | | (407 | ) |
| Net income | | | - | | | | - | | | | - | | | | - | | | | 441,402 | | | | - | | | | 441,402 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2020 | | | 67,843,334 | | | | 6,784 | | | | 278,234 | | | | (231,666 | ) | | | 436,900 | | | | (670 | ) | | | 489,582 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Share issuance for debt conversion | | | 17,134,162 | | | | 1,713 | | | | 257,060 | | | | - | | | | - | | | | - | | | | 258,773 | |
| Share issuance under employment agreement | | | 395,812 | | | | 40 | | | | 56,187 | | | | - | | | | - | | | | - | | | | 56,227 | |
| Stock awards to consultants and management | | | 11,848,625 | | | | 1,185 | | | | 560,030 | | | | (561,215 | ) | | | - | | | | - | | | | - | |
| Amortization of deferred stock-based compensation | | | - | | | | - | | | | - | | | | 428,021 | | | | - | | | | - | | | | 428,021 | |
| Unrealized loss on foreign currency translation | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,575 | ) | | | (1,575 | ) |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (2,967,637 | ) | | | - | | | | (2,967,637 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2021 | | | 97,221,933 | | | | 9,722 | | | | 1,151,511 | | | | (364,860 | ) | | | (2,530,737 | ) | | | (2,245 | ) | | | (1,736,609 | ) |
The accompanying notes are an integral part of these consolidated financial statements
GOLDEN STAR ENTERPRISES LTD.
Consolidated Statements of Cash Flows
| | | Years Ended | |
| | | December 31, | |
| | | 2021 | | | 2020 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
| Net income (loss) | | $ | (2,967,637 | ) | | $ | 441,402 | |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | | |
| Loss on debt settlement | | | 135,577 | | | | - | |
| Amortization of debt discount | | | 1,246,933 | | | | 488,640 | |
| Stock-based compensation | | | 484,248 | | | | 33,322 | |
| Unrealized (gain) loss on investment in securities | | | 792,933 | | | | (988,684 | ) |
| Changes in operating assets and liabilities: | | | | | | | | |
| Increase in accounts receivable | | | (1,580 | ) | | | - | |
| (Increase) decrease in prepaid expenses and other receivable | | | (9,200 | ) | | | 2,018 | |
| Increase (decrease) in unearned revenue | | | 48,950 | | | | (20,173 | ) |
| Increase in accounts payable and accrued liabilities | | | 50,384 | | | | 6,855 | |
| Net cash provided by (used in) in operating activities | | | (219,392 | ) | | | (36,620 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Advances from related party | | | 54,708 | | | | 6,684 | |
| Repayments to related party | | | - | | | | (3,947 | ) |
| Proceeds from demand loans | | | 69,000 | | | | - | |
| Proceeds from convertible notes | | | 134,774 | | | | - | |
| Net cash provided by financing activities | | | 258,482 | | | | 2,737 | |
| | | | | | | | | |
| Foreign exchange effect on cash | | | (824 | ) | | | 1,268 | |
| | | | | | | | | |
| Net increase (decrease) in cash | | | 38,266 | | | | (32,615 | ) |
| Cash at beginning of period | | | 3,527 | | | | 36,142 | |
| Cash at the end of the period | | $ | 41,793 | | | $ | 3,527 | |
| | | | | | | | | |
| Supplemental Disclosure of Cash Flow Information: | | | | | | | | |
| Cash paid for interest | | $ | - | | | $ | - | |
| Cash paid for income taxes | | $ | - | | | $ | - | |
| | | | | | | | | |
| Non-cash Investing and Financing Activities: | | | | | | | | |
| Advances from third party, balance transferred to convertible note under treaty agreement | | $ | 6,500 | | | $ | - | |
| Advances from third party settled with convertible notes | | $ | 28,758 | | | $ | - | |
| Stock-settled debt liability | | $ | 2,824,118 | | | $ | - | |
The accompanying notes are an integral part of these consolidated financial statements
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 1 – Organization and Description of Business
Golden Star Enterprises Ltd. (the “Company”) was incorporated on September 13, 1993 in the State of Delaware as Power Direct, Inc. On January 31, 2000, the Company changed its name to 2U Online.com Inc. On October 8, 2003, the Company changed its name to Golden Spirit Minerals Ltd. On October 19, 2004, the Company changed its name to Golden Spirit Mining Ltd. On July 18, 2005, the Company changed its name to Golden Spirit Gaming Ltd.
Effective June 30, 2006, the Company completed a 1-for-18 reverse stock split and changed its name to Golden Spirit Enterprises Ltd. On November 29, 2011, the Company changed its name to Terralene Fuels Corporation.
Effective July 15, 2013, the Company completed a 1-for-40 reverse stock split and changed its name to Golden Star Enterprises Ltd. On March 27, 2015, the Company signed a Licensing Agreement with North American Drones Enterprise Inc. (“NA Drones”), a Nevada company in the drones industry. Subsequently, effective December 31, 2020, the Company divested this operation.
Effective June 14, 2016, a majority of the shareholders entitled to vote on such matters, approved a 1-for-10 reverse split.
On October 27, 2020, the Company entered into an acquisition agreement with the shareholders of Enigmai Ltd., an operating enterprise software company established in 2009 that offers clients a workforce management system solution, whereby the Company acquired 100% of the issued and outstanding shares of Enigmai Ltd in exchange for 20,000,000 restricted common shares of the Company (the “Share Exchange”). The Company further agreed to pay a finder’s fee of 2,000,000 shares to third parties. The transaction closed effective October 31, 2020, and the Company administratively issued the shares on November 24, 2020, making Enigmai Ltd. a wholly owned subsidiary of the Company.
In applying the principles of reverse acquisition accounting, these consolidated financial statements have been presented as a continuation of the business of Enigmai Ltd. and the Company (the “Group”), as if the Company had always owned Enigmai Ltd. The consolidated share capital of the Group reflects the share capital of the Company, adjusted for movements in the share capital and reserves until the impact of the Share Exchange.
On November 4, 2020, the then Board of Directors and officers resigned, and Eliav Kling and Louis Shefsky were appointed to the Board of Directors and as officers of the Company, thus effecting a change in control of the Company.
Going Concern
During the year ended December 31, 2021, the Company reported a loss of $2,967,637 as compared to net income of $441,402 for the year ended December 31, 2020; cash used in operations totaled $219,392 for the year ended December 31, 2021, as compared to cash used in operations of $36,620 for the year ended December 31, 2020. On December 31, 2021, the Company had negative working capital of $1,736,609. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company’s existing business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The recent COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may severely impact the Company’s ability to raise additional capital and to pursue certain planned business activities. The Company may be required to cease operations if it is unable to finance its’ operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is highly uncertain and subject to change. Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to estimate the effects of the COVID-19 outbreak on its operations or financial condition in the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or continue to implement its planned business objectives to obtain profitable operations.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 1 – Organization and Description of Business (continued)
Going Concern (continued)
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Year End
The Company has selected December 31 as its year end.
Principals of Consolidation
The consolidated financial statements include the accounts of Golden Star Enterprises Ltd. and its 100% controlled subsidiary, Enigmai Ltd. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to estimates and assumptions include timing of recognition of revenue on software service renewals and expenses related thereto. Actual results could differ from those estimates.
Cash and Cash Equivalents
For financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments with a maturity of three (3) months or less at the time of purchase.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel (“ILS”).
All transactions initiated in ILS are translated into U.S. dollars in accordance with Accounting Standards Codification (“ASC”) 830-30, “Translation of Financial Statements,” as follows:
| i) | assets and liabilities are translated at the closing rate at the date of the balance sheet, or |
1USD=3.1125 ILS (December 31, 2021) and; 1USD=3.2127 ILS (December 31, 2020)
| ii) | income and expenses are translated at average exchange rates for twelve months ended December 31, or |
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 2 – Summary of Significant Accounting Policies (continued)
Foreign Currency Translation (cont’d)
1USD=3.2318 ILS (in 2021) and 1USD=3.4413 ILS (in 2020);
| iii) | all resulting exchange differences are recognized as other comprehensive income, a separate component of equity. |
Adjustments arising from such translations are included in accumulated other comprehensive income (loss) in stockholders’ equity.
Marketable Securities
The Company’s investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations. The Company’s marketable equity securities are measured at fair value with unrealized gains and losses reported in other income (expense), net (“OI&E”). If there is a permanent decline in the market value of the securities, this permanent market value adjustment is taken into income in the period.
On December 31, 2021 and 2020, the Company held $294,572 and $1,087,505 in marketable equity securities, respectively.
Stock-based Compensation
We account for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation. Under the fair value recognition provision of this guidance, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period (typically the vesting period) and reduced for actual forfeitures in the period they occur. Stock-based compensation is included as consulting fees in our consolidated statements of operations and comprehensive income (loss).
Revenue Recognition
The Company follows ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from software licensing agreements and contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
In each of the years ended December 31, 2021, and 2020, the Company generated revenues from subscriptions to the Company’s workforce software, the ENIGMAI Business Suite. Customers pay a fixed fee for access to the software suite. Thereafter, customers pay 12% of the software cost annually for maintenance and support. Updates and new software versions are included in the maintenance costs. Set up fees and software costs are expensed when the software is operational for each client. Annual maintenance fees are generally charged in advance at the start of each contract year and amortized over the year. The Company also generates revenue from time to time from ad hoc service/software installation projects which are invoiced on completion. During the year ended December 31, 2021, the Company recorded an increase of $48,950 to deferred revenue as compared to a decrease of $20,173 during the year ended December 31, 2020, in respect to customer contracts. Balances of deferred revenue in each of the years ended December 31, 2021, and 2020 totaled $49,738 and $0.
Disaggregated Revenues
Total revenues, consisting of disaggregated sales across each revenue component were as follows:
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 2 – Summary of Significant Accounting Policies (continued)
Disaggregated Revenues (cont’d)
| Revenue by channel |
| | | | | | | | | | | | | |
| | | 2021 $$ | | | 2021% | | | 2020 $$ | | | 2020% | |
| | | | | | | | | | | | | |
| Software subscription | | $ | 38,503 | | | | 85 | % | | $ | 45,905 | | | | 88 | % |
| Maintenance fees | | | 5,250 | | | | 12 | % | | | 6,260 | | | | 12 | % |
| Advertising | | | 1,322 | | | | 3 | % | | | 0 | | | | 0 | % |
| TOTAL | | $ | 45,075 | | | | 100.0 | % | | $ | 52,165 | | | | 100.0 | % |
Concentration of Credit Risks
Concentration of Major Customers
For the year ended December 31, 2021 the Company received 97% of its revenue from two customers. For the year ended December 31, 2020, the Company received 100% of its revenue from two customers.
Convertible Debt and Beneficial Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815, Derivatives and Hedging, to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20, Debt with Conversion and Other Options, for consideration of any beneficial conversion features.
Stock Settled Debt
In certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed discount to the trading price of the Company’s common shares as traded in the over-the-counter market. In these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed value transferred to the convertible note holder from the fixed discount conversion feature. As of December 31, 2021 and December 31, 2020, the Company had recorded within Convertible Notes, net of discount, the amount of $1,782,410 and $488,640 for the value of the stock settled debt for certain convertible notes (see Note 7).
Income Taxes
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 net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured at rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A valuation allowance is recorded when it is not more likely than not that all or a portion of the net deferred tax assets will be realized.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 2 – Summary of Significant Accounting Policies (continued)
Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations and comprehensive income (loss). Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. During the fiscal years ended December 31, 2021 and 2020 there were a total of 61,436,528 and 67,398,621 potentially dilutive shares, respectively, as a result of certain convertible promissory notes at conversion prices between $0.00725 and $0.02 per share.
The table below reflects the potentially dilutive securities at December 31, 2021 which have been excluded from computation of diluted net loss per share:
| | | December 31, 2021 | |
| Convertible Notes | | | 61,436,528 | |
The table below reflects the potentially dilutive securities at December 31, 2020 which have been included in our computation of diluted net loss per share:
| | | December 31, 2020 | |
| Convertible Notes | | | 67,398,621 | |
Recently issued accounting pronouncements
The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
Note 3 – Reverse Acquisition
On October 27, 2020, the Company entered into an acquisition agreement with the shareholders of Enigmai Ltd., an enterprise software company established in 2009 that offers clients a workforce management system solution, whereby the Company acquired 100% of the issued and outstanding shares of Enigmai Ltd in exchange for 20,000,000 restricted common shares of the Company. The Company further agreed to pay a finder’s fee of 2,000,000 shares to third parties. The transaction closed effective October 31, 2020 and the Company administratively issued the shares on November 24, 2020, making Enigmai Ltd. a wholly owned subsidiary of the Company.
For accounting purposes, mergers of operating private companies into public companies with limited operations are considered to be capital transactions rather than business combinations. The accounting for the transaction is identical to that resulting from a reverse acquisition, except that goodwill or other intangibles are not recognized. The net assets acquired from this transaction totaled $(468,850).
The following table sets forth the net assets as of October 31, 2020:
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 3 – Reverse Acquisition (continued):
| | | October 31, 2020 | |
| | | | |
| Marketable securities | | $ | 98,821 | |
| Accounts payable | | | (50,456 | ) |
| Advances | | | (517,215 | ) |
| Net assets | | $ | (468,850 | ) |
| | | | | |
| Consideration: 20,000,000 common shares | | $ | 2,000 | |
| Additional paid in capital | | | (470,850 | ) |
| | | $ | (468,850 | ) |
Note 4 – Marketable Securities
Marketable equity securities considered available-for-sale and acquired through reverse acquisition (Note 3) at December 31, 2021 and December 31, 2020:
| | | 2021 | | | 2020 | |
| 4,728,283 shares of Wee-Cig International Corp. (“WCIG”) | | $ | 294,572 | | | $ | 1,087,505 | |
| 35,187 shares of Bravo Enterprises Ltd. | | | - | | | | - | |
| Total | | $ | 294,572 | | | $ | 1,087,505 | |
During the years ended December 31, 2021 and 2020, the Company recorded an unrealized loss of $792,933 and unrealized gain of $988,684, respectively, on the change in fair market value of these investments.
Note 5 – Revenue Contracts
During the year ended December 31, 2021, the Company renegotiated two revenue contracts as follows:
Revenue contract 1:
On March 3, 2021, the Company entered into a three-year contract for the Enigmai Business Suite commencing January 1, 2021, and terminating December 31, 2023, whereunder the Customer agreed to remit the entire contract amount of 232,213 ILS (Approx. US$71,150) in advance to secure a fixed annual rate for the term of the contract. The contract was paid in May 2021. The Company recorded revenue of $24,656 in respect to services provided for the year ended December 31, 2021. As of December 31, 2021, $49,738 has been recorded as deferred revenue and will be reflected as revenue in future periods.
Revenue contract 2:
On February 14, 2021, the Company entered into a three-year contract for the Enigmai Business Suite commencing January 1, 2021 and terminating December 31, 2023 whereunder the Customer agreed to annual payments in advance of 64,000 ILS (Approx. US$19,600) in year one and 72,000 Israeli Shekels (Approx. US$22,100) in each of years two and three of the contract. The first-year fee under contract was paid in May 2021. The Company recorded revenue of $20,419 in respect to services provided for year ended December 31, 2021, with $0 deferred revenue remaining at year end.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 6– Deferred Stock-based Compensation
On December 1, 2020, the Company entered into certain consulting agreements with five consultants to the Company, including one member of management pursuant to which the Company issued a total of 18,275,000 unregistered, restricted shares of common stock, valued at $264,988. Included in the cumulative shares issued are a total of 8,975,000 unregistered, restricted shares of common stock issued to Mr. Louis Shefsky, the Company’s President and Secretary, at fair market value of $0.0145 per share. Each of the consulting contracts has a term of six months, save the contract with Mr. Shefsky, which has a term of one year, and each of the aforementioned contracts will be expensed over their respective term.
On January 1, 2021, the Company and its CEO and director, Eliav Kling, entered into a compensation agreement for a term of one year, ending December 31, 2021, pursuant to which the Company agreed to compensation of $150,000 in the form of 10,714,286 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.014 per share.
On August 15, 2021, the Company entered into advisory agreements with two consultants each with a term of two years, pursuant to which the Company issued a total of 80,000 unregistered, restricted shares of common stock, valued at $116,000.
On December 1, 2021, the Company entered into a compensation agreement for a term of one year with its President and secretary, Louis Shefsky pursuant to which the Company issued a total of 1,054,339 unregistered, restricted shares of common stock, valued at $295,215. During the years ended December 31, 2021 and 2020, $428,021 and $33,322 was expensed, respectively.
As of December 31, 2021 and December 31, 2020, the unamortized portion of the deferred compensation agreements totaled $364,860 and $231,666, respectively.
Note 7 – Debt
Loan Treaty Agreements
On March 8, 2021, the Company entered into two Loan Treaty Agreements with two third parties (“Treaty Agreement”) whereby each lender has agreed to provide a loan in the amount of up to $250,000 in tranches over a period of one year from time to time as agreed between the lender and the Company. Each amount deposited shall have a term of 12 months for repayment and shall bear an interest rate of 8% per annum. In addition, at the option of the Lender, the loan amount or any portion thereof is convertible into restricted, unregistered shares of the Common Stock of the Company at a fixed rate of $0.02 per share, being a 50% discount to the market price of the shares of the Company as published on OTC Markets as of the date of this Agreement, provided that at no time may the Lender hold more than 9.99% of the outstanding Common Stock of the Company. Each promissory note issued hereunder, or part thereof, may be converted into unrestricted common shares at the one-year anniversary of the deposit of the funds to the Company.
During the year ended December 31, 2021, the Company received an aggregate amount of $134,774. The Company recorded $2,824,118 as the liability on stock settled debt associated with the funding tranches which amount is amortized over the term of the notes.
The carrying value of tranches is as follows:
| | | December 31, 2021 | |
| Principal issued | | $ | 141,274 | |
| Stock-settled liability | | | 2,824,118 | |
| | | | 2,965,392 | |
| Unamortized debt discount | | | (1,577,185 | ) |
| | | $ | 1,388,207 | |
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 7 – Debt (continued)
Loan Treaty Agreements (cont’d)
The interest expenses of the tranches are as follows:
| | | For Years Ended | |
| | | December 31, | |
| | | 2021 | | | 2020 | |
| Interest expense on notes | | $ | 5,759 | | | $ | - | |
| Amortization of debt discount | | | 1,246,933 | | | | - | |
| Total: | | $ | 1,252,692 | | | $ | - | |
During the fiscal year ended December 31, 2021, the two third parties having funded $45,093 and $46,101, respectively, under their Treaty Agreements assigned their financing agreements to a third party who consolidated the two agreements into one Treaty Agreement with a total of $408,806 remaining to fund. During the fiscal year ended December 31, 2021, the new holder of the Treaty Agreement funded a total of $50,080 against this amount leaving a balance available of $358,726. Balances prior funded under the two original Treaty Agreements in the cumulative amount of $91,194 also remained due and payable at December 31, 2021.
Advances and Convertible Notes
The Company acquired total debt in the form of advances from third parties in the aggregate amount of $517,215 as a result of the reverse acquisition (Note 3). On November 16, 2020, certain of the aforementioned third party debt holders entered into convertible notes with the Company in respect to cumulative debt totaling $488,640 whereunder the Holder has the right, in its sole discretion, at any time, with three (3) days written notice, to convert any part of the notes into shares of the Company’s common stock at a conversion rate of a 50% discount to the market close on the last trading day prior to the date of the convertible notes; i.e. November 13, 2020 which was $0.00725 per share. The discount recognized in respect of the beneficial conversion feature on issuance of the aforementioned notes totaled $488,640, which amount was expensed immediately during the year ended December 31, 2020, as interest expense. As of December 31, 2020, the unamortized balance of the beneficial conversion feature was $nil and the principal amount payable under the notes was $488,640.
During the year ended December 31, 2021, 13,025,762 shares were issued to settle debt in the amount of $94,437 reducing the principal balance payable on the notes to $394,203.
On March 3, 2021, a creditor of the Company making up total remaining advances of $28,758 from the cumulative $517,215 acquired on the reverse merger assigned their debt in full to a third party. Concurrently the assignee elected to convert the debt into 4,108,400 shares of common stock at $0.007 per share. The 4,108,400 shares of common stock issued had a total fair value of $164,336, which resulted in the Company recording a loss on debt settlement of $135,577. As a result of this conversion the this debt balance was extinguished leaving a balance of $0.
The carrying value of remaining convertible notes set out above and the aforementioned loan treaties totaled $1,782,410 and $488,640 at December 31, 2021 and 2020, respectively.
Demand Loans
On June 30, 2021, the Company issued a promissory note (the “Note”) to a third party in the principal amount of $19,000. The Note bears interest at the rate of 8% per annum and is due and payable by the Company upon demand from debtor.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 7 – Debt (continued)
Demand Loans (cont’d)
On August 20, 2021, the Company issued a promissory note (the “Note”) to a third party in the principal amount of $50,000. The Note bears interest at the rate of 8% per annum and is due and payable by the Company upon demand from debtor.
We recorded interest expenses of $2,224 for the year ended December 31, 2021. As of December 31, 2021, the unpaid interest balance was $2,224 which amount is included in Accounts payable and accrued liabilities, and the principal balance payable for loans due on demand was $69,000.
Note 8 – Capital Stock
The Company’s authorized capital is 500,000,000 common shares with a par value of $0.0001 per share.
On October 27, 2020, a creditor of the Company assigned a total of $50,000 of outstanding debt payable to two third parties. Concurrently these parties elected to convert the debt into 7,407,408 shares of common stock at $0.00675 per share. The shares were administratively issued subsequent to December 31, 2020.
On October 31, 2020, a total of 22,000,000 shares were issued pursuant to the acquisition agreement with Enigmai (Note 3) of which 20,000,000 shares were issued to the shareholders of Enigmai and their assigns, and 2,000,000 shares were issued to third parties as finders fees.
On December 1, 2020, 18,275,000 unregistered, restricted shares of common stock were issued to certain consultants pursuant to a series of consulting agreements with the Company, including Louis Shefsky, an officer and director of the Company, who received 8,975,000 common shares (Note 6).
Effective January 1, 2021, 10,714,286 unregistered, restricted shares of common stock were issued by the Company to its CEO and director, Eliav Kling, pursuant to an executive compensation agreement (Note 6).
On March 3, 2021, 4,108,400 shares of common stock were issued to settle certain debt (Note 7).
On June 15, 2021, 13,025,762 shares of common stock were issued to settle certain debt (Note 7).
On August 15, 2021, 80,000 unregistered, restricted shares of common stock were issued by the Company to consultants pursuant to advisory agreements (Note 9).
During the year ended December 31, 2021, 395,812 unregistered, restricted shares of common stock were issued to an employee pursuant to an employment agreement (Note 9).
Effective December 1, 2021, 1,054,339 unregistered, restricted shares of common stock were issued by the Company to its President and director, Louis Shefsky, pursuant to an executive compensation agreement (Note 6).
There were 97,221,933 and 67,843,334 shares of common stock issued and outstanding on December 31, 2021 and 2020, respectively.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 9 – Commitments and Contingencies
On November 15, 2020, the Company entered into an employment agreement with Eital Muskal as VP of Strategy and Business Development for Enigmai Ltd., the Company’s wholly owned subsidiary. Under the terms of the employment agreement, Ms. Muskal receives compensation of $160,000 Canadian dollars per annum (approximately US$126,000), paid as follows: cash consideration of CDN$100,000 and CDN$60,000 in consideration by way of the issuance of shares of the common stock of the Company which shall be paid quarterly, based on a 10% discount to the 10 day average trading price at the time of issuance and using the applicable rate of exchange from Canadian to US dollars at the valuation date. On February 15, 2021, May 15, 2021, August 15, 2021, and November 15, 2021, respectively a total of 304,165, 26,266, 8,989, and 31,750 shares were issued in the consideration of the quarterly consideration of CDN$15,000 payable in shares. At the end of the term of the contract, the Company agreed to issue a bonus to its VP Business Development and Strategy in the amount of CDN$10,000 paid by the issuance of 24,642 shares of common stock at a discount of 10% to the market price on the date of issue. Concurrently the Company and Ms. Muskal entered into an amendment to the original employment agreement to extend the contract for a further year on the same terms and conditions, other than the rate of discount to the compensation shares quarterly was increased to a 15% discount to the 10-day average trading price at the time of issuance and using the applicable rate of exchange from Canadian to US dollars at the valuation date.
Further, on expiry, the Company and the consultant agreed to extend the contract for a further year and amend the terms of the employment agreement to provide those shares issued as compensation under the terms of the agreement shall be issued at a 15% discount to market, on the same terms and conditions, for the contract term from November 15, 2021 to November 15, 2022.
During the quarter ended September 30, 2021, the Company formed an Advisory Board and entered into Advisory agreements with two independent consultants. The Agreements have a term of two years from August 15, 2021 and provide that the Advisors will provide advice and recommendations regarding the Company’s business strategy and corporate development. Under the terms of the agreements the Company issued the advisors a cumulative 80,000 shares of unregistered, restricted common stock in consideration for their services.
In December 2021 the Company filed a lawsuit in Israel against the original founders of Enigmai for Breach of Contract, and for damages in the amount of 559,977 NIS (approximately $179,845 USD). With the acquisition of Enigmai, the original founders of Enigmai, agreed to assist the Company in its transition, and more specifically, with training on the use of its software, and performance of various services related to the upgrading of the product. During the month of October 2021, both
original founders of Enigmai informed the Company that they would cease providing their services on October 31, 2021, contrary with agreed upon terms of the acquisition of Enigmai, wherein, the founders agreed to assist the Company until the transition was complete and all improvements, upgrades and training of the product was completed. The Company has not yet received a response to the claim filed in Israel.
Note 10 – Related Party Transactions
On November 4, 2020, the then Board of Directors and officers resigned, and Eliav Kling and Louis Shefsky were appointed to the Board of Directors and as officers of the Company, thus effecting a change in control of the Company.
Louis Shefsky
On December 1, 2020, the Company entered into a compensation agreement with Louis Shefsky, a director and officer of the Company, pursuant to which the Company issued a total of 8,975,000 unregistered, restricted shares of common stock, valued at $130,138. The term of the contract was from December 1, 2020 to November 30, 2021. During the fiscal year ended December 31, 2020, the Company recorded expenses of $10,845 and deferred compensation of $119,293 which amount was expensed in fiscal 2021.
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 10 – Related Party Transactions (continued)
Louis Shefsky (continued)
On December 1, 2021, the Company entered into a new one-year compensation agreement with Mr. Shefsky under which the company issued a total of 1,054,339 shares of unregistered, restricted common stock at $0.28 per share for a total value of $295,215. During the year ended December 31, 2021, the Company recorded expense of $24,601 and deferred compensation of $270,614 which is recorded on the balance sheet as deferred compensation to be amortized over fiscal 2022 until the end of the contract term
Eliav Kling
On January 1, 2021 the Company and its CEO and director, Eliav Kling, entered into a compensation agreement for a term of one year, ending December 31, 2021, pursuant to which the Company agreed to compensation of $150,000 in the form of 10,714,286 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.014 per share, all of which was expensed in the year ended December 31, 2021.
During the fiscal year ended December 31, 2020, Mr. Kling, a director and officer of the Company advanced a total of $1,373 to the Company for operational expenses. During the fiscal year ended December 31, 2021, Mr. Kling further advanced a total of $55,077 to the Company for operational expenses. As at December 31, 2021 and December 31, 2020, Mr. Kling was owed a total of $56,361 and $1,373, respectively. The amount is reflected in the financial statements as due to related parties.
Ofir Hersaz
On each of December 31, 2021 and December 31, 2020, respectively, Mr. Hersaz, a former director of the Company’s subsidiary and over 8.2% shareholder of the Company, was owed $2,301 (6,381 NIS) and $2,542 (7,381 NIS), which amounts are reflected on the financial statements as due to related parties. Amounts owing to Mr. Hersaz were reduced by $241 (1,000 ILS) during the year ended December 31, 2021.
Note 11 – Income Taxes
The income tax expense (benefit) at a federal rate of 21% and a state tax rate of 8.7% consisted of the following for the years ended December 31, 2021 and 2020:
The provision for (benefit from) income taxes consist of the following:
| | | Year Ended December 31, 2021 | | | Year Ended December 31, 2020 | |
| Current | | | | | | |
| Federal | | $ | - | | | $ | - | |
| State | | | - | | | | - | |
| | | | - | | | | - | |
| Deferred | | | | | | | | |
| Federal | | | - | | | | - | |
| State | | | - | | | | - | |
| | | | - | | | | - | |
| Total income tax provision (benefit) | | $ | - | | | $ | - | |
GOLDEN STAR ENTERPRISES LTD.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
Note 11 – Income Taxes (continued)
A reconciliation of the provision for income taxes at the federal statutory rates of 21% to the Company’s provision for income tax is as follows:
| | | Year Ended December 31, 2021 | | | Year Ended December 31, 2020 | |
| U.S. Federal tax (benefit) provision at statutory rate | | $ | (623,000 | ) | | $ | 93,000 | |
| Non-deductible expenses (income) | | | 531,000 | | | | (98,000 | ) |
| Changes in valuation allowance | | | 92,000 | | | | 5,000 | |
| Total | | $ | - | | | $ | - | |
The Company has several unfiled tax years since a change in control in fiscal 2020, and certain prior filed returns are also open for examination by the taxing authorities. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the periods presented above. The Company had no accruals for interest and penalties at December 31, 2021 or 2020. The Company’s utilization of any net operating loss carry-forward may be unlikely as a result of the change in control which occurred in fiscal 2020 and its change in business activities.
Note 12 - Subsequent Events
On January 1, 2022, the Company and its CEO and director, Eliav Kling entered into a compensation agreement for a term of one year, ending December 31, 2022, pursuant to which the Company issued 1,216,545 unregistered, restricted shares of common stock, based on the fair market value of the stock on the date of the agreement or $0.1498 per share.
On February 15, 2022, the Company issued 171,354 unregistered, restricted shares of common stock were issued to an employee pursuant to an employment agreement at a 15% discount to the fair market value on the date of issuance.
The Company has evaluated events for the period from December 31, 2021, through the date of May 20, 2022 the date on which these financial statements were available to be issued, and determined that there are no additional events requiring disclosure.
LEGAL PROCEEDINGS
The Company has filed a lawsuit in Israel against the original founders of Enigmai for Breach of Contract, and for damages in the amount of 559,977 NIS (approximately $179,845 USD). With the acquisition of Enigmai, the original founders of Enigmai, agreed to assist the Company in its transition, and more specifically, with training on the use of its software, and performance of various services related to the upgrading of the product. During the month of October 2021, both original founders of Enigmai informed the Company that they would cease providing their services on October 31, 2021, contrary with agreed upon terms of the acquisition of Enigmai, wherein, the founders agreed to assist the Company until the transition was complete and all improvements, upgrades and training of the product was completed. The Company has not yet received a response to the claim filed in Israel. The lawsuit was filed in the regional court in Tel Aviv, and since the defendants (the original founders) didn’t respond to the claim, we filed for judgment without response. The Company as of the date of this filing is waiting for a ruling on the motion.
INTEREST OF NAMED EXPERTS AND COUNSEL
Pinnacle Accountancy Group of Utah (a dba of Heaton & Company, PLLC) located at 1438 N Highway 89, Suite 120, Farmington, Utah 84025, phone (801) 447-9572, our independent registered public accountant, has audited our financial statements as of and for the years ended December 31, 2021 and 2020 included in this prospectus and Registration Statement to the extent and for the periods set forth in their audit report and has presented its report with respect to our audited financial statements.
William MacDonald of the law offices of Macdonald Tuskey, WL Macdonald Law Corporation located at Suite 409, 221 West Esplanade, North Vancouver, B.C. Canada, V7M 3J3; telephone (604) 973-0580 passed on the legality of the shares being offered in this prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” into this prospectus the information contained in documents that we file with the SEC. This means that we can disclose important information to you by referring you to those documents filed separately by us with the SEC. The information that we incorporate by reference is considered to be a part of this prospectus, except for any information that is superseded by information that is included directly in this prospectus or incorporated by reference from information contained in documents that we file later with the SEC, which will automatically update and supersede this information.
We incorporate by reference into this prospectus information contained in any reports and other documents that we file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the effective date of this prospectus and prior to the completion or termination of the offering of the securities covered by this prospectus, other than information that is furnished but not filed with the SEC under those filings.
Any statement contained in a document incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any subsequently filed document which is also incorporated or deemed to be incorporated by reference in this prospectus modifies or supersedes that previous statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
The information relating to us contained in this prospectus should be read together with the information in the documents incorporated or deemed to be incorporated by reference in this prospectus.
Documents incorporated by reference are available from the SEC as described above or from us without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference as an exhibit in this prospectus. We will provide to each person, including any beneficial owner, to whom this prospectus is delivered, upon written or oral request, at no cost, a copy of any and all of the information that is incorporated by reference in this prospectus. Requests for such documents shall be directed to:
Golden Star Enterprises Ltd.
Suite B, 2803 Philadelphia Pike
Claymont, DE 19703
Attention: Chief Executive Officer
You should rely only on the information contained in, or incorporated by reference into, this prospectus and any prospectus supplement. We have not authorized any person to provide you with any information that is different from that contained in this prospectus or incorporated by reference in this prospectus.
We are not making an offer to sell or seeking an offer to buy these securities in any jurisdiction in which such an offer, sale or solicitation is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Certificate of Incorporation provides that we shall indemnify our directors and officers to the fullest extent permitted by Delaware law and that none of our directors will be personal liability to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:
| | · | for any breach of the director’s duty of loyalty to the Company or its stockholders; |
| | · | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of the law; |
| | · | pursuant to Section 174 of the Delaware Corporation Law; or |
| | · | for any transaction from which the director derives an improper personal benefit. |
These provisions require us to indemnify our directors and officers unless restricted by Delaware law and eliminate our rights and those of our stockholders to recover monetary damages from a director for breach of her fiduciary duty of care as a director except in the situation described above. The limitation summarized above, however, do not affect our ability or that of our stockholders to seek non-monetary remedies, such as an injunction or rescission, against a director for breach of fiduciary duty.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement on Form S-1 under the Securities Act, and the rules and regulations promulgated hereunder, with respect to the Common Stock offered hereby. This prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits thereto. While we have summarized the material terms of all agreements and exhibits included in the scope of their Registration Statement, for further information regarding the terms and conditions of any exhibit, reference is made to such exhibits. Upon effectiveness of their prospectus, we will be subject to the reporting and other requirements of Section 15(d) of the Securities Exchange Act of 1934 and will file periodic reports with the Securities and Exchange Commission. We will make available to our shareholders annual reports containing financial statements audited by our independent auditors and our quarterly reports containing unaudited financial statements for each of the first three quarters of each year; however, we will not send the annual report to our shareholders unless requested by an individual shareholder.
For further information with respect to us and the Common Stock, reference is hereby made to the Registration Statement and the exhibits thereto, which may be inspected and copied at the principal office of the SEC, 100 F Street NE, Washington, D.C. 20549, and copies of all or any part thereof may be obtained at prescribed rates from the Commission’s Public Reference Section at such addresses. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the forecasted expenses in connection with this registration statement. All of such expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission*.
| Securities and Exchange Commission Registration Fee (fee rounded to next whole dollar) | | | 651 | |
| Audit Fees and Expenses | | | 20,000 | |
| Legal Fees and Expenses | | | 15,000 | |
| Transfer Agent and Registrar Fees and Expenses | | | 1,000 | |
| Edgar Filing Fees | | | 5,000 | |
| Miscellaneous Expenses | | | 8,349 | |
| Total* | | | 50,000 | |
*Estimates only
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended, authorizes us to indemnify any director or officer under certain prescribed circumstances and subject to certain limitations against certain costs and expenses, including attorney’s fees actually and reasonably incurred in connection with any action, suit or proceeding, whether civil, criminal, administrative or investigative, to which a person is party by reason of being one of our directors or officers if it is determined that such person acted in accordance with the applicable standard of conduct set forth in such statutory provisions. Our certificate of incorporation contains provisions relating to the indemnification of directors and officers and our by-laws extend such indemnities to the full extent permitted by Delaware law. We do not currently maintain insurance for the benefit of any director or officer which cover claims for which we could not indemnify such persons. In addition, our agreement with MHFLP requires that we obtain directors and officers insurance within 60 days of the execution of the SPA, which we intend to do immediately.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
EXHIBITS
The following is a list of exhibits filed as part of their Registration Statement. Where so indicated by footnote, exhibits that were previously filed are incorporated herein by reference. Any statement contained in an Incorporated Document shall be deemed to be modified or superseded for purposes of their Registration Statement to the extent that a statement contained herein or in any other subsequently filed Incorporated Document modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of their Registration Statement.
| 3.1 | | Articles of Incorporation dated September 13, 1993 incorporated by reference to our Form 10SB/12G filed with the SEC on May 17, 1999 |
| 3.1.1 | | Certificate of Amendment of Certificate of Incorporation dated July 30, 1998, incorporated by reference to our Form 10SB/12G filed with the SEC on May 17, 1999 |
| 3.1.2 | | Restated and Amended Certificate of Incorporation dated January 19, 1999 , incorporated by reference to our Form 10SB/12G filed with the SEC on May 17, 1999 |
| 3.1.3 | | Name Change February 28, 2000, incorporated by reference to our Form 10SB/12G/A filed with the SEC on August 2, 2001 |
| 3.1.4 | | Reverse Split filed January 3, 2003, incorporated by reference to our Form 8K filed with the SEC on January 10, 2003 |
| 3.1.5 | | Name Change October 2, 2003, incorporated by reference to our Form 8K filed with the SEC on October 10, 2003 |
| 3.1.6 | | Certificate of Amendment of Articles of Incorporation filed with Delaware on August 24, 2004, incorporated by reference to our Form 8K filed on October 18, 2004. |
| 3.1.7 | | Certificate of Amendment to Articles of Incorporation, incorporated by reference to our Form 8K filed with the SEC on July 18, 2005 |
| 3.1.8 | | Certificate of Amendment to its Articles of Incorporation was filed with the State of Delaware changing the name to Golden Spirit Enterprises Ltd. and declaring a one-for-eighteen (1:18) reverse stock split. Incorporated by reference to our Form 8K filed with the SEC on June 3, 2006 |
| 3.1.9 | | Certificate of Amendment to its Articles of Incorporation was filed with the State of Delaware changing the name to Terralene Fuels Corporation. incorporated by reference to our Form 8K filed with the SEC on December 20, 2011 |
| 3.1.10+ | | Name Change filed June 5, 2013. |
| 3.2 | | Bylaws, incorporated by reference to our Form 10SB filed with the SEC on May 17, 1999 |
| | |
| 5.1+ | | Opinion of William MacDonald, re: the legality of the shares being registered |
| 10.1+ | | Acquisition agreement between the Company and Enigmai dated October 27, 2020 and addendum dated December 29, 2020 |
| 10.2+ | | Form of Convertible Promissory Note between the Company and Various Lenders |
| 10.3+ | | Employment Agreement between the Company and Eital Muskal dated November 16, 2020 |
| 10.4+ | | Consulting Agreement between the Company and Louis Shefsky dated December 1, 2020 |
| 10.5+ | | Consulting Agreement between the Company and Eliav Kling dated January 1, 2021. |
| 10.6+ | | Form of Loan Treaty between the Company and Various Lenders |
| 10.7+ | | Employment Agreement between the Company and Eital Muskal dated November 16, 2021. |
| 10.8+ | | Consulting Agreement between the Company and Louis Shefsky dated December 1, 2021 |
| 10.9+ | | Consulting Agreement between the Company and Eliav Kling dated January 1, 2022. |
| 10.10+ | | Finders fee Agreement between the Company and J.H. Darbie dated January 14, 2022 |
| 10.11+ | | Securities Purchase Agreement between Mast Hill Fund, L.P. and The Company dated May 20, 2022 |
| 10.12+ | | Promissory Note issued to Mast Hill Fund, L.P. dated May 20, 2022 |
| 10.13+ | | First Common Stock Purchase Warrant underlying the Securities Purchase Agreement issued to Mast Hill Fund, L.P. dated May 20, 2022 |
| 10.14+ | | Second Common Stock Purchase Warrant underlying the Securities Purchase Agreement issued to Mast Hill Fund, L.P. dated May 20, 2022 |
| 10.15+ | | Third Common Stock Purchase Warrant underlying the Securities Purchase Agreement issued to Mast Hill Fund, L.P. dated May 20, 2022 |
| 10.16+ | | Fourth Common Stock Purchase Warrant underlying the Securities Purchase Agreement issued to Mast Hill Fund, L.P. dated May 20, 2022 |
| 10.17+ | | Security Agreement between Mast Hill Fund L.P and the Company dated May 20, 2022 |
| 10.18+ | | Registration Rights Agreement between Mast Hill Fund, L.P. and the Company dated May 20, 2022 |
| 10.19+ | | Equity Purchase Agreement between Mast Hill Fund, L.P. and the Company dated May 27, 2022 |
| 10.20+ | | Common Stock Purchase Warrant underlying the EPA issued to Mast Hill Fund, L.P. dated May 27, 2022 |
| 10.21+ | | Registration Rights Agreement between Mast Hill Fund, L.P. and the Company dated May 27, 2022 |
| 10.22+ | | Consulting Agreement with Beyond Media SEZC dated June 6, 2022 |
| 23.1+ | | Auditor Consent |
| 23.2 | | Consent of William MacDonald (included in Exhibit 5) |
| 107+ | | Filing Fee Table |
+Filed herewith
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a post-effective amendment to their Registration Statement to:
| | (a) | Include any prospectus required by Section 10(a)(3) of the Securities Act; |
| | | |
| | (b) | Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement; and |
| | | |
| | (c) | Include any additional or changed material information on the plan of distribution. |
2. To, for the purpose of determining any liability under the Securities Act, treat each post-effective amendment as a new Registration Statement relating to the securities offered herein, and to treat the offering of such securities at that time to be the initial bona fide offering thereof.
3. To remove from registration, by means of a post-effective amendment, any of the securities being registered hereby that remain unsold at the termination of the offering.
4. For determining liability of the undersigned Registrant under the Securities Act to any purchaser in the initial distribution of the securities, that in a primary offering of securities of the undersigned Registrant pursuant to their Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;
(b) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;
(c) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and,
(d) Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to our director, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our director, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our director, officers, or controlling person sin connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue.
For the purposes of determining liability under the Securities Act for any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a Registration Statement relating to an offering, other than Registration Statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the Registration Statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a Registration Statement or prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by reference into the Registration Statement or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the Registration Statement or prospectus that was part of the Registration Statement or made in any such document immediately prior to such date of first use.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused their Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Clayton, Delaware on this 15th day of September 2022
| | GOLDEN STAR ENTERPRISES LTD. | |
| | | |
| | By: | /s/ Eliav Kling | |
| | Name: | Eliav Kling | |
| | Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
| Name | | Position | | Date |
| | | | | |
| /s/ Eliav Kling | | Chief Executive Officer | | September 15, 2022 |
| Eliav Kling | | | | |
| | | | | |
| /s/Louis Shefsy | | President, Secretary/ Treasurer, Chief Financial Officer (Principal Financial and Accounting Officer | | September 15, 2022 |
| Louis Shefsky | | | | |
| | | | | |
| /s/Louis Shefsy | | Director | | September 15, 2022 |
| Louis Shefsky | | | | |
| | | | | |
| /s/ Eliav Kling | | Director | | September 15, 2022 |
| Eliav Kling | | | | |
EXHIBIT 3.1.10
EXHIBIT 5.1
| 409 – 221 West Esplanade North Vancouver, BC V7M 3J3 CANADA Telephone: (604) 973-0579 Facsimile: (604) 973-0280 | 
|
| CORPORATE AND SECURITIES LAWYERS |
September 15, 2022
Golden Star Enterprises Ltd.
Suite B, 2803 Philadelphia Pike
Claymont, DE 19703
Dear Sirs:
| Re: Common shares of Golden Star Enterprises Ltd., Registered on Form S-1, filed on September 15, 2022 |
We have acted as special counsel to Golden Star Enterprises Ltd. (the “Company”), a corporation incorporated under the laws of the State of Delaware, in connection with the filing, on September 15, 2022, of a registration statement on Form S-1 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”) relating to the proposed resale of up to 118,420,000 shares of the Company’s common stock, par value $0.001 per share (the “Registered Shares”) by the selling stockholders identified in the Registration Statement. This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. § 229.601(b)(5), in connection with the Registration Statement.
In connection with rendering the opinion set forth below, we have reviewed: (a) the Registration Statement and exhibits thereto; (b) the Company’s Articles of Incorporation, as amended; (c) the Company’s Bylaws; (d) certain records of the proceedings of the Board of Directors of the Company relating to the proposed issuance of the Registered Shares; and (e) such statutes, records and other documents and matters as we have deemed necessary.
We have also examined the originals or copies of such corporate records of the Company and/or public officials and such other documents and have made such other factual and legal investigations as we have deemed relevant and necessary as the basis for the opinion set forth below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies or as facsimiles of copies or originals, which assumptions we have not independently verified.
We have made such inquiries with respect thereto as we consider necessary to render this opinion with respect to a Delaware corporation. This opinion letter is opining upon and is limited to the current federal laws of the United States, including the statutory provisions, all applicable provisions of Delaware law and reported judicial decisions interpreting those laws, as such laws presently exist and to the facts as they presently exist. We express no opinion with respect to the effect or applicability of the laws of any other jurisdiction. We assume no obligation to revise or supplement this opinion letter should the laws of such jurisdiction be changed after the date hereof by legislative action, judicial decision or otherwise.
Based upon the foregoing and the examination of such legal authorities as we have deemed relevant, and subject to the qualifications and further assumptions set forth herein, we are of the opinion that the Registered Shares have been duly authorized by all requisite corporate action and have been, or will be, legally issued, fully paid and non-assessable.
The opinions expressed herein are with respect to, and limited to, the corporate laws of the State of Delaware and the federal laws of the United States, in each case as currently in effect, and we express no opinion as to the effect of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the General Rules and Regulations of the Securities and Exchange Commission.
| | | Very truly yours, | |
| | | | |
| | /s/ William Macdonald | |
| | | On the behalf of | |
| | | W.L. Macdonald Law Corporation | |
EXHIBIT 10.1
ACQUISITION AGREEMENT AND EXCHANGE OF SHARES
THIS ACQUISITION AGREEMENT (“Agreement”), is entered into by and between Golden Star Enterprises Ltd. (“GSPT”, “Company”), a publicly traded company incorporated under the laws of the State of Delaware, and Enigmai Ltd. (“Enigmai”), a corporation incorporated under the laws of Israel, on this 3rd day of November with an effective date of the 27th day of October 2020.
WHEREAS, GSPT desires to acquire Enigmai, and Enigmai desires to be acquired by GSPT, and the shareholders of Enigmai (“Enigmai Shareholders”) do hereby authorize and approve of the acquisition of Enigmai by GSPT (“Acquisition”), on the terms and conditions set forth in this Agreement;
WHEREAS, the parties have agreed to effectuate the aforementioned Acquisition of Enigmai through the issuance of twenty million (20,000,000) GSPT’s unregistered, restricted Common Shares in exchange for all of the issued and outstanding shares of Enigmai; and
WHEREAS, the Company and Enigmai each deem it advisable and in their best interests to effect the Acquisition contemplated by this Agreement.
In consideration of the mutual covenants contained herein, GSPT and Enigmai hereby agree as follows:
ARTICLE 1
TERMS OF THE ACQUISITION
1.1 Acquisition. At the Effective Time (as hereinafter defined in paragraph 1.2 of this Agreement), upon the terms and subject to the conditions of this Agreement, GSPT shall acquire Enigmai in accordance with the Delaware Corporation Act (the “Delaware Act”) and the Delaware Corporations Code ("Delaware Code").
1.2 Effective Time. Subject to the terms and conditions of this Agreement, the Acquisition shall become effective upon the execution of this Agreement and once a treasury issuance of Common Shares has been executed by GSPT. The time when the Acquisition shall become effective is herein referred to as the “Effective Time,” and the date on which the Effective Time occurs is herein referred to as the “Closing Date” (as defined herein in paragraph 1.3). The closing of the Acquisition (the “Closing”) shall occur as soon as practicable after:
1.2.1 Execution of this Agreement;
1.2.2 Satisfactory completion by each party hereto of the due diligence investigation of each such other party to this Agreement;
1.2.3 Satisfaction of all conditions to closing set forth in Article 4, “Conditions Precedent to Obligations of GSPT” and Article 5, “Conditions Precedent to the Obligations of Enigmai and the Enigmai Shareholders”; and
1.3 Closing. The Closing Date shall be no later than November 3, 2020. Any further extension of the Closing Date may be made only with the written consent of GSPT, Enigmai and the Enigmai Shareholders.
1.4 Acquisition Consideration; Issuance of Shares. The total consideration by GSPT to be paid to the shareholders of Enigmai, or their assigns, in connection to the Acquisition of Enigmai shall be the issuance of twenty million (20,000,000) unregistered, restricted Common Shares of GSPT (“GSPT Shares”), par value $0.0001 to the Enigmai Shareholders.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ENIGMAI AND ITS SHAREHOLDERS
Enigmai, and its Shareholders represent and warrant to GSPT as follows to all Sections:
2.1 Validity of Agreement. This Agreement is valid and binding upon Enigmai, and its Shareholders, and neither the execution nor delivery of this Agreement by such parties nor the performance by such parties of any of their covenants or obligations hereunder will constitute a material default under any contract, agreement or obligation to which any of them is a party or by which they or any of their respective properties are bound. This Agreement is enforceable severally against Enigmai, and its Shareholders, in accordance with its terms, subject to bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium, receivership or other similar laws relating to or affecting creditors’ rights generally.
2.2 Organization and Good Standing. Enigmai is a corporation duly organized and existing in good standing under the laws of Israel. Enigmai has full corporate power and authority to carry on its business as now conducted and to own and operate the software platform and associated assets now owned and operated by it. Enigmai is duly qualified to transact business in Israel and in all jurisdictions in which the business or ownership of its property and/or assets makes it necessary so to qualify, except for jurisdictions in which the nature of the property owned or business conducted, when considered in relation to the absence of serious penalties, renders qualification as a foreign corporation unnecessary as a practical matter.
2.3 Subsidiaries. Enigmai has no subsidiaries.
2.4 Ownership and Authority. The execution, delivery and performance of this Agreement by Enigmai has been duly authorized by its Board of Directors and all other required corporate approvals have been obtained. This Agreement is valid and binding upon Enigmai, and its Shareholders, and is enforceable against Enigmai, and its Shareholders, in accordance with its terms, subject to bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium, receivership or other similar laws relating to or affecting creditors’ rights generally. The execution, delivery and performance of this Agreement by Enigmai will not result in the violation or breach of any term or provision of charter instruments applicable to Enigmai or constitute a material default under any material indenture, mortgage, deed of trust or other contract or agreement to which Enigmai, or its Shareholders, is a party or by which Enigmai or any of its properties is bound and will not cause the creation of a lien or encumbrance on any properties owned by or leased to or by Enigmai.
2.5 Liabilities and Obligations. Except to the extent set forth in Enigmai financial statements or disclosed in the Enigmai Disclosure Schedule, Enigmai has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) secured by a pledge or a lien on any of its assets.
2.6 Financial Statements. The financial statements for Enigmai (Enigmai Financial Statements) have been prepared from the books and records of Enigmai by its independent public accountants. Enigmai Financial Statements (i) are true, complete, and correct, and fairly present the financial condition and assets and liabilities or the results of operations of Enigmai as of the dates thereof and for the periods indicated in conformity with generally accepted accounting principles consistently applied, and (ii) contain and reflect all necessary adjustments for fair and accurate presentation of the financial condition as of such dates. There has not been any change between the date of Enigmai Financial Statements and the date of this Agreement which has had an adverse effect on the financial position or results of operations of Enigmai. Except as and to the extent reflected or reserved against in such Enigmai Financial Statements, or otherwise expressly disclosed therein, Enigmai has no liabilities or obligations, contingent or otherwise, of a nature required to be reflected in Enigmai Financial Statements in accordance with generally accepted accounting principles consistently applied.
2.7 Absence of Certain Changes. During the period from the date of this Agreement through and including the Closing Date, Enigmai has not:
2.7.1 Suffered any adverse change affecting its assets, liabilities, financial condition or business except in the ordinary course of business;
2.7.2 Made any change in the compensation payable or to become payable to any of its employees or agents, or made any bonus payments or compensation arrangements to or with any of its employees or agents, whether direct or indirect, except in the ordinary course of business consistent with past practices;
2.7.3 Paid or declared any dividends, distributions or other payments due or owing to Shareholders or redeemed or repurchased (or agreed to redeem or repurchase) any of its capital stock;
2.7.4 Issued any stock, or granted any stock options or warrants to purchase stock or issued any securities convertible into common stock of Enigmai;
2.7.5 Sold or transferred any of its assets or canceled any indebtedness or claims owing to it, except in the ordinary course of business and consistent with its past practices;
2.7.6 Sold, assigned or transferred any formulas, inventions, patents, patent applications, trademarks, trade names, copyrights, licenses, computer programs or software, know- how or other intangible assets;
2.7.7 Amended or terminated any contract, agreement or license to which it is a party otherwise than in the ordinary course of business or as may be necessary or appropriate for the consummation of the transactions described herein;
2.7.8 Borrowed any money or incurred, directly or indirectly (as a guarantor or otherwise), any indebtedness in excess of $10,000, except in the ordinary course of business and consistent with its past practices;
2.7.9 Discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities shown in the Financial Statements or current liabilities incurred since such date in the ordinary course of business, consistent with its past practices;
2.7.10 Mortgaged, pledged or subjected to lien, charge or other encumbrance any of its assets, except in the ordinary course of business and consistent with its past practices; or
2.7.11 Entered into or committed to any other transaction other than in the ordinary course of business, consistent with past practices.
2.8 Taxes. Enigmai has filed all requisite tax reports or forms that Enigmai is required to file since its inception. There are no outstanding tax balances owed by Enigmai.
2.9 Accounts Receivable/Payable. Enigmai has accounts receivable in the normal course and associated deferred revenue, further there are accounts payable incurred in the normal course. There have been no material adverse changes since September 30, 2020 in any accounts receivable or other debts due Enigmai or the allowances with respect thereto or accounts payable of Enigmai from that reflected in the most recently published Financial Statements.
2.10 Material Documents. Set forth in Section 2.10 of the Enigmai Disclosure Schedule is a complete list of all material contracts to which Enigmai is a party. All such documents listed in Section 2.10 of the Enigmai Disclosure Schedule are valid and enforceable and copies of such material documents (or, with the consent of GSPT, forms thereof) as have been requested by GSPT have been provided to GSPT. Except as disclosed in Section 2.10 of the Enigmai Disclosure Schedule, neither Enigmai nor any of the other parties thereto, is or will be, merely with the passage of time, in default under any such material document nor is there any requirement for any of such material documents to be novated or to have the consent of the other contracting party in order for such material documents to be valid, effective and enforceable by Enigmai after the Closing Date as it was immediately prior thereto.
2.11 Intellectual Properties. Except as set forth in Section 2.11 of the Enigmai Disclosure Schedule, Enigmai has no interest in and owns no domestic and foreign letters patent, patents, patent applications, patent licenses, software licenses and know-how licenses, trade names, trademarks, copyrights, unpatented inventions, service mark registrations and applications and copyright registrations and applications owned or used by Enigmai in the operation of its business (collectively, the “Intellectual Property”). No Intellectual Property, other than as set forth on Section 2.11 of the Enigmai Disclosure Schedule, is required or used in the operation of the business of Enigmai. There are no pending, or, to the knowledge of Enigmai, threatened claims of infringement upon the rights to the Intellectual Property or any intellectual property rights of others.
2.12 No Default. Enigmai is not in material default under any provision of any contract, commitment, or agreement respecting Enigmai or its assets to which Enigmai is a party or by which it is bound.
2.13 Litigation. There are no lawsuits, arbitration actions or other proceedings (equitable, legal, administrative or otherwise) pending or, threatened, and there are no investigations pending or threatened against Enigmai which relate to and could have a material adverse effect on the properties, business, assets or financial condition of Enigmai or which could adversely affect the validity or enforceability of this Agreement or the obligation or ability of Enigmai to perform its obligations under this Agreement or to carry out the transactions contemplated by this Agreement.
2.14 Finders. Enigmai does not owe any fees or commissions, or other compensation or payments to any broker, finder, financial consultant, or similar person claiming to have been employed or retained by or on behalf of Enigmai in connection with this Agreement or the transactions contemplated hereby.
2.15 Compliance With Laws. Enigmai has conducted and is continuing to conduct its business in compliance with, and is in compliance with, all applicable statutes, orders, rules and regulations promulgated by governmental authorities relating in any respect to its operations, conduct of business or use of properties, except where noncompliance with any such statutes, orders, rules or regulations would not have an adverse effect on Enigmai or its results of operations. Such statutes, orders, rules or regulations include, but are not limited to, any applicable statute, order, rule or regulation relating to (i) wages, hours, hiring, nondiscrimination, retirement, benefits, pensions, working conditions, and worker safety and health; (ii) air, water, toxic substances, noise, or solid, gaseous or liquid waste generation, handling, storage, disposal or transportation; (iii) zoning and building codes; (iv) the production, storage, processing, advertising, sale, distribution, transportation, disposal, use and warranty of products; or (v) trade and antitrust regulations. The execution, delivery and performance of this Agreement by Enigmai and the consummation by Enigmai of the transactions contemplated by this Agreement will not, separately or jointly, violate, contravene or constitute a default under any applicable statutes, orders, rules and regulations promulgated by governmental authorities or cause a lien on any property used, owned or leased by Enigmai to be created thereunder. To the knowledge of Enigmai, there are no proposed changes in any applicable statutes, orders, rules and regulations promulgated by governmental authorities that would cause any representation or warranty contained in this Section 2.17 to be untrue or have an adverse effect on its operations, conduct of business or use of properties.
2.16 Filings. Enigmai has made all filings and reports required under all local, state and federal laws with respect to its business and of any predecessor entity or partnership, except filings and reports in those jurisdictions in which the nature of the property owned or business conducted, when considered in relation to the absence of serious penalties, renders the required filings or reports unnecessary as a practical matter.
2.17 Certain Activities. Enigmai has not, directly or indirectly, engaged in or been a party to any of the following activities:
2.17.1 Bribes, kickbacks or gratuities to any person or entity, including domestic or foreign government officials or any other payments to any such persons or entity, whether legal or not legal, to obtain or retain business or to receive favorable treatment of any nature with regard to business (excluding commissions or gratuities paid or given in full compliance with applicable law and constituting ordinary and necessary expenses incurred in carrying on its business in the ordinary course);
2.17.2 Contributions (including gifts), whether legal or not legal, made to any domestic or foreign political party, political candidate or holder of political office;
2.17.3 Holding of or participation in bank accounts, funds or pools of funds created or maintained in the United States or any foreign country, without being reflected on the corporate books of account, or as to which receipts or disbursements therefrom have not been reflected on such books, the purpose of which is to obtain or retain business or to receive favorable treatment with regard to business;
2.17.4 Receiving or disbursing monies, the actual nature of which has been improperly disguised or intentionally misrecorded on or improperly omitted from the corporate books of account;
2.17.5 Paying fees to domestic or foreign consultants or commercial agents which exceed the reasonable value of the ordinary and customary consulting and agency services purported to have been rendered;
2.17.6 Paying or reimbursing (including gifts) personnel of Enigmai for the purpose of enabling them to expend time or to make contributions or payments of the kind or for the purposes referred to in Subparagraphs 2.17.1 through 2.17.5 above;
2.17.7 Participating in any manner in any activity which is illegal under the international boycott provisions of the Export Administration Act, as amended, or the international boycott provisions of the Internal Revenue Code, or guidelines or regulations thereunder; and
2.17.8 Making or permitting unlawful charges, mischarges or defective or fraudulent pricing under any contract or subcontract under a contract with any department, agency or subdivision thereof, of the United States government, state or municipal government or foreign government.
2.18 Employment Relations. Enigmai is in compliance with all applicable laws, domestic or foreign, respecting employment and employment practices, terms and conditions of employment and wages and hours, and has not and is not engaged in any unfair labor practice; no unfair labor practice complaint against Enigmai is pending; there is no labor strike, dispute, slow down or stoppage actually pending or threatened against or involving Enigmai; no labor representation question exists respecting the employees of Enigmai; no grievance which might have an adverse effect upon Enigmai or the conduct of its business exists; no arbitration proceeding arising out of or under any collective bargaining agreement is currently being negotiated by Enigmai; and Enigmai has not experienced any material labor difficulty during the last three (3) years.
2.19 Articles of Incorporation and Bylaws. Enigmai has heretofore delivered to GSPT true, accurate and complete copies of the Articles of Incorporation and Bylaws of Enigmai, together with all amendments to each of the same as of the date hereof.
2.20 Corporate Minutes. The minute books of Enigmai provided to GSPT at the Closing are the correct and only such minute books and do and will contain, in all material respects, complete and accurate records of any and all proceedings and actions at all meetings, including written consents executed in lieu of meetings of its shareholders, Board of Directors and committees thereof through the Closing Date. The stock records of Enigmai delivered to GSPT at the Closing are the correct and only such stock records and accurately reflects all issues and transfers of record of the capital stock of Enigmai.
2.21 Default on Indebtedness. Enigmai is not in default under any evidence of indebtedness for borrowed money.
2.22 Indebtedness. Neither Enigmai Shareholders nor any corporation or entity with which they are affiliated are indebted to Enigmai, and Enigmai has no indebtedness or liability to any Shareholder or any corporation or entity with which they are affiliated.
2.23 Governmental Approvals. Except as set forth in Section 2.23 of the Enigmai Disclosure Schedule, no consent, approval or authorization of, or notification to or registration with, any governmental authority, either federal, state or local, is required in connection with the execution, delivery and performance of this Agreement by Enigmai.
2.24 Investment Intent. Enigmai Shareholders are taking the GSPT Shares for their own account and for investment, with no present intention of dividing their interest with others or of reselling or otherwise disposing of all or any portion of the GSPT Shares other than pursuant to available exemptions under applicable securities laws. Enigmai Shareholders do not intend to sell the GSPT Shares, either currently or after the passage of a fixed or determinable period of time or upon the occurrence or non-occurrence of any predetermined event or circumstance. Enigmai Shareholders have no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for, or which is likely to compel, a disposition of the GSPT Shares. Enigmai Shareholders are not aware of any circumstances presently in existence which are likely in the future to prompt a disposition of the GSPT Shares. Enigmai Shareholders possess the experience in business in which GSPT is involved necessary to make an informed decision to acquire the GSPT Shares and the Enigmai Shareholders have the financial means to bear the economic risk of the investment in the GSPT Shares as of the Closing Date. The Enigmai Shareholders have been represented by legal counsel and have consulted with financial advisors to the extent they deemed necessary. The Enigmai Shareholders have received and read the Disclosure Statement of GSPT including its financial statements and all reports filed with OTCMarkets, as defined in Section 3.6, “Securities Filings; Financial Statements,” and any additional information they have requested. The Enigmai Shareholders have had the opportunity to ask questions of the directors and officers of GSPT concerning GSPT.
2.25 Completeness of Representations and Schedules. The Disclosure Schedule and Exhibits hereto completely and correctly present in all material respects the information required by this Agreement. This Agreement, any Schedules and Exhibits to be delivered under this Agreement and the representations and warranties of this Article 2 and the documents and written information pertaining to Enigmai and Enigmai Shareholders furnished to GSPT and their respective agents by or on behalf of, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make this Agreement, or such certificates, schedules, documents or written information, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF GSPT
GSPT represents and warrants to Enigmai as follows to all sections:
3.1 Organization and Good Standing.
3.1.1 GSPT is a corporation duly organized and existing in good standing under the laws of the State of Delaware. GSPT has full corporate power and authority to carry on its business as now conducted. GSPT is duly qualified to transact business in the State of Delaware and in all states and jurisdictions in which the business or ownership of properties or assets makes it necessary so to qualify (other than in jurisdictions in which the nature of the property owned or business conducted, when considered in relation to the absence of serious penalties, renders qualification as a foreign corporation unnecessary as a practical matter).
3.1 Finders. No agent, broker, person or firm acting on behalf of GSPT is, or will be, entitled to any commission or broker’s or finder’s fees from any of the parties to this Agreement, or from any person controlling, controlled by or under common control with any of the parties to this Agreement, in connection with any of the transactions contemplated in this Agreement.
3.2 Authority and Consent. The execution, delivery and performance of this Agreement by GSPT has been duly authorized by its Board of Directors. This Agreement is valid and binding upon GSPT, subject to shareholder approval, and is enforceable against GSPT in accordance with its terms, subject to bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium, receivership or other similar laws relating to or affecting creditors’ rights generally. GSPT has read and understands this Agreement, has consulted legal and accounting representatives to the extent deemed necessary and has the capacity to enter into this Agreement and to carry out the transactions contemplated hereby without the consent of any third party, except shareholder approval.
3.3 Validity of Agreement. Neither the execution nor the delivery of this Agreement by GSPT, nor the performance by GSPT of any of the covenants or obligations to be performed by GSPT hereunder, will result in any violation of any order, decree or judgment of any court or other governmental body, or statute or law applicable to GSPT, or in any breach of any terms or provisions of the Articles of Incorporation or the Bylaws of GSPT, or constitute a default under any indenture, mortgage, deed of trust or other contract to which GSPT is a party or by which GSPT is bound.
3.4 Government Approvals. No consent, approval or authorization of, or notification to or registration with, any governmental authority, either federal, state or local, is required in connection with the execution, delivery and performance of this Agreement by GSPT.
3.5 Securities Filings; Financial Statements. GSPT has made available to Enigmai a Disclosure Statement and true and complete copies of all reports, statements and registration statements and amendments thereto filed by GSPT with OTCMarkets since December 31, 2019 (the “OTC Reports”). As of their respective dates, or as of the date of the last amendment thereof, if amended after filing, none of the OTC Reports (including all schedules thereto and disclosure documents incorporated by reference therein), contains any untrue statement of a material fact or omitted a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the OTC Reports as of the time of filing or as of the date of the last amendment thereof, if amended after filing, complied in all material respects with the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the Securities Act of 1933, as amended (the “Securities Act”), as applicable. The financial statements of GSPT included in the OTC Reports fairly present in conformity in all material respects with GAAP applied on a consistent basis the financial position of GSPT as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended.
3.6 Capitalization. The authorized capital stock of GSPT consists of 500,000,000 shares of Common Stock, $0.0001 par value per share, 20,160,926 shares of which are issued and outstanding (“Outstanding GSPT Shares”). The Outstanding GSPT Shares constitute the only outstanding shares of the capital stock of GSPT of any nature whatsoever, voting and non-voting. The Outstanding GSPT Shares are validly issued, fully paid and non-assessable and are subject to no restrictions on transfer.
3.7 Subsidiaries. GSPT has two subsidiaries: 100% interest in PD Oil & Gas, Inc. (inactive), and a 100% interest in Cardstakes.com Enterprises Ltd. (inactive). Other than the subsidiaries noted herein, GSPT does not own five percent (5%) or more of the securities having voting power of any corporation (or would own such securities in such amount upon the closing of any existing purchase obligations for securities).
3.8 Absence of Certain Changes. During the period from the date of this Agreement through and including the Closing Date, GSPT has not:
3.8.1 Suffered any adverse change affecting its assets, liabilities, financial condition or business except in the ordinary course of business;
3.8.2 Made any change in the compensation payable or to become payable to any of its employees or agents, or made any bonus payments or compensation arrangements to or with any of its employees or agents, whether direct or indirect, except in the ordinary course of business consistent with past practices;
3.8.3 Sold or transferred any of its assets or canceled any indebtedness or claims owing to it, except in the ordinary course of business and consistent with its past practices;
3.8.4 Sold, assigned or transferred any formulas, inventions, patents, patent applications, trademarks, trade names, copyrights, licenses, computer programs or software, know- how or other intangible assets;
3.8.5 Amended or terminated any contract, agreement or license to which it is a party otherwise than in the ordinary course of business or as may be necessary or appropriate for the consummation of the transactions described herein;
3.8.6 Borrowed any money or incurred, directly or indirectly (as a guarantor or otherwise), any indebtedness in excess of $5,000, except in the ordinary course of business and consistent with its past practices;
3.8.7 Discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities shown in the Financial Statements or current liabilities incurred since such date in the ordinary course of business, consistent with its past practices;
3.8.8 Mortgaged, pledged or subjected to lien, charge or other encumbrance any of its assets, except in the ordinary course of business and consistent with its past practices; or
3.8.9 Entered into or committed to any other transaction other than in the ordinary course of business, consistent with past practices.
3.10 Title to Properties and Assets. GSPT presently owns or leases real property from which it conducts its business and owns or leases certain personal property. GSPT has good and marketable title to all real and personal property reflected on its books and records as owned by it or otherwise required or used in the operation of its business, free and clear of all security interests, liens, encumbrances, mortgages or charges of any nature. Set forth in Section 3.10 of the GSPT Disclosure Schedule is a list of property leased by GSPT. Such improved real property or tangible personal property is in good operating condition and repair, and suitable for the purpose for which it is being used, subject in each case to consumption in the ordinary course, ordinary wear and tear and ordinary repair, maintenance and periodic replacement.
3.11 Intellectual Properties. GSPT has no interest in and owns no domestic and foreign letters patent, patents, patent applications, patent licenses, software licenses and know-how licenses, trade names, trademarks, copyrights, unpatented inventions, service mark registrations and applications and copyright registrations and applications owned or used by GSPT in the operation of its business (collectively, the “Intellectual Property”). No GSPT Intellectual Property is required or used in the operation of the business of GSPT. There are no pending or threatened claims of infringement upon the GSPT Intellectual Property or upon the rights to any intellectual property of others. 
3.12 No Default. GSPT is not in default under any provision of any contract, commitment, or agreement respecting GSPT, or any of its respective assets to which GSPT is, or are party to, or by which it is bound.
3.13 Litigation. There are no lawsuits, arbitration actions or other proceedings (equitable, legal, administrative or otherwise) pending or, threatened, and there are no investigations pending or threatened against GSPT which relate to and could have a material adverse effect on the properties, business, assets or financial condition of GSPT or which could adversely affect the validity or enforceability of this Agreement or the obligation or ability of GSPT to perform its obligations under this Agreement or to carry out the transactions contemplated by this Agreement.
3.14 Compliance with Laws. GSPT has conducted and continues to conduct its businesses in compliance with, and is in compliance with, all applicable statutes, orders, rules and regulations promulgated by governmental authorities relating in any respect to its operations, conduct of business or use of properties, except where noncompliance with any such statutes, orders, rules or regulations would not have an adverse effect on GSPT, or its results of operations. Such statutes, orders, rules or regulations include, but are not limited to, any applicable statute, order, rule or regulation relating to (i) wages, hours, hiring, nondiscrimination, retirement, benefits, pensions, working conditions, and worker safety and health; (ii) air, water, toxic substances, noise, or solid, gaseous or liquid waste generation, handling, storage, disposal or transportation; (iii) zoning and building codes; (iv)the production, storage, processing, advertising, sale, distribution, transportation, disposal, use and warranty of products; or (v) trade and antitrust regulations. The execution, delivery and performance of this Agreement by GSPT and the consummation by GSPT of the transactions contemplated by this Agreement will not, separately or jointly, violate, contravene or constitute a default under any applicable statutes, orders, rules and regulations promulgated by governmental authorities or cause a lien on any property used, owned or leased by GSPT to be created thereunder. There are no proposed changes in any applicable statutes, orders, rules and regulations promulgated by governmental authorities that would cause any representation or warranty contained in this Section 3.15 to be untrue or have an adverse effect on its operations, conduct of business or use of properties.
3.15 Filings. GSPT has made all filings and reports required under all local, state and federal laws with respect to its business and of any predecessor entity or partnership, except filings and reports in those jurisdictions in which the nature of the property owned or business conducted, when considered in relation to the absence of serious penalties, renders the required filings or reports unnecessary as a practical matter.
3.16 Certain Activities. GSPT has not, directly or indirectly, engaged in or been a party to any of the following activities:
3.16.1 Bribes, kickbacks or gratuities to any person or entity, including domestic or foreign government officials or any other payments to any such persons or entity, whether legal or not legal, to obtain or retain business or to receive favorable treatment of any nature with regard to business (excluding commissions or gratuities paid or given in full compliance with applicable law and constituting ordinary and necessary expenses incurred in carrying on its business in the ordinary course);
3.16.2 Contributions (including gifts), whether legal or not legal, made to any domestic or foreign political party, political candidate or holder of political office;
3.16.3 Holding of or participation in bank accounts, funds or pools of funds created or maintained in the United States or any foreign country, without being reflected on the corporate books of account, or as to which receipts or disbursements therefrom have not been reflected on such books, the purpose of which is to obtain or retain business or to receive favorable treatment with regard to business;
3.16.4 Receiving or disbursing monies, the actual nature of which has been improperly disguised or intentionally misrecorded on or improperly omitted from the corporate books of account;
3.16.5 Paying fees to domestic or foreign consultants or commercial agents which exceed the reasonable value of the ordinary and customary consulting and agency services purported to have been rendered;
3.16.6 Paying or reimbursing (including gifts) personnel of GSPT for the purpose of enabling them to expend time or to make contributions or payments of the kind or for the purposes referred to in Subparagraphs 3.16.1 through 3.16.5 above;
3.16.7 Participating in any manner in any activity which is illegal under the international boycott provisions of the Export Administration Act, as amended, or the international boycott provisions of the Internal Revenue Code, or guidelines or regulations thereunder; and
3.16.8 Making or permitting unlawful charges, mischarges or defective or fraudulent pricing under any contract or subcontract under a contract with any department, agency or subdivision thereof, of the United States government, state or municipal government or foreign government.
3.17 Employment Relations. GSPT is in compliance with all Federal, state or other applicable laws, domestic or foreign, respecting employment and employment practices, terms and conditions of employment and wages and hours, and has not and is not engaged in any unfair labor practice; no unfair labor practice complaint against GSPT is pending before the National Labor Relations Board; there is no labor strike, dispute, slow down or stoppage actually pending or threatened against or involving GSPT; no labor representation question exists respecting the employees of GSPT; no grievance which might have an adverse effect upon GSPT or the conduct of its business exists; no arbitration proceeding arising out of or under any collective bargaining agreement is currently being negotiated by GSPT; and GSPT has not experienced any material labor difficulty during the last three (3) years.
3.18 Articles of Incorporation and Bylaws. GSPT has heretofore delivered to Enigmai true, accurate and complete copies of their respective Articles of Incorporation and Bylaws, together with all amendments to each of the same as of the date hereof.
3.19 Corporate Minutes. The minute books of GSPT provided to Enigmai at the Closing are the correct and only such minute book and do and will contain, in all material respects, complete and accurate records of any and all proceedings and actions at all meetings, including written consents executed in lieu of meetings of its shareholders, Board of Directors and committees thereof through the Closing Date. The stock records of GSPT delivered to Enigmai at the Closing are the correct and only such stock records and accurately reflects all issues and transfers of record of the capital stock of GSPT.
3.20 Default on Indebtedness. GSPT is not in default under any evidence of indebtedness for borrowed money.
3.21 Agreements, Judgment and Decrees. GSPT is not subject to any agreement, judgment or decree adversely affecting its ability to enter into this Agreement, or to consummate the transactions contemplated herein.
3.22 Governmental Approvals. No consent, approval or authorization of, or notification to or registration with, any governmental authority, either federal, state or local, is required in connection with the execution, delivery and performance of this Agreement by GSPT.
3.23 Licenses, Permits and Required Consents. GSPT has all required franchises, tariffs, licenses, ordinances, certifications, approvals, authorizations and permits (“Authorizations”) necessary to the conduct of its business as currently conducted or proposed to be conducted. All Authorizations relating to the business of GSPT are in full force and effect, no violations have been made in respect thereof, and no proceeding is pending or threatened which could have the effect of revoking or limiting any such Authorizations and the same will not cease to remain in full force and effect by reason of the transactions contemplated by this Agreement.
3.24 Employment and Consulting Agreements. GSPT does not have any outstanding employment or consulting agreement, written or oral, with any employee or third party.
3.25 Completeness of Representations and Schedules. This Agreement, any Schedules and Exhibits to be delivered under this Agreement and the representations and warranties of this Article 3, and the documents and written information pertaining to furnished to Enigmai or its agents and the Shareholders by or on behalf of GSPT, and the GSPT Principal Shareholders , do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make this Agreement, or such certificates, schedules, documents or written information, not misleading.
ARTICLE 4
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GSPT
The obligations of GSPT and pursuant to this Agreement are, at the option of GSPT, subject to the fulfillment by Enigmai, and its Shareholders, and to the satisfaction of GSPT on or before the Closing Date of each of the following conditions:
4.1 Execution of this Agreement. Enigmai has duly executed and delivered this Agreement to GSPT, and all corporate action required to consummate the Acquisition and the transactions contemplated hereby shall have been duly and validly taken.
4.2 Representations and Warranties Accurate. All representations and warranties of Enigmai contained in this Agreement shall have been true in all material respects as of the Closing Date.
4.3 Performance of Enigmai. Enigmai, and its Shareholders, shall have performed and complied with all agreements, terms and conditions required by this Agreement to be performed or complied with by them.
4.4 Intellectual Property. All trademarks, trade names, service marks, licenses or other rights that Enigmai uses in connection with its business shall be free and clear of any encumbrances, controversies, infringement or other claims or obligations on the Closing Date.
4.5 Obligations to Third Parties. There shall be no loans or obligations outstanding from Enigmai to any third party, except those incurred in the ordinary course of business or as otherwise disclosed to GSPT.
4.6 Approval of Acquisition. The Acquisition shall have been duly approved by the Board of Directors of GSPT and the majority Shareholders pursuant to the Delaware Act.
4.7 Legal Prohibition; Regulatory Consents. On the Closing Date, there shall exist no injunction or final judgment, law or regulation prohibiting the consummation of the transactions contemplated by this Agreement. Any required governmental or regulatory consents shall have been obtained.
4.8 No Adverse Change. There shall not have occurred any material adverse change in the assets, business, condition or prospects of Enigmai.
ARTICLE 5
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ENIGMAI
The obligations of Enigmai under this Agreement are, at the option of Enigmai, subject to the fulfillment by GSPT and to the satisfaction of Enigmai, and its Shareholders, on or before the Closing Date of each of the following conditions:
5.1 Execution and Approval of Agreement. GSPT shall have duly executed and delivered this Agreement to Enigmai and all corporate action required to consummate the Acquisition and the transactions contemplated hereby shall have been duly and validly taken.
5.2 GSPT Shares. The GSPT Shares received by Enigmai Shareholders shall be free and clear of any liens, encumbrances or other obligations, except as may be imposed pursuant to the Securities Act.
5.3 Representations and Warranties. The representations and warranties made to Enigmai and its Shareholders in this Agreement or in any document, statement, list or certificate furnished pursuant hereto shall be true and correct as of the Closing Date.
5.4 Financial and Other Conditions. GSPT shall have no contingent or other liabilities connected with its business, except as disclosed in the Financial Statements or which otherwise have been incurred in the ordinary course of business. The review of the business, premises and operations of GSPT and the Financial Statements by the Company at its expense shall be satisfactory to Enigmai and shall not have revealed any matter which, in the sole judgment of Enigmai, makes the Acquisition on the terms herein set forth inadvisable for Enigmai.
5.5 Approval of Acquisition. The Acquisition shall have been duly approved by Enigmai Board of Directors and majority Shareholders of Enigmai pursuant to the laws of Israel .
5.6 Securities Filings. GSPT shall have filed all required periodic reports under the Securities Exchange Act of 1934 (the “Exchange Act”) and shall have made all other such filings with the OTCMarkets and state securities regulators as may be required by applicable state and federal law, or as soon as practicable upon securing OTCMarket access.
ARTICLE 6
INDEMNIFICATION
6.1 Survival of Representations, Warranties and Certain Covenants. The representations and warranties made by the parties in this Agreement and all of the covenants of the parties in this Agreement shall survive the execution and delivery of this Agreement and the Closing Date and shall expire on the twelve-month anniversary of the Closing Date. Any claim for indemnification shall be effective only if notice of such claim is given by the party claiming indemnification or other relief on or before October 15, 2021.
6.2 Indemnification by GSPT. GSPT agrees to indemnify and hold Enigmai and its Shareholders harmless, from and after the Closing Date, against and in respect of all matters in connection with any losses, liabilities or damages (including reasonable attorneys’ fees) incurred by Enigmai and its Shareholders resulting from any misrepresentation or breach of the warranties made by GSPT in Article 3, "Representations and Warranties of GSPT" or any breach or nonfulfillment of any agreement, covenant, representation or warranty on the part of GSPT contained in this Agreement or any liabilities, obligations and commitments, and all suits, actions, proceedings, demands, judgments, costs and expenses incident to the foregoing matters, including reasonable attorneys’ fees. No claim for indemnification may be made under this Section 6.2 after October 27, 2021.
6.3 Arbitration. If Enigmai or its Shareholders believe that a matter has occurred that entitles them to indemnification under Section 6.2, “Indemnification by GSPT,” Enigmai or Enigmai Shareholders, as the case may be (the “Indemnified Party”), shall give written notice to the party or parties against whom indemnification is sought (each of whom is referred to herein as an “Indemnifying Party”) describing such matter in reasonable detail. The Indemnified Party shall be entitled to give such notice prior to the establishment of the amount of its losses, liabilities, costs or damages, and to supplement its claim from time to time thereafter by further notices as they are established. Each Indemnifying Party shall send a written response to such claim for indemnification within thirty (30) days after receipt of the claim stating its acceptance or objection to the indemnification claim, and explaining its position in respect thereto in reasonable detail. If such Indemnifying Party does not timely so respond, it will be deemed to have accepted the Indemnified Party’s indemnification claim as specified in the notice given by the Indemnified Party. If the Indemnifying Party gives a timely objection notice, then the parties will negotiate in good faith to attempt to resolve the dispute, and upon the expiration of an additional thirty (30) day period from the date of the objection notice or such longer period as to which the Indemnified and Indemnifying Parties may agree, any such dispute shall be submitted to arbitration in Delaware, to a member of the American Arbitration Association mutually appointed by the Indemnified Party and Indemnifying Party (or, in the event the Indemnified Party and Indemnifying Party cannot agree on a single such member, to a panel of three members of such Association selected in accordance with the rules of such Association), who shall promptly arbitrate such dispute in accordance with the rules of such Association and report to the parties upon such disputed items, and such report shall be final, binding and conclusive on the parties. Judgment upon the award by the arbitrator(s) may be entered in any court having jurisdiction. The prevailing party in any such arbitration shall be entitled to recover from, and have paid by, the other party hereto all fees and disbursements of such arbitrator or arbitrators. For this purpose, a party shall be deemed to be the prevailing party only if such party would be deemed to be a prevailing party under Section 6.7, "Definition of Prevailing Parties."
6.4 Finders Fee. Enigmai and Enigmai Shareholders acknowledge that GSPT will pay a 10% finder’s fee by the issuance of two million (2,000,000) shares of its restricted, unregistered common stock to two arm’s length third parties: Dmitry Solomovich as to 1,000,000 common shares and Nimrod Moatty as to 1,000,000 common shares, relative to the acquisition by GSPT of Enigmai.
6.5 Third Person Claim Procedures. If any third person asserts a claim against an Indemnified Party in connection with the matter involved in such claim, the Indemnified Party shall promptly (but in no event later than ten (10) days prior to the time at which an answer or other responsive pleading or notice with respect to the claim is required) notify the Indemnifying Party of such claim. The Indemnifying Party shall have the right, at its election, to take over the defense or settlement of such claim by giving prompt notice to the Indemnified Party that it will do so, such election to be made and notice given in any event at least five (5) days prior to the time at which an answer or other responsive pleading or notice with respect thereto is required. If the Indemnifying Party makes such election, the Indemnifying Party may conduct the defense of such claim through counsel of its choosing (subject to the Indemnified Party’s approval, not to be unreasonably withheld), will be responsible for the expenses of such defense, and shall be bound by the results of its defense or settlement of the claim to the extent it produces damage or loss to the Indemnified Party. The Indemnifying Party shall not settle such claims without prior notice to and consultation with the Indemnified Party and no such settlement involving any injunction or material and adverse effect on the Indemnified Party may be agreed to without its consent. As long as the Indemnifying Party is diligently contesting any such claim in good faith, the Indemnified Party shall not pay or settle any such claim. If the Indemnifying Party does not make such election, or having made such election does not proceed diligently to defend such claim prior to the time at which an answer or other responsive pleading or notice with respect thereto is required, or does not continue diligently to contest such claim, then the Indemnified Party may take over defense and proceed to handle such claim in its exclusive discretion, and the Indemnifying Party shall be bound by any defense or settlement that the Indemnified Party may make in good faith with respect to such claim. The parties agree to cooperate in defending such third party claims, and the defending party shall have access to records, information and personnel in control of the other part which are pertinent to the defense thereof.
6.6 Limitation of Remedies. No party to this Agreement shall be liable to any other party or parties or have any remedies against any other party or parties under this Agreement other than as provided in this Article 6. The parties understand that this Agreement requires that all disputed claims shall be submitted to arbitration in accordance with Section 6.3, “Arbitration.”
6.7 Definition of Prevailing. Notwithstanding any of the other provisions hereof, in the event of arbitration and/or litigation with respect to the interpretation or enforcement of this Agreement or any provisions hereof, the prevailing party in any such matter shall be entitled to recover from the other party their or its reasonable costs and expense, including reasonable attorneys’ fees, incurred in such arbitration and/or litigation. For purposes of this Agreement, a party shall be deemed to be the prevailing party only if such party (A)(i) receives an award or judgment in such arbitration and/or litigation for more than 50% of the disputed amount involved in such matter, or (ii) is ordered to pay the other party less than 50% of the disputed amount involved in such matter or (B)(i) succeeds in having imposed a material equitable remedy on the other party (such as an injunction or order compelling specific performance), or (ii) succeeds in defeating the other party’s request for such an equitable remedy.
ARTICLE 7
RISK OF LOSS
The risk of loss or destruction of all or any part of Enigmai properties or assets prior to the Closing Date from any cause (including, without limitation, fire, theft, acts of God or public enemy) shall be upon Enigmai and Enigmai Shareholders. Such risk shall be upon GSPT if such loss occurs after the Closing Date.
ARTICLE 8
CERTAIN COVENANTS OF THE PARTIES
8.1 Expenses and Fees. Each party shall be solely responsible for its own costs and expenses (including legal expenses, accounting expenses and brokers or finders fees and expenses), and the costs and expenses of its affiliates, in connection with the preparation and negotiation of this Agreement and the consummation of the transactions contemplated by this Agreement. No party shall have any obligation for paying such expenses or costs of any other party.
8.2 Public Announcements. The parties agree that no public release, announcement or any other disclosure concerning any of the transactions contemplated hereby shall be made or issued by any party without the prior written consent of GSPT and Enigmai (which consent shall not be unreasonably withheld or delayed), except to the extent such release, announcement or disclosure may be required by applicable laws, in which case the person required to make the release, announcement or disclosure shall allow GSPT or Enigmai, as applicable, reasonable time to comment on such release, announcement or disclosure in advance of such issuance or disclosure; provided, however, that no notice is required if the disclosure is determined by GSPT’s legal counsel to be required under federal or state securities laws or exchange regulation applicable to GSPT.
8.3 Operations Pending Closing. Each of Enigmai, on one hand, and GSPT, on the other hand, covenants that from the date hereof through the Closing Date, except as otherwise provided in this Agreement; or with the prior written consent of the other parties, which shall not be unreasonably withheld or delayed, shall:
8.3.1 not undertake any transactions or enter into any contracts, commitments or arrangements other than in the ordinary course of business, use its good faith efforts to preserve the present Business and organization of such party, and to preserve the goodwill of others having business relationships with such party;
8.3.2 not enter into, renew, extend, modify, terminate, waive or diminish any right under any material lease, contract or other instrument, except in the ordinary course of business; and
8.3.3 not allow any of such parties’ assets or properties to become subject to any Encumbrance that does not exist as of the date of this Agreement, except in the ordinary course of business.
8.4 Due Diligence Investigation. Each party shall afford to the officers, employees and authorized representatives of the other (including independent public accountants and attorneys) complete access to the offices, properties, books, records, tax returns, financial records (including computer files, retrieval programs and similar documentation), employees and business of such party subject to reasonable prior notice and shall furnish to such party and its authorized representatives such additional information concerning the assets, properties and operations as shall be reasonably requested, including all such information as shall be necessary or appropriate to enable such party or its representatives to verify the accuracy of the representations and warranties contained in this Agreement, to verify that the covenants contained in this Agreement have been complied with, and to determine whether the conditions set forth in Article 4 or 5 have been satisfied. Each party shall ensure that all third-party representatives of each, including without limitation accountants and attorneys, fully cooperate and are available to the other party in connection with such investigation, and each party shall bear its own costs and expenses in connection with the same. Any such investigation shall be conducted in a manner that would not interfere unreasonably with the operations of the other party.
8.5 Further Assurances. Each of the parties hereto shall, at any time, and from time to time, either before or after the Closing Date, upon the request of the appropriate party, do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, all such further acts, assignments, transfers, conveyances and assurances as may be reasonably required to complete the transactions contemplated in this Agreement. After the Closing Date, each party shall use its good faith efforts to assure that any necessary third party shall execute such documents and do such acts and things as the other party may reasonably require for the purpose of giving each party the full benefit of all the provisions of this Agreement and as may be reasonably required to complete the transactions contemplated in this Agreement.
8.6 Actions of the Parties.
8.6.1 No Actions Constituting a Breach. From the date hereof through the Closing Date, neither Enigmai will take or knowingly permit to be done any action in the conduct of the business of Enigmai, nor will GSPT take any action, which would be in breach of its obligations herein, and each of the parties hereto shall cause the deliveries for which such party is responsible at the Closing to be duly and timely made.
8.6.2 Notification of Breaches. From the date hereof through the Closing Date, each party will promptly notify the other party in writing if any such party becomes aware of any fact or condition that causes or constitutes a breach of any of its representations and warranties as of the date of this Agreement. During the same period, each party will promptly notify the other party of the occurrence of any breach of any covenant of such party in this Article 8.
8.7 Compliance With Conditions. Each party hereto agrees to cooperate fully with each other party and shall use its good faith efforts to cause the conditions precedent for which such party is responsible to be fulfilled. Each party hereto further agrees to use its good faith efforts to consummate this Agreement and the transactions contemplated in this Agreement as promptly as possible.
ARTICLE 9
MISCELLANEOUS
9.1 Termination.
9.1.1 General. This Agreement and the transactions contemplated hereby may be terminated prior to the Closing: (i) by the mutual written consent of the parties; (ii) by written notice from either party in the event of a material breach of this Agreement by the other party; provided that the party wishing to terminate this Agreement has notified the other party in writing of such breach and such breach has continued without cure for a period of thirty (30) calendar days after the notice of breach; or (iii) by written notice from GSPT if the Closing has not occurred by November 10, 2020, subject to the provisions of Section 1.3, "Closing," of this Agreement.
9.1.2 Effect of Termination. If any party terminates this Agreement pursuant to this Article 9, all rights and obligations of the parties hereunder shall terminate without any liability of any party to the other except for such damages arising out of, related to, or in connection with, breaches of representations, warranties, covenants, or agreements which shall have occurred prior to such termination. Except, as set forth in the immediately preceding sentence, this Section shall not be deemed to release any party from any liability for any breach by such party of the representations, warranties, covenants or agreements which shall have occurred prior to such termination.
9.2 Binding Agreement. The parties covenant and agree that this Agreement, when executed and delivered by the parties, will constitute a legal, valid and binding agreement between the parties and will be enforceable in accordance with its terms.
9.3 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto, their legal representatives, successors. This Agreement cannot be assigned without the consent of Enigmai.
9.4 Entire Agreement. This Agreement and its exhibits and schedules constitute the entire contract among the parties hereto with respect to the subject matter thereof, superseding all prior communications and discussions and no party hereto shall be bound by any communication on the subject matter hereof unless such is in writing signed by any necessary party thereto and bears a date subsequent to the date hereof. The exhibits and schedules shall be construed with and deemed as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. Information set forth in any exhibit, schedule or provision of this Agreement shall be deemed to be set forth in every other exhibit, schedule or provision of this Agreement and therefore shall be deemed to be disclosed for all purposes of this Agreement.
9.5 Modification. This Agreement may be waived, changed, amended, discharged or terminated only by an agreement in writing signed by the party against whom enforcement of any waiver, change, amendment, discharge or termination is sought.
9.6 Notices. All notices, requests, demands and other communications shall be deemed to have been duly given three (3) days after postmark of deposit in the United States mail, if mailed, certified or registered mail, postage prepaid, and by email, by confirmation of receipt:
If to:
Enigmai Ltd.
4 Ehud Manor,
Kfar Yona, Israel, 4037003
Attn: Mr. Ofir Herzas
If to:
Golden Star Enterprises Ltd.
6490 W. Desert Inn Rd.
Las Vegas, NV 89146
Attn: Mr. Robert Klein
or to such other address as any party shall designate to the other in writing. The parties shall promptly advise each other of changes in addresses for such notices.
9.7 Choice of Law and Jurisdiction. This Agreement shall be governed by, construed, interpreted and enforced according to the laws of the State of Delaware. Each party to this Agreement hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or any agreements or transactions contemplated hereby may be brought in the courts of the State of Delaware or of the United States of America for the District of Delaware and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address set forth in Paragraph 9.6, “Notices,” such service to become effective ten (10) days after such mailing.
9.8 Severability. If any portion of this Agreement shall be finally determined by any court or governmental agency of competent jurisdiction to violate applicable law or otherwise not to conform to requirements of law and, therefore, to be invalid, the parties will cooperate to remedy or avoid the invalidity, but, in any event, will not upset the general balance of relationships created or intended to be created between them as manifested by this Agreement and the instruments referred to herein. Except insofar as it would be an abuse of the foregoing principle, the remaining provisions hereof shall remain in full force and effect.
9.9 Other Documents. The parties shall upon reasonable request of the other, execute such documents as may be necessary or appropriate to carry out the intent of this Agreement.
9.10 Headings and the Use of Pronouns. The section headings hereof are intended solely for convenience of reference and shall not be construed to explain any of the provisions of this Agreement. All pronouns and any variations thereof and other words, as applicable, shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or matter may require.
9.11 No Waiver and Remedies. No failure or delay on a party’s part to exercise any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by a party of a right or remedy hereunder preclude any other or further exercise. No remedy or election hereunder shall be deemed exclusive, but it shall, wherever possible, be cumulative with all other remedies in law or equity.
9.12 Counterparts. This Agreement may be executed in two or more counterparts, and by the different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
9.13 Further Assurances. Each of the parties hereto shall use commercially practicable efforts to fulfill all of the conditions set forth in this Agreement over which it has control or influence (including obtaining any consents necessary for the performance of such party’s obligations hereunder) and to consummate the transactions contemplated hereby, and shall execute and deliver such further instruments and provide such documents as are necessary to effect this Agreement.
9.14 Rules of Construction. The normal rules of construction which require the terms of an agreement to be construed most stringently against the drafter of such agreement are hereby waived since each party have had the opportunity to be represented by counsel in the drafting and negotiation of this Agreement.
9.15 Third Party Beneficiaries. Each party hereto intends this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day first above written.
GOLDEN STAR ENTERPRISES LTD
| By: | /s/ Robert Klein | |
| | Robert Klein, CEO, President and Director | |
ENIGMAI LTD.
| By: | /s/ Ofir Herzas | |
| | Ofir Herzas, Chief Executive Officer | |
ENIGMAI SHAREHOLDERS:
| By: | /s/ Ilan Regev | |
| | Ilan Regev – 5% shareholder | |
| | | |
| By: | /s/ Itiel Efrat | |
| | Itiel Efrat – 5% shareholder | |
| | | |
| By: | /s/ Gilad Pinhas | |
| | Gilad Pinhas– 5% shareholder | |
| | | |
| By: | /s/ Nimrod Elmish | |
| | Nimrod Elmish – 5% shareholder | |
| | | |
| By: | /s/ Adir Iakya | |
| | Adir Iakya – 40% shareholder | |
| | | |
| By: | /s/ Ofir Herzas | |
| | Ofir Herzas – 40% shareholder | |
Addendum No. 1
Dated December 29, 2020 to that certain Acquisition Agreement and Exchange of Shares (the “Agreement”) originally dated as of the 27th day of October, 2020 by and between Golden Star Enterprises Ltd. (“GSPT”), a company incorporated under the laws of the State of Delaware and Enigmai Ltd. (“Enigmai”), a company incorporated under the laws of the country of Israel, individually referred to as “Party” and collectively as the “Parties”.
Whereas subsequent to the closing of the Agreement and issuance of the GSPT Shares to the Enigmai Shareholders, it was discovered that the share issuance resolution contained an error with respect to the number of shares of GSPT issued to two Enigmai Shareholders;
Whereas the Parties now wish to correct that error as follows:
| | (i) | Yaron Gal Weis who was issued a total of 2,800,000 unregistered, restricted shares of the Common stock of GSPT on or about November 24, 2020, hereby agrees to return 2,000,000 shares to treasury for cancelation and issuance to Ofir Herzas; |
| | (ii) | Ofir Herzas, who was issued a total of 6,000,000 unregistered, restricted shares of the Commmon stock of GSPT on or about November 24, 2020, shall be issued a further 2,000,000 unregistered, restricted shares of the Common stock of GSPT; |
| | (iii) | The cancelation and issuance of the aforementioned 2,000,000 shares of GSPT shall be effective as of the original issuance date, or November 24, 2020; |
All other terms and conditions as contained in the Agreement remain in full force and effect.
This Addendum No. 1 shall be appended to and form a part of the Agreement and shall become effective on December 29, 2020.
*****Signature Page to Follow*****
IN WITNESS WHEREOF the parties hereto have caused this Addendum No. 1 to be duly executed and delivered as of the day and year first written above.
| GOLDEN STAR ENTERPRISES LTD. | |
| | |
| /s/ Eliav Kling | |
| Eliav Kling | |
| CEO and Director | |
| | |
| /s/Yaron Gal Weis | |
| YARON GAL WEIS | |
| | |
| /s/ Ofir Herzas | |
| OFIR HERZAS | |
EXHIBIT 10.2
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, HYPOTHECATED, GIVEN, BEQUEATHED, TRANSFERRED, ASSIGNED PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF (“TRANSFERRED”) EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER THE ACT AND APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER THE ACT, AND APPLICABLE STATE SECURITIES LAW, PROVIDED THAT AN OPINION OF COUNSEL IS FURNISHED TO THE COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS AVAILABLE.
GOLDEN STAR ENTERPRISES LTD
CONVERTIBLE PROMISSORY NOTE
| Dated: 16 November 2020 | | US $[ ] |
For Value Received, the undersigned, Golden Star Enterprises Ltd, a company organized under the laws of the State of Delaware (herein called the “Company”), hereby promises to pay to [ ] a [ ] entity (the “Holder”), the amount set forth above (the “Principal) no later than November 16, 2021 (the “Maturity Date”).
1. Repayment. (a) At the Holder’s discretion, the Company may pre-pay all, or any portion, of this Note at any time upon Thirty (30) days written notice to the Holder, without penalty.
2. The Holder has the right, in its sole discretion, at any time, with three (3) days written notice, to convert any part of this Note into shares of the Company's common stock at a conversion rate of 50% discount to the close of market on the last trading day prior to the date this Note is entered into; i.e. November 13, 2020, which is $0.00725 per share. The Holder shall exercise its right to convert this Note or any part thereof, by delivering to the Company a Notice of Election to Convert in the form attached hereto as Exhibit A (the “Notice of Election to Convert”). The Holder shall provide this original Note to the Company along with such Notice of Election to Convert. In the case that the Holder elects to convert the entire outstanding balance of this Note, then the Note shall be cancelled in whole. In the event that Holder elects to convert less than the entire outstanding balance of this Note, then a new Note shall be reissued reflecting the remaining balance of this Note and delivered to the Holder along with the common stock issued as a result of the Holder's Notice of Election to Convert.
3. In the event that the Holder elects to convert the principal amount of this Note into shares of the Company’s common stock, then no re-capitalization, forward split or reverse split of the Company’s common stock to take effect after the date hereof but prior to the date of conversion shall have a dilutive effect on the number of shares that are to be issued as a result of such conversion.
4. In the event that the Holder elects to convert the Note into shares of the Company’s common stock, Holder shall at no time convert an amount that would put Holder in the position of holding more than 9.99% of the issued and outstanding common stock.
5. Unregistered. This Note has not been registered under the Act, or the securities laws of any state and:
(a) In the case of a U.S. Person (as such term is defined in Rule 902 of Regulation S under the Act) or any entity or individual that is a resident of the U.S., this Note is being offered and sold to a limited number of U.S. accredited investors in transactions not requiring registration under the Act; and
(b) In the case of a non-U.S. Person, this Note is being offered and sold to such non-U.S. Person pursuant to Regulation S in transactions not requiring registration under the Act.
Accordingly, this Note, upon issuance, will be a “restricted security” in the United States within the meaning of Rule 144(a)(3) of the Act.
If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the Principal of this Note may be declared or otherwise become due and payable in the manner and with the effect provided in the Note Purchase Agreement.
5. Limitation on Holder’s Right to Convert Debt.
Notwithstanding anything to the contrary in this Note, in no event shall the Holder convert a number of Shares, which when added to the sum of the number of Shares beneficially owned, (as such term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934, as may be amended, (the “1934 Act”)), by the Holder, would exceed 9.99% of the total number of Shares outstanding on the date of delivery of the Notice of Election to Convert.
6. Non-circumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note.
7. Waiver. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Note Purchase Agreement.
8. Enforcement Fees. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, financial advisory fees and attorneys' fees and disbursements.
9. Governing Law,Jurisdiction; Severability; Jury Trial. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware, 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 suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.
The Company has caused this Note to be duly executed on the date first written above.
GOLDEN STAR ENTERPRISES LTD
| By: | | |
| | Eliav Kling, CEO | |
| | | |
| [ ] | | |
| | | |
| By: | | |
| Print Name: | |
EXHIBIT A
FORM OF NOTICE OF ELECTION TO CONVERT
NOTICE OF ELECTION TO CONVERT
DEBT
TO GOLDEN STAR ENTERPRISES LTD
The undersigned Holder of that certain debt owed to it (the "Debt") by GOLDEN STAR ENTERPRISES LTD., a Delaware corporation ("GSPT"), hereby irrevocably exercises the option to convert $_____________ of the Debt into shares of Common Stock of GSPT, at the conversion price of $0.00725 per share for a total of ___________ shares and directs that the shares of the Common Stock issuable and deliverable upon the conversion be issued and delivered to the Holder hereof.
| | |
| Signature Guaranteed | |
| | |
| Fill in for name in which Shares are to be issued: | |
| | |
| | |
| | |
| (Please print name and address, including zip code) | |
| | |
| Social Security or other Taxpayer Identification Number | |
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”) is made this 16th day of November, 2020, by and between Eital Muskal, a resident of Richmond Hill, Ontario, Canada (the “Employee”), and Golden Star Enterprises, Ltd., a Delaware corporation (“Golden Star” or “the Company”), registration number 2350791, with a business address of 2803 Philadelphia Pike, Suite B #565, Claymont, DE 19703, both parties hereafter sometimes referred to together as the “Parties” and individually as a “Party”.
AGREEMENTS
In consideration of the mutual covenants and obligations contained herein, and intending to be legally bound, the Parties, subject to the terms and conditions set forth herein, agree as follows:
1. Employment and Term. Golden Star hereby employs the Employee and Employee hereby accepts the offer of employment with the Company as Vice President of Strategy and Business development of Enigmai Ltd. (“Enigmai), a wholly owned subsidiary of Golden Star (hereafter, the “Position”). The employment under this Agreement will commence on November 16, 2020. The place of employment will be in Greater Toronto area.
2. Duties. During the term of employment, the Employee shall serve the Company faithfully and to the best of her ability and shall devote full business time during ordinary business hours and such additional time as required for the position of VP of Strategy & Business Development for Enigmai and provide attention, skills and efforts (except for permitted vacations, reasonable periods of illness or other incapacity) to the performance of the duties required by or appropriate for her Position. The employee shall be responsible for customary duties related to this position. In her capacity as VP of Strategy & Business Development and will report directly to the Company’s CEO. She will also report to the Board of Directors of the Company (the “Board”) from time to time.
3. Compensation. During her period of employment hereunder, The Company will pay the employee a gross annual base salary (see below), paid bi-weekly, less applicable withholdings and deductions, payable in accordance with the Company’s normal payroll practices. The annual salary of $160,000 Canadian Dollars (the “Salary”) shall be paid as described below. The parties shall review the Salary and terms of compensation on an annual basis and may, but are not required to, make upward adjustments from time to time.
(i) The Employee shall be paid cash compensation of $100,000 Canadian Dollars per annum paid bi-weekly; The salary shall be paid by direct bank deposit and in Canadian Dollars.
(ii) For this agreement, and as an exception to all regular payments to the employee stated in this agreement, the parties have agreed that all salaries accumulating between date of employment commencing and until January 15, 2021, shall be paid in one payment to the employee no later than January 15, 2021.
(iii) All salary payments due from January 15, 2021 and forward shall be paid on their regular date.
(iv) The Employee shall be paid the remaining $60,000 Canadian Dollars of annual salary by way of the quarterly issuance of unregistered restricted shares of common stock of Golden Star (the “Shares”), in arrears, and valued at a 10% discount to the market price of the Shares based on the 10 day trading average of the Shares on OTCMarkets at time of payment or such other quotation system as Golden Star may be quoted as of the last day of the quarter for which the shares shall be issued. The Company will apply the exchange rate from Canadian to United States Dollars as of the date of each respective quarterly share issuance which shall be based on $15,000 Canadian Dollars at the United States Dollar equivalent prior to determining the number of issuable compensation shares.
4. Benefits, Bonus and Vacation.
(i) The Employee will be eligible for health coverage from the beginning date of employment. The Employee shall be entitled to participate in the standard package of health benefit plans adopted by Golden Star including, but not limited to, health benefits provided by way of an HSA account funded to the amount of $5,000 annually;
(ii) Employee shall be entitled to participate in any employee stock option plan which Company may adopt from time to time, for senior management, assuming Employee shall have fulfilled the eligibility requirements for participation therein;
(iii) Vacation – The employee shall be entitled to four (4) weeks paid vacation or eight (8%) of earnings paid vacation in each calendar year of employment with the Company, prorated for partial years. Such vacation must be taken at a time or times acceptable to the Company having regard to the Company’s operations. All vacation entitlement must be taken in the year it is granted. However, the employee shall be entitled to either carry forward any unused vacation days to the next calendar year or redeem the remaining unused vacation as a paid salary at the end of the calendar year and any such unused vacation shall be forfeited. Notwithstanding the foregoing, you will not receive less vacation each year than is required under the Employment Standards Act, 2000 (Ontario);
(iv) The employee will be entitled to receive an annual bonus based on her professional performance as well as the company’s performance. The parties agree to determine the bonus structure no later than 90 days from the day of signing this agreement. Upon agreement, the agreed structure will be considered a part of the compensation section of this agreement.
All salary and benefits payments stated in the compensation section to this agreement, will commence immediately at the beginning date of employment.
5. Reimbursement of Expenses. Subject to compliance with any applicable policies of the Company, as amended from time to time, Employee shall be entitled to receive reimbursement, within ten (10) days of submission to the Company of all reasonable supporting documentation, for all reasonable business expenses incurred by him in connection with the performance of her duties under this Agreement.
6. Confidentiality. Employee recognizes and acknowledges that the Proprietary Information (as hereinafter defined) is a valuable, special and unique asset of the Company and its subsidiaries and affiliates. As a result, both during the Term and thereafter, Employee shall not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for her own benefit, or for any purpose other than the exclusive benefit of the Company and its subsidiaries and affiliates, any confidential, proprietary, business and technical information or trade secrets of the Company or of any subsidiary or affiliate of the Company (“Proprietary Information”) revealed, obtained or developed in the course of her employment with the Company, unless and to the extent the Proprietary Information becomes generally known to and available for use by the public other than as a result of Employee’s acts or omissions. In the event that the Employee is requested or required (by oral questions, interrogatories, requests for Proprietary Information or documents in a court or administrative proceeding, subpoena, civil investigative demand or other similar process) to disclose any Proprietary Information, the Employee will provide the Company prompt notice of any such request or requirement so that the Company may, at the Company’s expense, seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If, in the absence of a protective order or other similar remedy or the receipt of a waiver from the Company, the Employee reasonably determines that disclosure of Proprietary Information is required to comply with such process or applicable law, the Employee may, without liability under this Agreement, disclose to the appropriate authority only that portion of the Proprietary Information which, on advice of counsel, he reasonably believes he is required to disclose.
7. Property. All rights, title and interest in and to Proprietary Information and intellectual property developed by the Company or its subsidiaries or affiliates prior to, or during, the Term of Employment shall be and remain the sole and exclusive property of the Company. During the term of employment, Employee shall not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless reasonably necessary or appropriate in accordance with the duties and responsibilities required by or appropriate for her Position and, in the event that such materials or property are removed, all of the foregoing shall be returned to their proper files or places of safekeeping as promptly as possible after the removal shall serve its specific purpose. Employee shall not make, retain, remove and/or distribute any copies of any of the foregoing for any reason whatsoever except as may be necessary in the discharge of her assigned duties and shall not divulge to any third person the nature of and/or contents of any of the foregoing or of any other oral or written information to which he may have access or with which for any reason he may become familiar, except as disclosure shall be necessary in the performance of her duties; and immediately following the termination of her employment with the Company, he shall return to the Company, or destroy at the Company’s direction, all originals and copies of the foregoing then in her possession, whether prepared by Employee or by others.
8. Non-Solicit. The Employee shall not, for her own purposes or gain, or for the purposes of any third party, during her employment and the 24 month period immediately following any cessation thereof (without regard to the reason for that cessation or whether that cessation is initiated by the Company or by the Employee) (the “Restricted Period”), do any of the following directly or indirectly without the prior written consent of the Company:
(a) solicit or call on, for competitive purposes, either directly or indirectly, either any (i) client or prospective client with whom the Company or its subsidiaries or affiliates shall have sold or offered to sell its services or products at any time during the two (2) year period immediately preceding the termination of Employee’s employment hereunder; or (ii) any supplier or prospective supplier with whom the Company or its subsidiaries or affiliates shall have purchased, been solicited to or offered to purchase products or services from at any time during the two (2) year period immediately preceding the termination of Employee’s employment hereunder;
(b) influence or attempt to influence any consultant, agent, supplier, potential supplier, or client or potential client of the Company or its subsidiaries or affiliates to terminate or modify any written or oral agreement or course of dealing with the Company or its affiliates; or
(c) directly or indirectly influence or attempt to influence any person to terminate or modify her employment, consulting, agency, distributorship or other arrangement with the Company or its subsidiaries or affiliates., or (ii) employ or retain, or arrange to have any other person or entity employ or retain, any person who has been employed or retained by the Company or its subsidiaries or affiliates as an employee, consultant, agent or distributor of the Company or its subsidiaries or affiliates at any time during the two (2) year period immediately preceding the termination of Employee’s employment hereunder.
9. Termination of Employment. Either Party may terminate this Agreement for any reason, with or without Cause, hereinafter defined, as the case may be, at any time upon forty five (45) days prior written notice to the other party of its decision to terminate (except in the event of a termination for Cause, whereupon Employee’s termination shall be effective immediately upon written notice thereof).
“Cause” shall mean termination for any of the following:
(a) Employee’s conviction of a felony or a crime involving commission of an act of or omission involving dishonesty in the performance of her duties to the Company or its subsidiaries or fraud against the Company or its subsidiaries;
(b) Employee’s substantial and repeated failure to perform the duties of the office held by the Employee as reasonably directed by the Board;
(c) Employee’s gross negligence or willful misconduct with respect to the Company or its subsidiaries;
(d) Employee’s harassment of or discrimination against the Company’s or its subsidiaries ‘ employees, customers or vendors in violation of the Company or its subsidiaries’ policies with respect to such matters; and,
(e) Employee’s misappropriation of funds or assets of the Company or its subsidiaries for personal use or willful violation of Company or its subsidiaries’ policies or standards of business conduct as determined in good faith by the Board.
If during the Term, Employee’s employment is terminated by the Company with Cause then the Company’s obligation to Employee will be limited solely to the payment of accrued and unpaid Salary though the date of such termination and reimbursement for expenses, in accordance with Section 5, incurred prior to the termination of employment. All compensation and benefits will cease at the time of such termination and the Company will have no further liability or obligation by reason of such termination.
If during the Term, Employee’s employment is terminated by the Company without Cause then the Company shall pay to Employee:
(i) the accrued and unpaid Salary through the date of such termination and reimbursement for expenses, in accordance with Section 5, incurred prior to the termination of employment; and
(ii) a lump sum in cash equal to the total remaining Salary of the full Employment Term due under this agreement; and
(iii) the continued payment of any bonus payments employee would be eligible to receive paid at the time such bonus would be calculated, if such bonus falls within the Employment Term specified in Section 1.
(iv) in addition, the Company shall immediately vest the remaining outstanding, non-vested shares as specified in Section 3(b)
10. Other Agreements. Employee represents and warrants to the Company that:
(a) There are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful Employee’s execution of this Agreement or Employee’s employment hereunder, or which is or would be inconsistent or in conflict with this Agreement or Employee’s employment hereunder, or would prevent, limit or impair in any way the performance by Employee of her obligations hereunder;
(b) Employee’s execution of this Agreement and Employee’s employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which Employee is a party or by which Employee is bound;
(c) Employee is free to execute this Agreement and to enter into the employ of the Company pursuant to the provisions set forth herein; and
(d) Employee shall disclose the existence and terms of the restrictive covenants set forth in this Agreement to any employer that the Employee may work for during the term of this Agreement (which employment is not hereby authorized) or after the termination of the Employee’s employment at the Company if such restrictive covenants are then in full force and effect.
11. Survival of Provisions. Except as otherwise set forth in this Agreement, the provisions of this Agreement (including, without limitation, Sections 6, 7, 8, 9, 10, 11, 12 and 19) shall survive the cessation of Employee’s employment as set forth herein.
12. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and Employee and their respective successors, executors, administrators, heirs and/or permitted assigns; provided, however, that neither Employee nor the Company may make any assignments of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other parties hereto, except that, without such consent, the Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise, provided that such successor assumes in writing all of the obligations of the Company under this Agreement.
13. Notice. Any notice or communication required or permitted under this Agreement shall be made in writing and delivered in person, sent by recognized overnight courier or sent by certified or registered mail, return receipt requested, addressed to the last known address of the party or to such other address as either party may from time to time duly specify by notice given to the other party in the manner specified above.
14. Entire Agreement; Amendments. This Agreement contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature between the parties hereto relating to the employment of Employee with the Company. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the parties hereto.
15. Waiver. The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other or subsequent breach of this Agreement.
16. Governing Law.
(a) This Agreement shall be construed and enforced in accordance with the substantive laws of the Province of Ontario without reference to its conflicts of law principles.
(b) Notwithstanding the substantive laws to be applied and the residence of the Parties, in the event of any dispute hereunder, the jurisdiction for resolution of such dispute shall be the Province of Ontario.
17. Invalidity. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the validity of any other provision of this Agreement, and such provision(s) shall be deemed modified to the extent necessary to make it enforceable.
18. Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation.
19. Specific Enforcement; Extension of Period.
(a) Employee acknowledges that the restrictions contained in Sections 6, 7, and 8 hereof are reasonable and necessary to protect the legitimate interests of the Company and its subsidiaries and affiliates, that the duration of the restrictions are reasonable given the nature of this Agreement and the position Employee holds within the Company, and that the Company would not enter into this Agreement unless Employee agrees to be bound by the restrictions set forth in Sections 6, 7 and 8 hereof.
(b) Employee acknowledges that any breach by of Sections 6, 7, and 8 hereof will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. Employee shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that an adequate remedy at law exists. In the event of any such breach by Employee, the Company shall have the right to enforce the provisions of Sections 6, 7, and 8 of this Agreement by seeking injunctive or other similar equitable relief in any court, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company. If an action at law or equity is necessary by the Company to enforce or interpret the terms of this Agreement, the Company shall be entitled to recover, in addition to any other relief, reasonable attorneys’ fees, costs and disbursements. In the event that the provisions of Sections 6, 7 or 8 hereof should ever be adjudicated to exceed the time, geographic, or other limitations permitted by applicable law in any applicable jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, or other limitations permitted by applicable law.
(c) In the event that Employee shall be in breach of any of the restrictions contained in Section 8 hereof, then the Restricted Period shall be extended for a period of time equal to the period of time that Employee is in breach of such restriction.
20. Withholding. All payments made by the Company to the Employee, or to her estate, shall be subject to the withholding of such amounts including, without limitation, any payroll taxes and any other assessments, as the Company determines should be withheld or paid pursuant to any applicable law or regulation.
21. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.
*****SIGNATURE PAGE TO FOLLOW*****
IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND, the parties have caused this Agreement to be executed on the day and year first written above by and between:
Golden Star Enterprises Ltd.
| | /s/ Eliav Kling | | | /s/ Eital Muskal | |
| By: | Eliav Kling | | By: | Eital Muskal | |
| Its: | Chief Executive Officer | | | Employee | |
EXHIBIT 10.4
GOLDEN STAR ENTERPRISES LTD. EXECUTIVE COMPENSATION AGREEMENT
This Agreement is dated effective as of December 1, 2020
Between:
LOUIS SHEFSKY an individual residing at 7420 Bathurst St., Suite 1104, Thornhill Ontario L4J6X4 (the “EXECUTIVE”)
And:
GOLDEN STAR ENTERPRISES LTD., a Delaware corporation having a business office at 2803 Philadelphia Pike, Suite B #565, Claymont, DE 19703 (the “Company”)
Whereas:
A. The Company desires to retain the services of EXECUTIVE with respect to the day to day operations of the Company and its wholly owned subsidiary, Enigmai;
B. The EXECUTIVE has certain business management expertise and financial markets expertise and has agreed to provide day to day management and oversight of the Company’s operations.
Now therefore this Agreement is entered into pursuant to the mutual covenants and agreements set forth below:
Section 1. Interpretation
1.1 Where used herein the following terms shall have the meanings set out below:
(a) “Executive Services” means the services to be provided by the EXECUTIVE as set out herein;
(b) “Board” means the board of directors of the Company;
(c) “Business Material” means any financial, market and technical information, methods and plans, trade secrets, know-how, technical expertise and other information relating to the Company’s business and operations;
(d) “Term” has the meaning given to it in subsection 2.1.
1.2 Governing Law.
This Agreement shall be governed by and be construed in accordance with the laws of Delaware.
1.3 Severability.
If any one or more of the provisions contained in this Agreement should be determined to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
Section 2. Term
2.1 Term.
The term of this Agreement (the “Term”) shall be from and including December 1, 2020, to and including November 30, 2021, unless this Agreement is earlier terminated in accordance with Section 5.
Section 3. Consulting Services
3.1 Consulting Services.
The Company hereby appoints and retains the EXECUTIVE, on a non-exclusive basis, during the Term to act as President of the Company and to provide such management services as requested by the Company from time to time relative to the operation of the Company including oversight of the Company’s required compliance filings, management and director of staff and consultants, as maybe required, and other day to day operations. The EXECUTIVE hereby accepts such appointment and agrees to provide diligently the Executive Services. In providing the Executive Services, the EXECUTIVE will report directly to and take direction from the Board. The EXECUTIVE shall attend as may be required by the Board, such meetings of the Board, either telephonically or in person, and provide reports on the Executive Services which shall include:
(a) be contracted by the Company as President;
(b) perform such duties and services as are commensurate with Executive’s position or as otherwise reasonably directed by the Board of Directors of the Company (the “Board”), which include but are not limited to;
| | · | Design and implement business strategies, plans and procedures; |
| | · | Set comprehensive goals for performance and growth; |
| | · | Establish policies that promote company culture and vision; |
| | · | Oversee daily operations of the company and the work of employees and consultants (IT, Marketing, Sales, and Finance etc.); |
| | · | Lead employees to encourage maximum performance and dedication; |
| | · | Evaluate performance by analyzing and interpreting data and metrics; |
| | · | Work with Company in fundraising ventures; |
| | · | Participate in expansion activities (investments, acquisitions, corporate alliances etc.); |
| | · | Manage relationships with partners/vendors; |
| | · | Executive will serve on the Board of Directors of the Company and will retain said Board Seat at all times that they serve as an Executive of the Company |
(c) Perform all duties incident to Executive’s position to the best of Executive’s ability and in compliance with the policies and procedures of the Company;
(d) Report directly to the Board
3.2 Board to Act Independently.
The Board shall diligently and responsibly receive all advice from the EXECUTIVE and exercise its own independent judgment before acting upon such advice.
3.3 Remuneration.
(a) In consideration of the provision of the EXECUTIVE Services, the Company shall pay to the EXECUTIVE a flat fee of Eight Million Nine Hundred and Seventy Five Thousand (8,975,000) unregistered, restricted Shares of its Common Stock.
(b) The Company shall further pay to the EXECUTIVE any out-of-pocket expenses which shall be prior approved by the Company for the attendance at any meetings as may be required.
3.4 Other Contractual Agreements
The parties to this Agreement recognize that they may enter into other contractual agreements for services to be provided to the Company for which independent contracts shall be executed and that this Agreement relates solely to the appointment of the EXECUTIVE and the mandate of the EXECUTIVE as noted by the Company and the Board.
3.5 Disclosure of EXECUTIVE. During the Term, the EXECUTIVE shall:
(a) disclose to the Company all of its interests in any transaction or agreement contemplated by the Company or any matter which may taint the EXECUTIVE’s objectivity when performing its role as an EXECUTIVE hereunder;
(b) inform the Company of any business opportunities made available to the EXECUTIVE as a result of the EXECUTIVE’s involvement with the Company or otherwise through the performance of the EXECUTIVE Services; and
(c) not serve as EXECUTIVE, or consent to an appointment as a member of the board of directors, of a company which competes, directly or indirectly, with the Company.
Section 4. Confidential Information
4.1 Confidentiality Obligation.
The EXECUTIVE recognizes and agrees that any Business Material, Corporate Knowhow or Technical Data (the “Business Material”) furnished or to be furnished to it by the Company is to be used only for the purpose of providing the EXECUTIVE Services hereunder and that such materials and information will be kept confidential by the EXECUTIVE provided, however, that any such Business Material may be disclosed:
(a) if specifically consented to in writing by the Company; or
(b) if required by applicable law or by an order of a court of competent jurisdiction.
4.2 Exceptions.
The provisions of Section 4.1 shall not apply to:
(a) information which becomes generally available to the public other than as a result of a disclosure by the EXECUTIVE;
(b) information which is generally known to knowledgeable businesspeople involved in the business conducted by the Company other than as a result of a disclosure by the EXECUTIVE in violation of this part;
(c) information that was available to the EXECUTIVE on a non-confidential basis prior to its disclosure to the EXECUTIVE by the Company; or
(d) information that becomes available to the EXECUTIVE on a non-confidential basis from a person or entity other than the Company, unless such disclosure by that person is itself in breach of a confidentiality commitment made directly or indirectly to the Company;
and provided that nothing in this Agreement shall prevent the EXECUTIVE from using its expertise and knowledge in the conduct of other business for its own account or as a Consultant to others, except as set forth in paragraph 3.5(c) above.
5. Termination
5.1 Termination by the Company and the EXECUTIVE.
The Company or the EXECUTIVE may terminate this Agreement without cause at any time by giving thirty (30) days written notice of termination of this Agreement to the other party. Any termination of this Agreement, either pursuant to this Section or otherwise, will not affect the obligations under Section 4, which will survive such termination. In the event that this Agreement is terminated by the Company, the Company shall pay the EXECUTIVE an amount equal to any expenses incurred by the EXECUTIVE up to the effective date of the termination to the extent such expenses have not previously been reimbursed. Upon payment of such amounts, the EXECUTIVE shall have no claim against the Company for damages or otherwise by reason of such termination. In the event of termination of this Agreement, the EXECUTIVE shall, prior to the effective date of the termination, deliver to the Company all books, records, or other information in its possession pertaining to the Company’s business.
6. Indemnity and Limitation of Liability
6.1 Indemnification by the Company.
The Company shall indemnify and hold harmless the EXECUTIVE against any and all losses, damages, suits, judgments, costs and expenses arising under any such third-party claim or action that occurs solely due to actions taken by the Company, or by EXECUTIVE at the Company’s direction, provided however, that the EXECUTIVE provides the Company with:
(a) written notice of such claim or action within 14 days of acquiring knowledge of the event;
(b) sole control and authority of the defense or settlement of such claim or action (provided that the Company shall not enter into any settlement which materially affects the EXECUTIVE’s rights without the EXECUTIVE’s prior written consent); and
(c) proper and full information and reasonable assistance to defend and/or settle any such claim or action.
The Company shall not indemnify EXECUTIVE for any losses, damages, suits, judgments, costs or expenses arising from actions taken solely by EXECUTIVE.
6.2 No Liability for Acts of the Company.
The EXECUTIVE shall not be liable for any act of the Company or any of its other directors, officers or employees, except as required under applicable Delaware law.
6.3 Limitation of Liability.
Under no circumstances will either party be liable to the other party for indirect, incidental, consequential, special or exemplary or punitive damages (even if such party has been advised of the possibility of such damages), arising from any provision of this Agreement, such as, but not limited to, loss of revenue or anticipated profits or loss of business.
7. General Provisions
7.1 No Partnership or Agency.
The relationship between the Company and the EXECUTIVE is that of independent contractor and nothing herein contained shall be interpreted so as to create a partnership or agency relationship between the parties.
7.2 Assignment.
Neither party may assign any rights or delegate any obligations hereunder without the prior written consent of the other party.
As evidence of their agreement this Agreement has been executed by the parties hereto as of the date first above written.
| GOLDEN STAR ENTERPRISES, LTD. | |
| | |
| /s/ Eliav Kling | |
| Eliav Kling, CEO | |
| | |
| /s/ Louis Shefsky | |
| Louis Shefsky, EXECUTIVE | |
EXHIBIT 10.5
GOLDEN STAR ENTERPRISES LTD. EXECUTIVE COMPENSATION AGREEMENT
This Agreement is dated effective as of January 1, 2021.
Between:
ELIAV KLING an individual residing at 112 Thornhill Ravines Cres., Maple, ON L6A 4J8 Canada (the “EXECUTIVE”)
And:
GOLDEN STAR ENTERPRISES LTD., a Delaware corporation having a business office at 2803 Philadelphia Pike, Suite B #565, Claymont, DE 19703 (the “Company”)
Whereas:
A. The Company desires to retain the services of EXECUTIVE with respect to the day to day operations of the Company and its wholly owned subsidiary, Enigmai;
B. The EXECUTIVE has certain business management expertise and financial markets expertise and has agreed to provide day to day management and oversight of the Company’s operations.
Now therefore this Agreement is entered into pursuant to the mutual covenants and agreements set forth below:
Section 1. Interpretation
1.1 Where used herein the following terms shall have the meanings set out below:
(a) “Executive Services” means the services to be provided by the EXECUTIVE as set out herein;
(b) “Board” means the board of directors of the Company;
(c) “Business Material” means any financial, market and technical information, methods and plans, trade secrets, know-how, technical expertise and other information relating to the Company’s business and operations;
(d) “Term” has the meaning given to it in subsection 2.1.
1.2 Governing Law.
This Agreement shall be governed by and be construed in accordance with the laws of Delaware.
1.3 Severability.
If any one or more of the provisions contained in this Agreement should be determined to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
Section 2. Term
2.1 Term.
The term of this Agreement (the “Term”) shall be from and including January 1, 2021, to and including December 31, 2021, unless this Agreement is earlier terminated in accordance with Section 5.
Section 3. Consulting Services
3.1 Consulting Services.
The Company hereby formally retains the EXECUTIVE, on a non-exclusive basis, during the Term to act as Chief Executive Officer of the Company and to provide such management services as requested by the Company from time to time relative to the operation of the Company including oversight of the Company’s required compliance filings, management and director of staff and consultants, as maybe required, and other day to day operations. The EXECUTIVE hereby accepts such appointment and agrees to provide diligently the Executive Services. In providing the Executive Services, the EXECUTIVE will report directly to and take direction from the Board. The EXECUTIVE shall attend as may be required by the Board, such meetings of the Board, either telephonically or in person, and provide reports on the Executive Services which shall include:
(a) Perform such duties and services as are commensurate with Executive’s position or as otherwise reasonably directed by the Board of Directors of the Company (the “Board”), which include but are not limited to;
| | · | Design and implement business strategies, plans and procedures; |
| | · | Set comprehensive goals for performance and growth; |
| | · | Establish policies that promote company culture and vision; |
| | · | Oversee daily operations of the company and the work of employees and consultants (IT, Marketing, Sales, and Finance etc.); |
| | · | Lead employees to encourage maximum performance and dedication; |
| | · | Evaluate performance by analyzing and interpreting data and metrics; |
| | · | Work with Company in fundraising ventures; |
| | · | Participate in expansion activities (investments, acquisitions, corporate alliances etc.); |
| | · | Manage relationships with partners/vendors; |
| | · | Executive will serve on the Board of Directors of the Company and will retain said Board Seat at all times that they serve as an Executive of the Company; |
| | · | Work directly with President of the Company to enhance shareholder value. |
(c) Perform all duties incident to Executive’s position to the best of Executive’s ability and in compliance with the policies and procedures of the Company;
(d) Report directly to the Board.
3.2 Board to Act Independently.
The Board shall diligently and responsibly receive all advice from the EXECUTIVE and exercise its own independent judgment before acting upon such advice.
3.3 Remuneration.
(a) In consideration of the provision of the EXECUTIVE Services, the Company shall pay to the EXECUTIVE a flat fee of $150,000 payable by the issuance of Ten Million Seven Hundred and Fourteen Thousand Two Hundred and Eighty Six (10,714,286) unregistered, restricted Shares of the Company’s Common Stock at a per share value of $0.014.
(b) The Company shall further pay to the EXECUTIVE any out-of-pocket expenses which shall be prior approved by the Company for the attendance at any meetings as may be required.
3.4 Other Contractual Agreements
The parties to this Agreement recognize that they may enter into other contractual agreements for services to be provided to the Company for which independent contracts shall be executed and that this Agreement relates solely to the appointment of the EXECUTIVE and the mandate of the EXECUTIVE as noted by the Company and the Board.
3.5 Disclosure of EXECUTIVE. During the Term, the EXECUTIVE shall:
(a) disclose to the Company all of its interests in any transaction or agreement contemplated by the Company or any matter which may taint the EXECUTIVE’s objectivity when performing its role as an EXECUTIVE hereunder;
(b) inform the Company of any business opportunities made available to the EXECUTIVE as a result of the EXECUTIVE’s involvement with the Company or otherwise through the performance of the EXECUTIVE Services; and
(c) not serve as EXECUTIVE, or consent to an appointment as a member of the board of directors, of a company which competes, directly or indirectly, with the Company.
Section 4. Confidential Information
4.1 Confidentiality Obligation.
The EXECUTIVE recognizes and agrees that any Business Material, Corporate Knowhow or Technical Data (the “Business Material”) furnished or to be furnished to it by the Company is to be used only for the purpose of providing the EXECUTIVE Services hereunder and that such materials and information will be kept confidential by the EXECUTIVE provided, however, that any such Business Material may be disclosed:
(a) if specifically consented to in writing by the Company; or
(b) if required by applicable law or by an order of a court of competent jurisdiction.
4.2 Exceptions.
The provisions of Section 4.1 shall not apply to:
(a) information which becomes generally available to the public other than as a result of a disclosure by the EXECUTIVE;
(b) information which is generally known to knowledgeable businesspeople involved in the business conducted by the Company other than as a result of a disclosure by the EXECUTIVE in violation of this part;
(c) information that was available to the EXECUTIVE on a non-confidential basis prior to its disclosure to the EXECUTIVE by the Company; or
(d) information that becomes available to the EXECUTIVE on a non-confidential basis from a person or entity other than the Company, unless such disclosure by that person is itself in breach of a confidentiality commitment made directly or indirectly to the Company;
and provided that nothing in this Agreement shall prevent the EXECUTIVE from using its expertise and knowledge in the conduct of other business for its own account or as a Consultant to others, except as set forth in paragraph 3.5(c) above.
5. Termination
5.1 Termination by the Company and the EXECUTIVE.
The Company or the EXECUTIVE may terminate this Agreement without cause at any time by giving thirty (30) days written notice of termination of this Agreement to the other party. Any termination of this Agreement, either pursuant to this Section or otherwise, will not affect the obligations under Section 4, which will survive such termination. In the event that this Agreement is terminated by the Company, the Company shall pay the EXECUTIVE an amount equal to any expenses incurred by the EXECUTIVE up to the effective date of the termination to the extent such expenses have not previously been reimbursed. Upon payment of such amounts, the EXECUTIVE shall have no claim against the Company for damages or otherwise by reason of such termination. In the event of termination of this Agreement, the EXECUTIVE shall, prior to the effective date of the termination, deliver to the Company all books, records, or other information in its possession pertaining to the Company’s business.
6. Indemnity and Limitation of Liability
6.1 Indemnification by the Company.
The Company shall indemnify and hold harmless the EXECUTIVE against any and all losses, damages, suits, judgments, costs and expenses arising under any such third-party claim or action that occurs solely due to actions taken by the Company, or by EXECUTIVE at the Company’s direction, provided however, that the EXECUTIVE provides the Company with:
(a) written notice of such claim or action within 14 days of acquiring knowledge of the event;
(b) sole control and authority of the defense or settlement of such claim or action (provided that the Company shall not enter into any settlement which materially affects the EXECUTIVE’s rights without the EXECUTIVE’s prior written consent); and
(c) proper and full information and reasonable assistance to defend and/or settle any such claim or action.
The Company shall not indemnify EXECUTIVE for any losses, damages, suits, judgments, costs or expenses arising from actions taken solely by EXECUTIVE.
6.2 No Liability for Acts of the Company.
The EXECUTIVE shall not be liable for any act of the Company or any of its other directors, officers or employees, except as required under applicable Delaware law.
6.3 Limitation of Liability.
Under no circumstances will either party be liable to the other party for indirect, incidental, consequential, special or exemplary or punitive damages (even if such party has been advised of the possibility of such damages), arising from any provision of this Agreement, such as, but not limited to, loss of revenue or anticipated profits or loss of business.
7. General Provisions
7.1 No Partnership or Agency.
The relationship between the Company and the EXECUTIVE is that of independent contractor and nothing herein contained shall be interpreted so as to create a partnership or agency relationship between the parties.
7.2 Assignment.
Neither party may assign any rights or delegate any obligations hereunder without the prior written consent of the other party.
As evidence of their agreement this Agreement has been executed by the parties hereto as of the date first above written.
GOLDEN STAR ENTERPRISES, LTD.
| /s/ Louis Shefsky | |
| Louis Shefsky, President | |
| | |
| /s/ Eliav Kling | |
| Eliav Kling, EXECUTIVE | |
EXHIBIT 10.6
LOAN TREATY AGREEMENT
THIS LOAN TREATY AGREEMENT (“Treaty”) is entered into by and between Golden Star Enterprises Ltd. (“GSPT”, “Company”, “Borrower”), a publicly traded Delaware corporation and [*] (“Lender”), a [*] corporation, on the [*] day of [ ], 202[ ], and based on the terms and conditions set forth below:
1. Subject of the Treaty. Under this Treaty, the Lender shall provide loans in the amount of up to [ ] Thousand Dollars ($[ ]), hereinafter referred to as the “Loan Amount”, and the Borrower undertakes to return to the Lender the amount of the loan received on time and in accordance with the procedure established by the Treaty.
2. Loan Granting Procedure. Lender shall provide up to $[ ] in tranches over a period of one (1) year as agreed between the Parties from time to time, each tranche being memorialized by Promissory Note, executed by both GSPT and Lender.
2.1 Each tranche shall be deposited in the Huntington Bank IOLTA account of SD Mitchell & Associates (“IOLTA”) and shall be dispersed pursuant to the instructions of Eliav Kling, CEO of GSPT.
2.2 Each amount deposited into the IOLTA shall have a term of 12 months for repayment; the day the 12 months commences shall be the day the deposit is available for disbursement in the IOLTA.
3. Interest rate under the Treaty. The interest rate on the loan amount shall be 8% (per annum. Interest shall begin accruing on the date the funds are deposited into the IOLTA.
4. Rights of Conversion. The Loan Amount or any portion thereof is convertible into restricted, unregistered shares of the Common Stock of GSPT at a fixed rate of $0.02 per share, being a 50% discount to the market price of the shares of GSPT as published on OTCMarkets as of the date of this Agreement, provided that at no time may the Lender hold more than 9.99% of the outstanding Common Stock of GSPT.
5. Date of Conversion. Each promissory note issued hereunder, or part thereof, may be converted into unrestricted common shares at the one year anniversary of the deposit of the funds to the IOLTA, unless the Company becomes fully reporting prior, at which time the hold period for the underlying shares would be six months, or should GSPT file a Registration Statement prior to the one year anniversary, such shares are agreed to be registered in any such filing. Shares of common stock issuable upon receipt of a notice of conversion in the form appended hereto as Exhibit “B”, shall be delivered to the Lender within five business days of receipt.
6. Final provisions. This Treaty and any relations in connection with this Treaty are governed and interpreted in accordance with the laws of the State of Delaware. If any dispute, disagreement or claim arises from this Treaty or related to this Treaty, the Parties shall make every effort to resolve this dispute in good faith in a timely manner.
Loan Treaty – GSPT
6.1. If it is not possible to resolve the disagreements through negotiations, all disputes, disagreements and demands arising from this Treaty or in connection with it, shall be resolved in accordance with the rules of jurisdiction of disputes established by the procedural law of the State of Delaware.
6.2. Any changes, modifications, or amendments to this Treaty are valid only upon mutual written agreement, executed by authorized representatives of both Lender and Borrower. Under the written form, the Parties, for the purposes of this Treaty, understand and agree that both the drawing up of a single document, and/or the exchange of letters, telegrams, messages using facsimile facilities which allows to identify the sender and the date of departure, are sufficient for written approval.
7. Party Information
Lender’s Details:
[ ]
Borrower’s Details:
Golden Star Enterprieses Ltd.
Attn: Eliav Kling
2803 Philadelphia Pike, Suite B
Claymont, DE 19703
1-888-680-8033
info@goldenstarenterprisesltd.com
Huntington Bank IOLTA:
The Huntington National Bank
19683 Mack Ave
MI4212
Gross Pointe Woods, MI 48236
Account #: [ ]
ABA Routing number: 044000024
Swift Code (International): HUNTUS33
Beneficiary:
Loan Treaty – GSPT
SD Mitchell & Associates, PLC IOLTA
977 Hampton Road
Gross Pointe Woods, MI 48236
***Signature page below***
Loan Treaty – GSPT
The undersigned, by signing below, do hereby acknowledge that they have read, understand, and agree to the terms and conditions of this Treaty.
| GOLDEN STAR ENTERPRISES LTD. | | LENDER | |
| | | | | | |
| By: | | | By: | | |
| | Eliav Kling, CEO | | | [ ] | |
| | | | | | |
Loan Treaty – GSPT
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”) is made this 16th day of November, 2021, by and between Eital Muskal, a resident of Richmond Hill, Ontario, Canada (the “Employee”), and Golden Star Enterprises, Ltd., a Delaware corporation (“Golden Star” or “the Company”), registration number 2350791, with a business address of 2803 Philadelphia Pike, Suite B #565, Claymont, DE 19703, both parties hereafter sometimes referred to together as the “Parties” and individually as a “Party”.
AGREEMENTS
In consideration of the mutual covenants and obligations contained herein, and intending to be legally bound, the Parties, subject to the terms and conditions set forth herein, agree as follows:
1. Employment and Term. Golden Star hereby employs the Employee and Employee hereby accepts the offer of employment with the Company as Vice President of Strategy and Business development of Enigmai Ltd. (“Enigmai), a wholly owned subsidiary of Golden Star (hereafter, the “Position”). The employment under this Agreement will commence on November 16, 2021. The place of employment will be in Greater Toronto area.
2. Duties. During the term of employment, the Employee shall serve the Company faithfully and to the best of her ability and shall devote full business time during ordinary business hours and such additional time as required for the position of VP of Strategy & Business Development for GSPT and provide attention, skills and efforts (except for permitted vacations, reasonable periods of illness or other incapacity) to the performance of the duties required by or appropriate for her Position. The employee shall be responsible for customary duties related to this position. In her capacity as VP of Strategy & Business Development and will report directly to the Company’s CEO. She will also report to the Board of Directors of the Company (the “Board”) from time to time.
3. Compensation. During her period of employment hereunder, The Company will pay the employee a gross annual base salary (see below), paid bi-weekly, less applicable withholdings and deductions, payable in accordance with the Company’s normal payroll practices. The annual salary of $160,000 Canadian Dollars (the “Salary”) shall be paid as described below. The parties shall review the Salary and terms of compensation on an annual basis and may, but are not required to, make upward adjustments from time to time.
(i) The Employee shall be paid cash compensation of $100,000 Canadian Dollars per annum paid bi-weekly; The salary shall be paid by direct bank deposit and in Canadian Dollars.
(ii) The Employee shall be paid the remaining $60,000 Canadian Dollars of annual salary by way of the quarterly issuance of unregistered restricted shares of common stock of Golden Star (the “Shares”), in arrears, and valued at a 15% discount to the market price of the Shares based on the 10 day trading average of the Shares on OTCMarkets at time of payment or such other quotation system as Golden Star may be quoted as of the last day of the quarter for which the shares shall be issued. The Company will apply the exchange rate from Canadian to United States Dollars as of the date of each respective quarterly share issuance which shall be based on $15,000 Canadian Dollars at the United States Dollar equivalent prior to determining the number of issuable compensation shares.
4. Benefits, Bonus and Vacation.
(i) The Employee will be eligible for health coverage from the beginning date of employment. The Employee shall be entitled to participate in the standard package of health benefit plans adopted by Golden Star including, but not limited to, health benefits provided by way of an HSA account funded to the amount of $5,000 annually;
(ii) Employee shall be entitled to participate in any employee stock option plan which Company may adopt from time to time, for senior management, assuming Employee shall have fulfilled the eligibility requirements for participation therein;
(iii) Vacation – The employee shall be entitled to four (4) weeks paid vacation or eight precent (8%) of earnings paid vacation in each calendar year of employment with the Company, pro-rated for partial years. Such vacation must be taken at a time or times acceptable to the Company having regard to the Company’s operations. All vacation entitlement must be taken in the year it is granted. However, the employee shall be entitled to either carry forward any unused vacation days to the next calendar year or redeem the remaining unused vacation as a paid salary at the end of the calendar year and any such unused vacation shall be forfeited. Notwithstanding the foregoing, you will not receive less vacation each year than is required under the Employment Standards Act, 2000 (Ontario);
(iv) The employee will be entitled to receive an annual bonus based on her professional performance as well as the company’s performance. The parties agree to determine the bonus structure no later than 90 days from the day of signing this agreement. Upon agreement, the agreed structure will be considered a part of the compensation section of this agreement.
All salary and benefits payments stated in the compensation section to this agreement, will commence immediately at the beginning date of employment.
5. Reimbursement of Expenses. Subject to compliance with any applicable policies of the Company, as amended from time to time, Employee shall be entitled to receive reimbursement, within ten (10) days of submission to the Company of all reasonable supporting documentation, for all reasonable business expenses incurred by him in connection with the performance of her duties under this Agreement.
6. Confidentiality. Employee recognizes and acknowledges that the Proprietary Information (as hereinafter defined) is a valuable, special and unique asset of the Company and its subsidiaries and affiliates. As a result, both during the Term and thereafter, Employee shall not, without the prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for her own benefit, or for any purpose other than the exclusive benefit of the Company and its subsidiaries and affiliates, any confidential, proprietary, business and technical information or trade secrets of the Company or of any subsidiary or affiliate of the Company (“Proprietary Information”) revealed, obtained or developed in the course of her employment with the Company, unless and to the extent the Proprietary Information becomes generally known to and available for use by the public other than as a result of Employee’s acts or omissions. In the event that the Employee is requested or required (by oral questions, interrogatories, requests for Proprietary Information or documents in a court or administrative proceeding, subpoena, civil investigative demand or other similar process) to disclose any Proprietary Information, the Employee will provide the Company prompt notice of any such request or requirement so that the Company may, at the Company’s expense, seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If, in the absence of a protective order or other similar remedy or the receipt of a waiver from the Company, the Employee reasonably determines that disclosure of Proprietary Information is required to comply with such process or applicable law, the Employee may, without liability under this Agreement, disclose to the appropriate authority only that portion of the Proprietary Information which, on advice of counsel, he reasonably believes he is required to disclose.
7. Property. All rights, title and interest in and to Proprietary Information and intellectual property developed by the Company or its subsidiaries or affiliates prior to, or during, the Term of Employment shall be and remain the sole and exclusive property of the Company. During the term of employment, Employee shall not remove from the Company’s offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company unless reasonably necessary or appropriate in accordance with the duties and responsibilities required by or appropriate for her Position and, in the event that such materials or property are removed, all of the foregoing shall be returned to their proper files or places of safekeeping as promptly as possible after the removal shall serve its specific purpose. Employee shall not make, retain, remove and/or distribute any copies of any of the foregoing for any reason whatsoever except as may be necessary in the discharge of her assigned duties and shall not divulge to any third person the nature of and/or contents of any of the foregoing or of any other oral or written information to which he may have access or with which for any reason he may become familiar, except as disclosure shall be necessary in the performance of her duties; and immediately following the termination of her employment with the Company, he shall return to the Company, or destroy at the Company’s direction, all originals and copies of the foregoing then in her possession, whether prepared by Employee or by others.
8. Non-Solicit. The Employee shall not, for her own purposes or gain, or for the purposes of any third party, during her employment and the 24 month period immediately following any cessation thereof (without regard to the reason for that cessation or whether that cessation is initiated by the Company or by the Employee) (the “Restricted Period”), do any of the following directly or indirectly without the prior written consent of the Company:
(a) solicit or call on, for competitive purposes, either directly or indirectly, either any (i) client or prospective client with whom the Company or its subsidiaries or affiliates shall have sold or offered to sell its services or products at any time during the two (2) year period immediately preceding the termination of Employee’s employment hereunder; or (ii) any supplier or prospective supplier with whom the Company or its subsidiaries or affiliates shall have purchased, been solicited to or offered to purchase products or services from at any time during the two (2) year period immediately preceding the termination of Employee’s employment hereunder;
(b) influence or attempt to influence any consultant, agent, supplier, potential supplier, or client or potential client of the Company or its subsidiaries or affiliates to terminate or modify any written or oral agreement or course of dealing with the Company or its affiliates; or
(c) directly or indirectly influence or attempt to influence any person to terminate or modify her employment, consulting, agency, distributorship or other arrangement with the Company or its subsidiaries or affiliates., or (ii) employ or retain, or arrange to have any other person or entity employ or retain, any person who has been employed or retained by the Company or its subsidiaries or affiliates as an employee, consultant, agent or distributor of the Company or its subsidiaries or affiliates at any time during the two (2) year period immediately preceding the termination of Employee’s employment hereunder.
9. Termination of Employment. Either Party may terminate this Agreement for any reason, with or without Cause, hereinafter defined, as the case may be, at any time upon forty five (45) days prior written notice to the other party of its decision to terminate (except in the event of a termination for Cause, whereupon Employee’s termination shall be effective immediately upon written notice thereof).
“Cause” shall mean termination for any of the following:
(a) Employee’s conviction of a felony or a crime involving commission of an act of or omission involving dishonesty in the performance of her duties to the Company or its subsidiaries or fraud against the Company or its subsidiaries;
(b) Employee’s substantial and repeated failure to perform the duties of the office held by the Employee as reasonably directed by the Board;
(c) Employee’s gross negligence or willful misconduct with respect to the Company or its subsidiaries;
(d) Employee’s harassment of or discrimination against the Company’s or its subsidiaries ‘ employees, customers or vendors in violation of the Company or its subsidiaries’ policies with respect to such matters; and,
(e) Employee’s misappropriation of funds or assets of the Company or its subsidiaries for personal use or willful violation of Company or its subsidiaries’ policies or standards of business conduct as determined in good faith by the Board.
If during the Term, Employee’s employment is terminated by the Company with Cause then the Company’s obligation to Employee will be limited solely to the payment of accrued and unpaid Salary though the date of such termination and reimbursement for expenses, in accordance with Section 5, incurred prior to the termination of employment. All compensation and benefits will cease at the time of such termination and the Company will have no further liability or obligation by reason of such termination.
If during the Term, Employee’s employment is terminated by the Company without Cause then the Company shall pay to Employee:
(i) the accrued and unpaid Salary through the date of such termination and reimbursement for expenses, in accordance with Section 5, incurred prior to the termination of employment; and
(ii) a lump sum in cash equal to the total remaining Salary of the full Employment Term due under this agreement; and
(iii) the continued payment of any bonus payments employee would be eligible to receive paid at the time such bonus would be calculated, if such bonus falls within the Employment Term specified in Section 1.
(iv) in addition, the Company shall immediately vest the remaining outstanding, non-vested shares as specified in Section 3(b)
10. Other Agreements. Employee represents and warrants to the Company that:
(a) There are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful Employee’s execution of this Agreement or Employee’s employment hereunder, or which is or would be inconsistent or in conflict with this Agreement or Employee’s employment hereunder, or would prevent, limit or impair in any way the performance by Employee of her obligations hereunder;
(b) Employee’s execution of this Agreement and Employee’s employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which Employee is a party or by which Employee is bound;
(c) Employee is free to execute this Agreement and to enter into the employ of the Company pursuant to the provisions set forth herein; and
(d) Employee shall disclose the existence and terms of the restrictive covenants set forth in this Agreement to any employer that the Employee may work for during the term of this Agreement (which employment is not hereby authorized) or after the termination of the Employee’s employment at the Company if such restrictive covenants are then in full force and effect.
11. Survival of Provisions. Except as otherwise set forth in this Agreement, the provisions of this Agreement (including, without limitation, Sections 6, 7, 8, 9, 10, 11, 12 and 19) shall survive the cessation of Employee’s employment as set forth herein.
12. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and Employee and their respective successors, executors, administrators, heirs and/or permitted assigns; provided, however, that neither Employee nor the Company may make any assignments of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other parties hereto, except that, without such consent, the Company may assign this Agreement to any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise, provided that such successor assumes in writing all of the obligations of the Company under this Agreement.
13. Notice. Any notice or communication required or permitted under this Agreement shall be made in writing and delivered in person, sent by recognized overnight courier or sent by certified or registered mail, return receipt requested, addressed to the last known address of the party or to such other address as either party may from time to time duly specify by notice given to the other party in the manner specified above.
14. Entire Agreement; Amendments. This Agreement contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature between the parties hereto relating to the employment of Employee with the Company. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the parties hereto.
15. Waiver. The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other or subsequent breach of this Agreement.
16. Governing Law.
(a) This Agreement shall be construed and enforced in accordance with the substantive laws of the Province of Ontario without reference to its conflicts of law principles.
(b) Notwithstanding the substantive laws to be applied and the residence of the Parties, in the event of any dispute hereunder, the jurisdiction for resolution of such dispute shall be the Province of Ontario.
17. Invalidity. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the validity of any other provision of this Agreement, and such provision(s) shall be deemed modified to the extent necessary to make it enforceable.
18. Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation.
19. Specific Enforcement; Extension of Period.
(a) Employee acknowledges that the restrictions contained in Sections 6, 7, and 8 hereof are reasonable and necessary to protect the legitimate interests of the Company and its subsidiaries and affiliates, that the duration of the restrictions are reasonable given the nature of this Agreement and the position Employee holds within the Company, and that the Company would not enter into this Agreement unless Employee agrees to be bound by the restrictions set forth in Sections 6, 7 and 8 hereof.
(b) Employee acknowledges that any breach by of Sections 6, 7, and 8 hereof will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. Employee shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that an adequate remedy at law exists. In the event of any such breach by Employee, the Company shall have the right to enforce the provisions of Sections 6, 7, and 8 of this Agreement by seeking injunctive or other similar equitable relief in any court, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company. If an action at law or equity is necessary by the Company to enforce or interpret the terms of this Agreement, the Company shall be entitled to recover, in addition to any other relief, reasonable attorneys’ fees, costs and disbursements. In the event that the provisions of Sections 6, 7 or 8 hereof should ever be adjudicated to exceed the time, geographic, or other limitations permitted by applicable law in any applicable jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, or other limitations permitted by applicable law.
(c) In the event that Employee shall be in breach of any of the restrictions contained in Section 8 hereof, then the Restricted Period shall be extended for a period of time equal to the period of time that Employee is in breach of such restriction.
20. Withholding. All payments made by the Company to the Employee, or to her estate, shall be subject to the withholding of such amounts including, without limitation, any payroll taxes and any other assessments, as the Company determines should be withheld or paid pursuant to any applicable law or regulation.
21. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.
*****SIGNATURE PAGE TO FOLLOW*****
IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND, the parties have caused this Agreement to be executed on the day and year first written above by and between:
Golden Star Enterprises Ltd.
| | /s/ Eliav Kling | | | /s/ Eital Muskal | |
| By: | Eliav Kling | | By: | Eital Muskal | |
| Its: | Chief Executive Officer | | | Employee | |
EXHIBIT 10.8
GOLDEN STAR ENTERPRISES LTD. EXECUTIVE COMPENSATION AGREEMENT
This Agreement is dated effective as of December 1, 2021
Between:
LOUIS SHEFSKY an individual residing at 7420 Bathurst St., Suite 1104, Thornhill Ontario L4J6X4 (the “EXECUTIVE”)
And:
GOLDEN STAR ENTERPRISES LTD., a Delaware corporation having a business office at 2803 Philadelphia Pike, Suite B #565, Claymont, DE 19703 (the “Company”)
Whereas:
A. The Company desires to retain the services of EXECUTIVE with respect to the day to day operations of the Company and its wholly owned subsidiary, Enigmai;
B. The EXECUTIVE has certain business management expertise and financial markets expertise and has agreed to provide day to day management and oversight of the Company’s operations.
Now therefore this Agreement is entered into pursuant to the mutual covenants and agreements set forth below:
Section 1. Interpretation
1.1 Where used herein the following terms shall have the meanings set out below:
(a) “Executive Services” means the services to be provided by the EXECUTIVE as set out herein;
(b) “Board” means the board of directors of the Company;
(c) “Business Material” means any financial, market and technical information, methods and plans, trade secrets, know-how, technical expertise and other information relating to the Company’s business and operations;
(d) “Term” has the meaning given to it in subsection 2.1.
1.2 Governing Law.
This Agreement shall be governed by and be construed in accordance with the laws of Delaware.
1.3 Severability.
If any one or more of the provisions contained in this Agreement should be determined to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
Section 2. Term
2.1 Term.
The term of this Agreement (the “Term”) shall be from and including December 1, 2021, to and including November 30, 2022, unless this Agreement is earlier terminated in accordance with Section 5.
Section 3. Consulting Services
3.1 Consulting Services.
The Company hereby appoints and retains the EXECUTIVE, on a non-exclusive basis, during the Term to act as President of the Company and to provide such management services as requested by the Company from time to time relative to the operation of the Company including oversight of the Company’s required compliance filings, management and director of staff and consultants, as maybe required, and other day to day operations. The EXECUTIVE hereby accepts such appointment and agrees to provide diligently the Executive Services. In providing the Executive Services, the EXECUTIVE will report directly to and take direction from the Board. The EXECUTIVE shall attend as may be required by the Board, such meetings of the Board, either telephonically or in person, and provide reports on the Executive Services which shall include:
(a) be contracted by the Company as President;
(b) perform such duties and services as are commensurate with Executive’s position or as otherwise reasonably directed by the Board of Directors of the Company (the “Board”), which include but are not limited to;
| | · | Design and implement business strategies, plans and procedures; |
| | · | Set comprehensive goals for performance and growth; |
| | · | Establish policies that promote company culture and vision; |
| | · | Oversee daily operations of the company and the work of employees and consultants (IT, Marketing, Sales, and Finance etc.); |
| | · | Lead employees to encourage maximum performance and dedication; |
| | · | Evaluate performance by analyzing and interpreting data and metrics; |
| | · | Work with Company in fundraising ventures; |
| | · | Participate in expansion activities (investments, acquisitions, corporate alliances etc.); |
| | · | Manage relationships with partners/vendors; |
| | · | Executive will serve on the Board of Directors of the Company and will retain said Board Seat at all times that they serve as an Executive of the Company |
(c) Perform all duties incident to Executive’s position to the best of Executive’s ability and in compliance with the policies and procedures of the Company;
(d) Report directly to the Board
3.2 Board to Act Independently.
The Board shall diligently and responsibly receive all advice from the EXECUTIVE and exercise its own independent judgment before acting upon such advice.
3.3 Remuneration.
(a) In consideration of the provision of the EXECUTIVE Services, the Company shall pay to the EXECUTIVE a flat fee of one million fifty-four thousand three hundred thirty-nine (1,054,339) unregistered, restricted Shares of its Common Stock.
(b) The Company shall further pay to the EXECUTIVE any out-of-pocket expenses which shall be prior approved by the Company for the attendance at any meetings as may be required.
3.4 Other Contractual Agreements
The parties to this Agreement recognize that they may enter into other contractual agreements for services to be provided to the Company for which independent contracts shall be executed and that this Agreement relates solely to the appointment of the EXECUTIVE and the mandate of the EXECUTIVE as noted by the Company and the Board.
3.5 Disclosure of EXECUTIVE. During the Term, the EXECUTIVE shall:
(a) disclose to the Company all of its interests in any transaction or agreement contemplated by the Company or any matter which may taint the EXECUTIVE’s objectivity when performing its role as an EXECUTIVE hereunder;
(b) inform the Company of any business opportunities made available to the EXECUTIVE as a result of the EXECUTIVE’s involvement with the Company or otherwise through the performance of the EXECUTIVE Services; and
(c) not serve as EXECUTIVE, or consent to an appointment as a member of the board of directors, of a company which competes, directly or indirectly, with the Company.
Section 4. Confidential Information
4.1 Confidentiality Obligation.
The EXECUTIVE recognizes and agrees that any Business Material, Corporate Knowhow or Technical Data (the “Business Material”) furnished or to be furnished to it by the Company is to be used only for the purpose of providing the EXECUTIVE Services hereunder and that such materials and information will be kept confidential by the EXECUTIVE provided, however, that any such Business Material may be disclosed:
(a) if specifically consented to in writing by the Company; or
(b) if required by applicable law or by an order of a court of competent jurisdiction.
4.2 Exceptions.
The provisions of Section 4.1 shall not apply to:
(a) information which becomes generally available to the public other than as a result of a disclosure by the EXECUTIVE;
(b) information which is generally known to knowledgeable businesspeople involved in the business conducted by the Company other than as a result of a disclosure by the EXECUTIVE in violation of this part;
(c) information that was available to the EXECUTIVE on a non-confidential basis prior to its disclosure to the EXECUTIVE by the Company; or
(d) information that becomes available to the EXECUTIVE on a non-confidential basis from a person or entity other than the Company, unless such disclosure by that person is itself in breach of a confidentiality commitment made directly or indirectly to the Company;
and provided that nothing in this Agreement shall prevent the EXECUTIVE from using its expertise and knowledge in the conduct of other business for its own account or as a Consultant to others, except as set forth in paragraph 3.5(c) above.
5. Termination
5.1 Termination by the Company and the EXECUTIVE.
The Company or the EXECUTIVE may terminate this Agreement without cause at any time by giving thirty (30) days written notice of termination of this Agreement to the other party. Any termination of this Agreement, either pursuant to this Section or otherwise, will not affect the obligations under Section 4, which will survive such termination. In the event that this Agreement is terminated by the Company, the Company shall pay the EXECUTIVE an amount equal to any expenses incurred by the EXECUTIVE up to the effective date of the termination to the extent such expenses have not previously been reimbursed. Upon payment of such amounts, the EXECUTIVE shall have no claim against the Company for damages or otherwise by reason of such termination. In the event of termination of this Agreement, the EXECUTIVE shall, prior to the effective date of the termination, deliver to the Company all books, records, or other information in its possession pertaining to the Company’s business.
6. Indemnity and Limitation of Liability
6.1 Indemnification by the Company.
The Company shall indemnify and hold harmless the EXECUTIVE against any and all losses, damages, suits, judgments, costs and expenses arising under any such third-party claim or action that occurs solely due to actions taken by the Company, or by EXECUTIVE at the Company’s direction, provided however, that the EXECUTIVE provides the Company with:
(a) written notice of such claim or action within 14 days of acquiring knowledge of the event;
(b) sole control and authority of the defense or settlement of such claim or action (provided that the Company shall not enter into any settlement which materially affects the EXECUTIVE’s rights without the EXECUTIVE’s prior written consent); and
(c) proper and full information and reasonable assistance to defend and/or settle any such claim or action.
The Company shall not indemnify EXECUTIVE for any losses, damages, suits, judgments, costs or expenses arising from actions taken solely by EXECUTIVE.
6.2 No Liability for Acts of the Company.
The EXECUTIVE shall not be liable for any act of the Company or any of its other directors, officers or employees, except as required under applicable Delaware law.
6.3 Limitation of Liability.
Under no circumstances will either party be liable to the other party for indirect, incidental, consequential, special or exemplary or punitive damages (even if such party has been advised of the possibility of such damages), arising from any provision of this Agreement, such as, but not limited to, loss of revenue or anticipated profits or loss of business.
7. General Provisions
7.1 No Partnership or Agency.
The relationship between the Company and the EXECUTIVE is that of independent contractor and nothing herein contained shall be interpreted so as to create a partnership or agency relationship between the parties.
7.2 Assignment.
Neither party may assign any rights or delegate any obligations hereunder without the prior written consent of the other party.
As evidence of their agreement this Agreement has been executed by the parties hereto as of the date first above written.
GOLDEN STAR ENTERPRISES, LTD.
| /s/ Eliav Kling | |
| Eliav Kling, CEO | |
| | |
| /s/ Louis Shefsky | |
| Louis Shefsky, EXECUTIVE | |
EXHIBIT 10.9
GOLDEN STAR ENTERPRISES LTD. EXECUTIVE COMPENSATION AGREEMENT
This Agreement is dated effective as of January 1, 2022.
Between:
ELIAV KLING an individual residing at 112 Thornhill Ravines Cres., Maple, ON L6A 4J8 Canada (the “EXECUTIVE”)
And:
GOLDEN STAR ENTERPRISES LTD., a Delaware corporation having a business office at 2803 Philadelphia Pike, Suite B #565, Claymont, DE 19703 (the “Company”)
Whereas:
A. The Company desires to retain the services of EXECUTIVE with respect to the day to day operations of the Company and its wholly owned subsidiary, Enigmai;
B. The EXECUTIVE has certain business management expertise and financial markets expertise and has agreed to provide day to day management and oversight of the Company’s operations.
Now therefore this Agreement is entered into pursuant to the mutual covenants and agreements set forth below:
Section 1. Interpretation
1.1 Where used herein the following terms shall have the meanings set out below:
(a) “Executive Services” means the services to be provided by the EXECUTIVE as set out herein;
(b) “Board” means the board of directors of the Company;
(c) “Business Material” means any financial, market and technical information, methods and plans, trade secrets, know-how, technical expertise and other information relating to the Company’s business and operations;
(d) “Term” has the meaning given to it in subsection 2.1.
1.2 Governing Law.
This Agreement shall be governed by and be construed in accordance with the laws of Delaware.
1.3 Severability.
If any one or more of the provisions contained in this Agreement should be determined to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
Section 2. Term
2.1 Term.
The term of this Agreement (the “Term”) shall be from and including January 1, 2022, to and including December 31, 2022, unless this Agreement is earlier terminated in accordance with Section 5.
Section 3. Consulting Services
3.1 Consulting Services.
The Company hereby formally retains the EXECUTIVE, on a non-exclusive basis, during the Term to act as Chief Executive Officer of the Company and to provide such management services as requested by the Company from time to time relative to the operation of the Company including oversight of the Company’s required compliance filings, management and director of staff and consultants, as maybe required, and other day to day operations. The EXECUTIVE hereby accepts such appointment and agrees to provide diligently the Executive Services. In providing the Executive Services, the EXECUTIVE will report directly to and take direction from the Board. The EXECUTIVE shall attend as may be required by the Board, such meetings of the Board, either telephonically or in person, and provide reports on the Executive Services which shall include:
(a) Perform such duties and services as are commensurate with Executive’s position or as otherwise reasonably directed by the Board of Directors of the Company (the “Board”), which include but are not limited to;
| | · | Design and implement business strategies, plans and procedures; |
| | · | Set comprehensive goals for performance and growth; |
| | · | Establish policies that promote company culture and vision; |
| | · | Oversee daily operations of the company and the work of employees and consultants (IT, Marketing, Sales, and Finance etc.); |
| | · | Lead employees to encourage maximum performance and dedication; |
| | · | Evaluate performance by analyzing and interpreting data and metrics; |
| | · | Work with Company in fundraising ventures; |
| | · | Participate in expansion activities (investments, acquisitions, corporate alliances etc.); |
| | · | Manage relationships with partners/vendors; |
| | · | Executive will serve on the Board of Directors of the Company and will retain said Board Seat at all times that they serve as an Executive of the Company; |
| | · | Work directly with President of the Company to enhance shareholder value. |
(c) Perform all duties incident to Executive’s position to the best of Executive’s ability and in compliance with the policies and procedures of the Company;
(d) Report directly to the Board.
3.2 Board to Act Independently.
The Board shall diligently and responsibly receive all advice from the EXECUTIVE and exercise its own independent judgment before acting upon such advice.
3.3 Remuneration.
(a) In consideration of the provision of the EXECUTIVE Services, the Company shall pay to the EXECUTIVE a flat fee of $150,000 payable by the issuance of one million two hundred sixteen thousand five hundred forty-five (1,216,545) unregistered, restricted Shares of the Company’s Common Stock at a per share value of $0.1233.
(b) The Company shall further pay to the EXECUTIVE any out-of-pocket expenses which shall be prior approved by the Company for the attendance at any meetings as may be required.
3.4 Other Contractual Agreements
The parties to this Agreement recognize that they may enter into other contractual agreements for services to be provided to the Company for which independent contracts shall be executed and that this Agreement relates solely to the appointment of the EXECUTIVE and the mandate of the EXECUTIVE as noted by the Company and the Board.
3.5 Disclosure of EXECUTIVE. During the Term, the EXECUTIVE shall:
(a) disclose to the Company all of its interests in any transaction or agreement contemplated by the Company or any matter which may taint the EXECUTIVE’s objectivity when performing its role as an EXECUTIVE hereunder;
(b) inform the Company of any business opportunities made available to the EXECUTIVE as a result of the EXECUTIVE’s involvement with the Company or otherwise through the performance of the EXECUTIVE Services; and
(c) not serve as EXECUTIVE, or consent to an appointment as a member of the board of directors, of a company which competes, directly or indirectly, with the Company.
Section 4. Confidential Information
4.1 Confidentiality Obligation.
The EXECUTIVE recognizes and agrees that any Business Material, Corporate Knowhow or Technical Data (the “Business Material”) furnished or to be furnished to it by the Company is to be used only for the purpose of providing the EXECUTIVE Services hereunder and that such materials and information will be kept confidential by the EXECUTIVE provided, however, that any such Business Material may be disclosed:
(a) if specifically consented to in writing by the Company; or
(b) if required by applicable law or by an order of a court of competent jurisdiction.
4.2 Exceptions.
The provisions of Section 4.1 shall not apply to:
(a) information which becomes generally available to the public other than as a result of a disclosure by the EXECUTIVE;
(b) information which is generally known to knowledgeable businesspeople involved in the business conducted by the Company other than as a result of a disclosure by the EXECUTIVE in violation of this part;
(c) information that was available to the EXECUTIVE on a non-confidential basis prior to its disclosure to the EXECUTIVE by the Company; or
(d) information that becomes available to the EXECUTIVE on a non-confidential basis from a person or entity other than the Company, unless such disclosure by that person is itself in breach of a confidentiality commitment made directly or indirectly to the Company;
and provided that nothing in this Agreement shall prevent the EXECUTIVE from using its expertise and knowledge in the conduct of other business for its own account or as a Consultant to others, except as set forth in paragraph 3.5(c) above.
5. Termination
5.1 Termination by the Company and the EXECUTIVE.
The Company or the EXECUTIVE may terminate this Agreement without cause at any time by giving thirty (30) days written notice of termination of this Agreement to the other party. Any termination of this Agreement, either pursuant to this Section or otherwise, will not affect the obligations under Section 4, which will survive such termination. In the event that this Agreement is terminated by the Company, the Company shall pay the EXECUTIVE an amount equal to any expenses incurred by the EXECUTIVE up to the effective date of the termination to the extent such expenses have not previously been reimbursed. Upon payment of such amounts, the EXECUTIVE shall have no claim against the Company for damages or otherwise by reason of such termination. In the event of termination of this Agreement, the EXECUTIVE shall, prior to the effective date of the termination, deliver to the Company all books, records, or other information in its possession pertaining to the Company’s business.
6. Indemnity and Limitation of Liability
6.1 Indemnification by the Company.
The Company shall indemnify and hold harmless the EXECUTIVE against any and all losses, damages, suits, judgments, costs and expenses arising under any such third-party claim or action that occurs solely due to actions taken by the Company, or by EXECUTIVE at the Company’s direction, provided however, that the EXECUTIVE provides the Company with:
(a) written notice of such claim or action within 14 days of acquiring knowledge of the event;
(b) sole control and authority of the defense or settlement of such claim or action (provided that the Company shall not enter into any settlement which materially affects the EXECUTIVE’s rights without the EXECUTIVE’s prior written consent); and
(c) proper and full information and reasonable assistance to defend and/or settle any such claim or action.
The Company shall not indemnify EXECUTIVE for any losses, damages, suits, judgments, costs or expenses arising from actions taken solely by EXECUTIVE.
6.2 No Liability for Acts of the Company.
The EXECUTIVE shall not be liable for any act of the Company or any of its other directors, officers or employees, except as required under applicable Delaware law.
6.3 Limitation of Liability.
Under no circumstances will either party be liable to the other party for indirect, incidental, consequential, special or exemplary or punitive damages (even if such party has been advised of the possibility of such damages), arising from any provision of this Agreement, such as, but not limited to, loss of revenue or anticipated profits or loss of business.
7. General Provisions
7.1 No Partnership or Agency.
The relationship between the Company and the EXECUTIVE is that of independent contractor and nothing herein contained shall be interpreted so as to create a partnership or agency relationship between the parties.
7.2 Assignment.
Neither party may assign any rights or delegate any obligations hereunder without the prior written consent of the other party.
As evidence of their agreement this Agreement has been executed by the parties hereto as of the date first above written.
GOLDEN STAR ENTERPRISES, LTD.
| /s/ Louis Shefsky | |
| Louis Shefsky, President | |
| | |
| /s/ Eliav Kling | |
| Eliav Kling, EXECUTIVE | |
EXHIBIT 10.10
Golden Star Enterprises Ltd.
2803 Philadelphia Pike
Suite B
Claymont, DE 19703
Re: Finder’s Fee Agreement
Dear Eliav Kling:
As you know, Golden Star Enterprises Ltd. (the “Issuer”), has expressed an interest in obtaining private equity or debt capital for various purposes. This letter agreement (“Agreement”) sets forth the terms and conditions upon which J.H. Darbie & Co., Inc. (“Darbie”), will introduce the Issuer to third-party investors (each, an “Introduced Party”).
1. Nature of Agreement and Services.
(a) Promptly upon execution of this Agreement by the Issuer, Darbie will use its best efforts to initiate an introduction between principals of the Introduced Party and the Issuer. The Issuer understands that Darbie is not guaranteeing that a Transaction (as defined herein) will be consummated, is not offering to purchase any securities of the Issuer and is not obligated to provide any additional services beyond the scope of this Agreement.
(b) Issuer is not at the time of this Agreement a customer, affiliate, or representative of Darbie.
(c) Darbie is not providing any recommendation to the Issuer in connection with any possible Transaction.
(d) Darbie has not provided any investment banking, advisory, or analytic services to the Issuer, including underwriting or placement agent services, either as principal or agent, in connection with the offer or sale of any securities of the Issuer.
(e) Darbie is not and will not be a party to any contract entered into between the Issuer and any Introduced Party.
(f) Darbie will not participate in any way in fulfilling any obligations to any Introduced Party undertaken by the Issuer, including services relating to the offer or sale of securities, such as: (i) performing any independent analysis of the offer or sale of securities; (ii) engaging in any due diligence activities; (iii) assisting in or providing financing for such purchases; (iv) providing any advice relating to the valuation of or the financial advisability of such an investment; (v) advising or providing information regarding the suitability of any investment for any person; or (vi) handling any funds or securities.
2. Term.
(a) This Agreement will remain in effect for a period of 120 days from its date (the “Term”). Darbie will have the right to terminate this Agreement immediately upon written notice to the Issuer. The Issuer will not have the right to terminate this Agreement unless there has been a breach by Darbie of a material term of this Agreement, and the Issuer has provided Darbie with written notice of such breach; provided, however, Darbie will have the right to cure such breach within 10 days of the date of the notice sent by the Issuer. Notwithstanding termination of this Agreement, Darbie will be entitled to receive compensation under section 3 in the event the Issuer and an Introduced Party consummate a Transaction
J.H. Darbie & Co.
40 Wall Street New York, NY 10005
Telephone: 212-269-7271 Fax: 212-269-7330
www.jhdarbie.com
J H DARBIE & CO., INC.
Golden Star Enterprises Ltd.
January 14, 2022
Page 2
(as defined herein) at any time during the period commencing on the date hereof and ending 18 months from the latter of the date of the termination of this Agreement or the last funding of a Transaction between the Issuer and the Introduced Party, resulting in an executed term sheet. Sections 2, 3, 6, 8, and 11 will survive termination of this Agreement.
(b) If: (i) during the 18 months following termination or expiration of this Agreement, any Introduced Party purchases equity or debt securities from the Issuer; or (ii) during the Term, an Introduced Party enters into an agreement to purchase securities from the Issuer, which is consummated at any time thereafter; each of the foregoing, a “Transaction,” the Issuer will pay Darbie, upon the receipt of the purchase price for the securities or the close of the Transaction, a Finder’s Fee in the amount that would otherwise have been payable to Darbie in accordance with this Agreement had such Transaction occurred during the Term.
3. Finder’s Fee and Expenses.
(a) In consideration of the foregoing, upon consummation of the closing regarding a financing on behalf of the Issuer, directly or through a structured Transaction, Darbie will be entitled to receive a finder fee (“Finder’s Fee”) in cash equal to 8% of the gross proceeds of an equity/convertible debt transaction and/or cash equal to 3% of the gross proceeds of a non-convertible debt transaction received by the Issuer within three business days from the closing date. The Issuer and the Introduced Party will not be obligated to pay Darbie if the Issuer does not receive the Transaction Proceeds.
(b) Within three days of closing the Transaction the Issuer also shall pay Darbie equity in the form of common stock equal to 8% of the amount raised. The common stock will be restricted and priced at the Issuer’s public market closing price on the date of the Transaction.
(c) In the event that the Issuer proceeds with a non-financing transaction with one or more Introduced Parties, then prior to closing the Issuer and Darbie shall mutually agree upon compensation payable to Darbie which may include an ownership interest in the resulting licensed, joint venture and/or merged/acquiring entity. In the event the Issuer completes a non-financing transaction with an Introduced Party, without first agreeing with Darbie on the finder’s fee for the non-financing transaction, then Darbie shall be entitled to receive a cash fee equal to 6% of any licensing fees payable upon receipt by the licensor, a cash fee equal to 6% of the value of the Issuer related portion of the surviving entity resulting from any merger or acquisition payable upon closing of the transaction and, in the case of a joint venture, equal to 6% of Darbie’s ownership portion of the joint venture.
(d) The Finder’s Fee will be paid in cash and will be payable whether or not the Transaction involves equity or debt securities, or a combination of equity and debt securities and cash or is made on the installment-sale basis. The Finder’s Fee will be deducted from the Transaction Proceeds by the Introduced Party, and the Introduced Party will remit the Finder’s Fee directly to Darbie on Issuer’s behalf. For purposes of this Agreement “Transaction Proceeds” will mean the fair market value of all cash and securities received by the Issuer from the Introduced Party, including a debt repayment or debt assumption, all determined in accordance with generally accepted accounting principles. Notwithstanding the foregoing, in the event that the Transaction Proceeds are received by the Issuer in installments, the compensation payable to Darbie hereunder will be due and payable upon receipt by the Issuer of each installment in the same manner described earlier in this section.
(e) Darbie will be solely liable for the payment of any taxes imposed or arising out of any Finder’s Fee received by it under this Agreement.
(f) Issuer agrees to not circumvent Darbie by entering into business relations with any Introduced Party without providing payment of the agreed upon Finder’s Fee as stated in this Agreement.
(g) Issuer and Darbie will each pay its own expenses arising out of or relating to this Agreement.
J H DARBIE & CO., INC.
Golden Star Enterprises Ltd.
January 14, 2022
Page 3
4. Preexisting Relationship. In the event Issuer has prior evidentiary communication with an Introduced Party, the Issuer will notify Darbie of such a relationship and, upon written request, provide documentation of the Issuer’s prior communication with an Introduced Party. Communication will include phone or e-mail contact or written representations by both Issuer and an Introduced Party of a preexisting relationship. For purposes of this paragraph, email communication is deemed acceptable.
5. Confidential Information. Darbie will hold in confidence, for a period of two years from the date hereof, any confidential information that the Issuer may provide to it pursuant to this Agreement unless the Issuer gives Darbie permission in writing to disclose such confidential information to a specific third party. Notwithstanding the foregoing, Darbie will not be required to maintain confidentiality for information: (a) that is or becomes part of the public domain through no fault or action of Darbie; (b) of which it had independent knowledge prior to disclosure to it by the Issuer; (c) that comes into Darbie’s possession in the normal and routine course of its own business from and through independent, nonconfidential sources; or (d) that is required to be disclosed by Darbie by governmental or security regulatory requirements. If Darbie is requested or required (by oral questions, interrogatories, requests for information or document subpoenas, civil investigative demands, or similar process) to disclose any confidential information supplied to it by the Issuer, or the existence of other negotiations in the course of its dealings with the Issuer or its representatives, Darbie will, unless prohibited by law, promptly notify the Issuer of such a request so that the Issuer may seek an appropriate protective order.
6. Independent Contractor. Nothing in this Agreement will constitute a business combination, joint venture, partnership, or employment relationship between the Issuer and Darbie. Darbie acknowledges and agrees that it is merely and strictly acting as a finder, and not as an agent, employee, or representative of the Issuer, and has no authority to negotiate for or to bind the Issuer. This Agreement is not exclusive. Darbie agrees it will not make, publish, or distribute any advertisement or marketing material using the trademarks, logos, trade names or abbreviations thereof, or any other such identifying mark or name of the Issuer or its affiliates without the prior consent of the Issuer.
7. Indemnification. The Issuer agrees to indemnify and hold harmless Darbie and its officers, directors, employees, agents, representatives, and controlling persons (and the officers, directors, employees, agents, representatives, and controlling persons of each of them),from and against any and all losses, claims, damages, liabilities, costs, and expenses (and all actions, suits, proceedings, or claims in respect thereof) and any legal or other expenses in giving testimony or furnishing documents in response to a subpoena or otherwise (including the cost of investigating, preparing, or defending any such action, suit, proceeding or claim, whether or not in connection with any action, suit, proceeding, or claim in which Darbie or the Issuer is a party), as and when incurred, directly or indirectly, caused by, relating to, based upon, or arising out of Darbie’s service pursuant to this Agreement, including any suit based upon the terms and conditions of a Transaction or information, representations, or warranties provided by the Issuer to a Transaction party by the Issuer. The Issuer further agrees that Darbie will incur no liability to the Issuer for any acts or omissions by Darbie arising out of or relating to this Agreement or Darbie’s performance or failure to perform any services under this Agreement, except for Darbie’s intentional or willful misconduct. Further, in no event will Darbie be liable to the Issuer or to any third party or Transaction party for an amount in excess of the cash compensation received pursuant to section 3 hereof. This section 8 will survive the termination of this Agreement. Notwithstanding the foregoing, no party otherwise entitled to indemnification will be entitled thereto to the extent such party has been determined to have acted in a manner that has been deemed as gross negligence or willful misconduct regarding the matter for which indemnification is sought herein.
8. Notices. Any notice, demand, request, or other communication permitted or required under this Agreement will be in writing and will be deemed to have been given as of the date so delivered, if personally delivered; as of the date so sent, if sent by electronic mail and receipt is acknowledged by the recipient; and one day after the date so sent, if delivered by overnight courier service; addressed as follows:
| | If to the Issuer: | Golden Star Enterprises Ltd. |
| | | 2803 Philadelphia Pike Suite B |
J H DARBIE & CO., INC.
Golden Star Enterprises Ltd.
January 14, 2022
Page 4
Claymont, DE 19703 Attn: Eliav Kling
Email: eliav.kling@goldenstarenterprisesltd.com
| | If to Darbie, to: | J. H. Darbie & Co., Inc. |
| | | 48 Wall Street, Suite 1206 New York, NY 10005 Attn: Xavier Vicuna Email: ib@jhdarbie.com |
Notwithstanding the foregoing, service of legal process or other similar communications will not be given by electronic mail and will not be deemed duly given under this Agreement if delivered by such means. Each party, by notice duly given in accordance herewith, may specify a different address for the giving of any notice hereunder.
9. Successors and Assigns. No party will assign its rights, duties, and obligations under this Agreement without the written consent of the other party, which will not be unreasonably withheld, except as otherwise specifically contemplated in this Agreement. This Agreement will be binding upon, inure to the benefit of, and be enforceable by the parties and their permitted successors and assigns.
10. Governing Law and Enforcement. This Agreement will be governed by and construed under and in accordance with the laws of the state of New York, without giving effect to any choice or conflict of law provision or rule (whether the state of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the state of New York. All matters involving the Issuer and Darbie, whether arising under this Agreement or otherwise will be heard and determined by mediation or arbitration.
11. Entire Agreement. This Agreement incorporates and includes all prior negotiations, correspondence, conversations, agreements, or understandings applicable to the matters contained herein, and the parties agree that there are no commitments, agreements, or understandings concerning the subject matter of this Agreement that are not contained in this document. The parties acknowledge that, in deciding to enter into this Agreement, they have not relied upon any statements, promises, or representations, written or oral, express or implied, other than those set forth in this Agreement. Accordingly, it is agreed that no deviation from the terms hereof will be predicated upon any prior representations or agreements, whether oral or written. The parties acknowledge that they have negotiated this Agreement at arm’s-length with adequate representation on an equal basis, and the filing of a suit challenging the negotiated terms of this Agreement by either party will be deemed a default and this Agreement will be terminated as provided herein.
12. Amendment. Any amendment, modification, or waiver of the terms of this Agreement must be executed in writing by both parties.
13. Severability. The provisions of this Agreement are severable and should any provision hereof be void, voidable, or unenforceable under any applicable law, such void, voidable, or unenforceable provision will not affect or invalidate any other provision of this Agreement, which will continue to govern the relative rights and duties of the parties as though the void, voidable, or unenforceable provision was not a part hereof. In addition, it is the intention and agreement of the parties that all the terms and conditions hereof be enforced to the fullest extent permitted by law.
14. Warranty of Authority. Each of the individuals signing this Agreement on behalf of a party hereto warrants and represents that such individual is duly authorized and empowered to enter in this Agreement and bind such party hereto.
15. Counterpart Signatures. This Agreement may be executed in any number of counterparts (and any counterpart may be executed by original, portable document format (pdf), or facsimile signature), each of which when executed and delivered will be deemed an original, but all of which will constitute one and the same instrument.
J H DARBIE & CO., INC.
Golden Star Enterprises Ltd.
January 14, 2022
Page 5
If the foregoing is acceptable to you, please so indicate by signing in the space provided below and returning a signed copy of this Agreement to us for our records.
Sincerely,
J.H. DARBIE & CO., INC.
By: /s/ Xavier Vicuna
Name: Xavier Vicuna
Title: Vice President
GOLDEN STAR ENTERPRISES LTD.
By: /s/ Eliav Kling
Name: Eliav Kling
Title: CEO
Agreed to and accepted this 14 day of January 2022.
EXHIBIT 10.11
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of May 20, 2022, by and between GOLDEN STAR ENTERPRISES LTD., a Delaware corporation, with headquarters located at 2803 Philadelphia Pike, Suite B, Claymont, DE 19703 (the “Company”), and MAST HILL FUND, L.P., a Delaware limited partnership, with its address at 48 Parker Road, Wellesley, MA 02482 (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506(b) promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act; and
B. Buyer desires to purchase from the Company, and the Company desires to issue and sell to the Buyer, upon the terms and conditions set forth in this Agreement, a senior secured promissory note of the Company, in the aggregate principal amount of $370,000.00 (as the principal amount thereof may be increased pursuant to the terms thereof, and together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, in the form attached hereto as Exhibit A, the “Note”), convertible into shares of common stock, $0.0001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note; and
C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of the Note as is set forth immediately below its name on the signature pages hereto; and
D. The Company wishes to issue to the Warrants (as defined below) and Commitment Shares (as defined below) to the Buyer as additional consideration for the purchase of the Note, exercisable into shares of Common Stock, which shall be earned in full as of the Closing Date, as further provided herein.
NOW THEREFORE, in consideration of the foregoing and of the agreements and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Buyer hereby agree as follows:
1. Purchase and Sale of Note.
a. Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from the Company, the Note, as further provided herein. As used in this Agreement, the term “business day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.
b. Form of Payment. On the Closing Date: (i) the Buyer shall pay the purchase price of $333,000.00 (the “Purchase Price”) for the Note, to be issued and sold to it at the Closing (as defined below), by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note, and (ii) the Company shall deliver such duly executed Note and Warrants on behalf of the Company, to the Buyer, against delivery of such Purchase Price. On the Closing, the Buyer shall withhold a non-accountable sum of $5,000.00 from the Purchase Price to cover the Buyer’s legal fees in connection with the transactions contemplated by this Agreement.
c. Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be on the date that the Purchase Price for the Note is paid by Buyer pursuant to terms of this Agreement.
d. Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties (including via exchange of electronic signatures).
e. Warrants; Commitment Shares. On or before the Closing Date, the Company shall issue a common stock purchase warrant to Buyer to purchase 15,000,000 shares of the Company’s common stock (the “First Warrant”) upon the terms and subject to the limitations and conditions set forth in such First Warrant. On or before the Closing Date, the Company shall issue a common stock purchase warrant to Buyer to purchase 2,000,000 shares of the Company’s common stock (the “Second Warrant”) upon the terms and subject to the limitations and conditions set forth in such Second Warrant. On or before the Closing Date, the Company shall issue a common stock purchase warrant to Buyer to purchase 1,000,000 shares of the Company’s common stock (the “Third Warrant”) upon the terms and subject to the limitations and conditions set forth in such Third Warrant. On or before the Closing Date, the Company shall issue a common stock purchase warrant to Buyer to purchase 1,000,000 shares of the Company’s common stock (the “Fourth Warrant”) upon the terms and subject to the limitations and conditions set forth in such Fourth Warrant. The First Warrant, Second Warrant, Third Warrant, and Fourth Warrant shall collectively be referred to herein as the “Warrants”. On or before the Closing Date, the Company shall issue 4,920,000 shares of the Company’s common stock (the “Commitment Shares”) to the Buyer, which shall be earned in full as of the Closing Date.
2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company as of the Closing Date that:
a. Investment Purpose. As of the Closing Date, the Buyer is purchasing the Note, Commitment Shares, and Warrants (the Note, Commitment Shares, Warrants, shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (the “Conversion Shares”), and shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants (the “Exercise Shares”) shall collectively be referred to herein as the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).
c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been, and for so long as the Note remains outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remains outstanding will continue to be, afforded the opportunity to ask questions of the Company regarding its business and affairs. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information regarding the Company or otherwise and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below.
e. Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Re-sale. The Buyer understands that (i) the sale or resale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act,
(b) the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel (which may be the Legal Counsel Opinion (as defined below)) that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144 or other applicable exemption, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged in connection with a bona fide margin account or other lending arrangement secured by the Securities, and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and the Buyer in effecting such pledge of Securities shall be not required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or otherwise.
g. Legends. The Buyer understands that until such time as the Note, Warrants, Commitment Shares, Conversion Shares, and/or Exercise Shares, have been registered under the 1933 Act or may be sold pursuant to Rule 144, Rule 144A under the 1933 Act, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Securities may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such Securities):
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE/EXERCISABLE] HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S, OR OTHER APPLICABLE EXEMPTION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above shall be removed and the Company shall issue a certificate or book entry statement for the applicable shares of Common Stock without such legend to the holder of any Security upon which it is stamped or (as requested by such holder) issue the applicable shares of Common Stock to such holder by electronic delivery by crediting the account of such holder’s broker with The Depository Trust Company (“DTC”), if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) the Company or the Buyer provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 4(m) hereof) to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation S, or other applicable exemption at the Deadline (as defined in the Note), it will be considered an Event of Default pursuant to Section 3.2 of the Note.
h. Authorization; Enforcement. This Agreement has been duly and validly authorized by the Buyer and has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and except as may be limited by the exercise of judicial discretion in applying principles of equity.
3. Representations and Warrantiesofthe Company. The Company represents and warrants to the Buyer as of the Closing Date that:
a. Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a), if attached hereto, sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.
b. Authorization; Enforcement. The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note, and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Warrants, the Note, Commitment Shares, Conversion Shares, and the Exercise Shares by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note, Warrants, as well as the issuance and reservation for issuance of the Conversion Shares and Exercise Shares issuable upon conversion of the Note and/or exercise of the Warrants) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, its shareholders, or its debt holders is required, (iii) this Agreement and the Note (together with any other instruments executed in connection herewith or therewith) have been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement, the Note and the other instruments documents executed in connection herewith or therewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms.
c. Capitalization; Governing Documents. As of May 20, 2022, the authorized capital stock of the Company consists of: 500,000,000 authorized shares of Common Stock, of which 98,609,832 shares were issued and outstanding, and 50,000,000, 0 authorized shares of preferred stock, of which 0 shares of preferred stock were issued and outstanding. All of such outstanding shares of capital stock of the Company, the Conversion Shares, Exercise Shares, and Commitment Shares are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of this Agreement, other than as publicly announced prior to such date and reflected in the SEC Documents of the Company (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of any of the Securities. The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto.
d. Issuance of Conversion Shares and Exercise Shares. The Conversion Shares and Exercise Shares are duly authorized and reserved for issuance and, upon conversion of the Note and/or exercise of the Warrant in accordance with its terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
e. Issuance of Warrants and Commitment Shares. The issuance of the Warrants and Commitment Shares are duly authorized and will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
f. Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect of the Conversion Shares and Exercise Shares to the Common Stock upon the conversion of the Note and/or exercise of the Warrants. The Company further acknowledges that its obligation to issue, upon conversion of the Note and/or exercise of the Warrants, the Conversion Shares and/or Exercise Shares, are absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
g. Ranking; No Conflicts. The Note shall have priority in payment and performance over all indebtedness of the Company and its Subsidiaries, as further provided in that certain security agreement entered into between the Company, the Subsidiaries, and the Buyer on the date of this Agreement (the “Security Agreement”), a form of which is attached hereto as Exhibit C. The Company represents and warrants that there are no security interests in, or liens on, the Company’s assets as of the date of this Agreement except as created in favor of the Buyer pursuant to the Security Agreement. The execution, delivery and performance of this Agreement and the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares and Exercise Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, note, evidence of indebtedness, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities is subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect), or (iv) trigger any anti-dilution and/or ratchet provision contained in any other contract in which the Company is a party thereto or any security issued by the Company. Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement and the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and, upon conversion of the Note and/or exercise of the Warrants, issue Conversion Shares and/or Exercise Shares as applicable. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Principal Market (as defined herein) and does not reasonably anticipate that the Common Stock will be delisted by the Principal Market in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The “Principal Market” shall mean the principal securities exchange or trading market where such Common Stock is listed or traded, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
h. SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”), as well as all reports, schedules, forms, statements and other documents required to be filed by it with OTC Markets (in each case, all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to December 31, 2021, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act. The Company has never been a “shell company” as described in Rule 144(i)(1)(i).
i. Absence of Certain Changes. Since December 31, 2021, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.
j. Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The SEC Documents contain a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
k. Intellectual Property. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.
l. No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.
m. Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.
n. Transactions with Affiliates. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options described in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
o. Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).
p. Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’s purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
q. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.
r. No Brokers; No Solicitation. Except with respect to J. H. Darbie & Co., a registered broker-dealer (CRD#: 43520), the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. The Company acknowledges and agrees that neither the Buyer nor its employee(s), member(s), beneficial owner(s), or partner(s) solicited the Company to enter into this Agreement and consummate the transactions described in this Agreement.
s. Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since December 31, 2021, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.
t. Environmental Matters.
(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term ”Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.
(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.
u. Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(u), if attached hereto, or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held bythem under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.
v. Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Upon written request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage.
w. Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
x. Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
y. Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company’s financial statements for its most recent fiscal year end and interim financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
z. No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.
aa. No Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.
bb. No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.
cc. Manipulation of Price. The Company has not, and to its knowledge no one acting on its behalf has: (i) taken, directly or indirectly, any action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.
dd. Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
ee. Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any of the officers, directors, employees, agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.
ff. Breach of Representations and Warranties by the Company. The Company agrees that if the Company breaches any of the representations or warranties set forth in this Section 3 and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.4 of the Note.
4. ADDITIONAL COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS.
a. Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities if required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.
c. Use of Proceeds. The Company shall use the proceeds for business development, and not for any other purpose, including but not limited to (i) the repayment of any indebtedness owed to officers, directors or employees of the Company or their affiliates, (ii) the repayment of any debt issued in corporate finance transactions, (iii) any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with the Company’s currently existing operations), (iv) any loan, credit, or advance to any officers, directors, employees, or affiliates of the Company, or (v) in violation or contravention of any applicable law, rule or regulation.
d. Right of Participation and First Refusal.
(i) Other than arrangements that are in place or disclosed in SEC Documents prior to the date of this Agreement, from the date of this Agreement until the Note is extinguished in its entirety, the Company will not, (i) directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or its Subsidiaries’ debt, equity, or equity equivalent securities, including without limitation any debt, preferred shares or other instrument or security that is, at any time during its life and/or under any circumstances, convertible into, exchangeable, or exercisable for Common Stock (any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”) or (ii) enter into any definitive agreement with regard to the foregoing, in each case unless the Company shall have first complied with this Section 4(d).
(ii) The Company shall deliver to the Buyer an irrevocable written notice (the “Offer Notice”) of any proposed or intended Subsequent Placement, which shall (w) identify and describe the Subsequent Placement, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the securities in the Subsequent Placement to be issued, sold, or exchanged and (y) offer to issue and sell to or exchange with the Buyer at least one hundred percent (100%) of the securities in the Subsequent Placement (in each case, an “Offer”).
(iii) To accept an Offer, in whole or in part, the Buyer must deliver a written notice (the “Notice of Acceptance”) to the Company prior to the end of the fifth (5th) Trading Day (as defined in the Note) after the Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the amount that the Buyer elects to purchase (the “Subscription Amount”). The Company shall complete the Subsequent Placement and issue and sell the Subscription Amount to the Buyer upon terms and conditions (including, without limitation, unit prices and interest rates) set forth in the Offer Notice, unless a change to such terms and conditions is agreed to in writing between the Company and Buyer.
(iv) Notwithstanding anything to the contrary contained herein, if the Company desires to modify or amend the terms or conditions of a Subsequent Placement at any time after the Offer Notice is given to Buyer (provided, however, that such modification or amendment to the terms or conditions cannot occur during any Offer Period), the Company shall deliver to the Buyer a new Offer Notice and the Offer Period of such new Offer shall expire at the end of the fifth (5th) Trading Day after the Buyer’s receipt of such new Offer Notice.
e. Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Buyer in order to enforce any right or remedy under this Agreement, the Note and any document, agreement or instrument contemplated thereby. Notwithstanding any provision to the contrary contained in this Agreement, the Note and any document, agreement or instrument contemplated thereby, it is expressly agreed and provided that the total liability of the Company under this Agreement, the Note or any document, agreement or instrument contemplated thereby for payments which under applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under applicable law in the nature of interest that the Company may be obligated to pay under this Agreement, the Note and any document, agreement or instrument contemplated thereby exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law applicable to this Agreement, the Note and any document, agreement or instrument contemplated thereby is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Agreement, the Note and any document, agreement or instrument contemplated thereby from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Buyer with respect to indebtedness evidenced by this Agreement, the Note and any document, agreement or instrument contemplated thereby, such excess shall be applied by the Buyer to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Buyer’s election.
f. Restriction on Activities. Commencing as of the date first above written, and until the earlier of payment of the Note in full or full conversion of the Note, the Company shall not, directly or indirectly, without the Buyer’s prior written consent, which consent shall not be unreasonably withheld: (a) change the nature of its business; or (b) sell, divest, acquire, change the structure of any material assets other than in the ordinary course of business.
g. Listing. The Company will, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the Principal Market or any equivalent replacement exchange or electronic quotation system (including but not limited to the Pink Sheets electronic quotation system) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the Principal Market and any other exchanges or electronic quotation systems on which the Common Stock is then traded regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.
h. Corporate Existence. The Company will, so long as the Buyer beneficially owns any of the Securities, maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading or quotation on the Principal Market, any tier of the NASDAQ Stock Market, the New York Stock Exchange or the NYSE MKT.
i. No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
j. Breach of Covenants. The Company acknowledges and agrees that if the Company breaches any of the covenants set forth in this Section 4, in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.3 of the Note.
k. Compliance with 1934 Act; Public Information Failures. Beginning on the date that is one hundred eighty (180) calendar days after the date of this Agreement and continuing for or so long as the Buyer beneficially owns the Note, Warrants, Conversion Shares, Commitment Shares, or any Exercise Shares, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act. During the period that the Buyer beneficially owns the Note, if the Company shall (i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirements under Rule 144(c) or (ii) if the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (each, a “Public Information Failure”) then, as partial relief for the damages to the Buyer by reason of any such delay in or reduction of its ability to sell the Securities (which remedy shall not be exclusive of any other remedies available pursuant to this Agreement, the Note, or at law or in equity), the Company shall pay to the Buyer an amount in cash equal to three percent (3%) of the Purchase Price on each of the day of a Public Information Failure and on every thirtieth day (pro rated for periods totaling less than thirty days) thereafter until the date such Public Information Failure is cured. The payments to which a holder shall be entitled pursuant to this Section 4(k) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (iii) the third business day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 5% per month (prorated for partial months) until paid in full.
l. Acknowledgement Regarding Buyer’s Trading Activity. Until the Note is fully repaid or fully converted, the Buyer shall not effect any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Common Stock which establishes a net short position with respect to the Common Stock.
m. [Intentionally Omitted].
n. Legal Counsel Opinions. Upon the request of the Buyer from to time to time, the Company shall be responsible (at its cost) for promptly supplying to the Company’s transfer agent and the Buyer a customary legal opinion letter of its counsel (the “Legal Counsel Opinion”) to the effect that the resale of the Conversion Shares and/or Exercise Shares by the Buyer or its affiliates, successors and assigns is exempt from the registration requirements of the 1933 Act pursuant to Rule 144 (provided the requirements of Rule 144 are satisfied and provided the Conversion Shares and/or Exercise Shares are not then registered under the 1933 Act for resale pursuant to an effective registration statement) or other applicable exemption (provided the requirements of such other applicable exemption are satisfied). In addition, the Buyer may (at the Company’s cost) at any time secure its own legal counsel to issue the Legal Counsel Opinion, and the Company will instruct its transfer agent to accept such opinion. The Company hereby agrees that it may never take the position that it is a “shell company” in connection with its obligations under this Agreement or otherwise.
o. Piggyback Registration Rights and Registration Rights Agreement. The Company hereby grants to the Buyer the piggyback registration rights set forth on Exhibit B hereto as well as the registration rights in the registration rights agreement attached hereto as Exhibit D (the “Registration Rights Agreement”).
p. Most Favored Nation. While the Note or any principal amount, interest or fees or expenses due thereunder remain outstanding and unpaid, the Company shall not enter into any public or private offering of its securities (including securities convertible into shares of Common Stock) with any individual or entity (an “Other Investor”) that has the effect of establishing rights or otherwise benefiting such Other Investor in a manner more favorable in any material respect to such Other Investor than the rights and benefits established in favor of the Buyer by this Agreement or the Note unless, in any such case, the Buyer has been provided with such rights and benefits pursuant to a definitive written agreement or agreements between the Company and the Buyer.
q. Subsequent Variable Rate Transactions. From the date hereof until such time as the Note is fully converted or fully repaid, the Company shall be prohibited from effecting or entering into an agreement involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement whereby the Company may issue securities at a future determined price (except with respect to an Equity Line of Credit (as defined in the Note)). The Buyer shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
r. [Intentionally Omitted].
s. Non-Public Information. The Company covenants and agrees that neither it, nor any other person acting on its behalf will provide the Buyer or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto the Buyer shall have consented to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and confirms that the Buyer shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company delivers any material, non-public information to the Buyer without such Buyer’s consent, the Company hereby covenants and agrees that such Buyer shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or affiliates, not to trade on the basis of, such material, non- public information, provided that the Buyer shall remain subject to applicable law. To the extent that any notice provided, information provided, or any other communications made by the Company, to the Buyer, constitutes or contains material non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice or other material information with the SEC pursuant to a Current Report on Form 8-K. In addition to any other remedies provided by this Agreement or the related transaction documents, if the Company provides any material non-public information to the Buyer without their prior written consent, and it fails to immediately (no later than that business day) file a Form 8-K disclosing this material non-public information, it shall pay the Buyer as partial liquidated damages and not as a penalty a sum equal to $3,000 per day beginning with the day the information is disclosed to the Buyer and ending and including the day the Form 8-K disclosing this information is filed.
t. D&O Insurance. Within 60 calendar days of the Closing, the Company shall purchase director and officer insurance on behalf of the Company's (including its subsidiary) officers and directors for a period of 18 months after the Closing with respect to any losses, claims, damages, liabilities, costs and expense in connection with any actual or threatened claim or proceeding that is based on, or arises out of their status as a director or officer of the Company. The insurance policy shall provide for two years of tail coverage.
5. Transfer Agent Instructions. The Company shall issue irrevocable instructions to the Company’s transfer agent to issue certificates and/or issue shares electronically at the Buyer’s option, registered in the name of the Buyer or its nominee, upon conversion of the Note and/or exercise of the Warrants, the Conversion Shares and Exercise Shares, in such amounts as specified from time to time by the Buyer to the Company in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably reserved shares of Common Stock in the Reserved Amount (as defined in the Note)) signed by the successor transfer agent to the Company and the Company. Prior to registration of the Conversion Shares and/or Exercise Shares under the 1933 Act or the date on which the Conversion Shares and/or Exercise Shares may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates or book entry shares shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5 will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Securities to be issued to the Buyer upon conversion of or otherwise pursuant to the Note and/or upon exercise of or otherwise pursuant to the Warrants as and when required by the Note and this Agreement; (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Securities issued to the Buyer upon conversion of or otherwise pursuant to the Note and/or upon exercise of or otherwise pursuant to the Warrants as and when required by the Note, Warrants, and/or this Agreement and (iv) it will provide any required corporate resolutions and issuance approvals to its transfer agent within 6 hours of each conversion of the Note and/or exercise of the Warrants. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Company, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to 144, Rule 144A, Regulation S, or other applicable exemption, the Company shall permit the transfer, and, in the case of the Securities, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.
6. Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:
a. The Buyer shall have executed this Agreement, the Security Agreement, and the Registration Rights Agreement, and delivered the same to the Company.
b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
7. Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note, on the Closing Date, is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement, the Security Agreement, and the RRA, and delivered the same to the Buyer.
b. The Company shall have delivered to the Buyer the duly executed Note in such denominations as the Buyer shall request and in accordance with Section 1(b) above.
c. The Company shall have delivered to the Buyer the Warrants and Commitment Shares.
d. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.
e. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of Closing Date, as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
f. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
g. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to the failure of the Company to be timely in its reporting obligations to OTC Markets.
h. Trading in the Common Stock on the Principal Market shall not have been suspended by the SEC, FINRA or the Principal Market.
i. The Company shall have delivered to the Buyer (i) a certificate evidencing the formation and good standing of the Company and each of its Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction, as of a date within ten (10) days of the Closing Date and (ii) resolutions adopted by the Company’s Board of Directors at a duly called meeting or by unanimous written consent authorizing this Agreement and all other documents, instruments and transactions contemplated hereby.
8. Governing Law; Miscellaneous.
a. Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the state courts located in the Commonwealth of Massachusetts or in the federal courts located in the Commonwealth of Massachusetts. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. A facsimile or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or .pdf signature. Delivery of a counterpart signature hereto by facsimile or email/.pdf transmission shall be deemed validly delivery thereof.
c. Construction; Headings. This Agreement shall be deemed to be jointly drafted by the Company and the Buyer and shall not be construed against any person as the drafter hereof. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
d. Severability. In the event that any provision of this Agreement, the Note, or any other agreement or instrument delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby.
e. Entire Agreement; Amendments. This Agreement, the Note, and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement or any agreement or instrument contemplated hereby may be waived or amended other than by an instrument in writing signed by the Buyer.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
GOLDEN STAR ENTERPRISES LTD.
2803 Philadelphia Pike, Suite B
Claymont, DE 19703
Attention: Eliav Kling
e-mail: info@goldenstarenterprisesltd.com
If to the Buyer:
MAST HILL FUND, L.P.
48 Parker Road
Wellesley, MA 02482
e-mail: admin@masthillfund.com
g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer. The Buyer may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
j. Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, Principal Market or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, Principal Market (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
l. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
m. Indemnification. In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement or the Note, the Company shall defend, protect, indemnify and hold harmless the Buyer and its stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of the Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.
n. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement, the Note, the Warrants, or any other agreement, certificate, instrument or document contemplated hereby or thereby will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, the Note, the Warrants, or any other agreement, certificate, instrument or document contemplated hereby or thereby, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement, the Note, the Warrants, or any other agreement, certificate, instrument or document contemplated hereby or thereby, and to enforce specifically the terms and provisions hereof and thereof, without the necessity of showing economic loss and without any bond or other security being required.
o. Payment Set Aside. To the extent that the (i) Company makes a payment or payments to the Buyer hereunder, pursuant to the Note, pursuant to the Warrants, or pursuant to any other agreement, certificate, instrument or document contemplated hereby or thereby, or (ii) the Buyer enforces or exercises its rights hereunder, pursuant to the Note, pursuant to the Warrants, or pursuant to any other agreement, certificate, instrument or document contemplated hereby or thereby, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof (including but not limited to the sale of the Securities) are for any reason (i) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Buyer, or (ii) are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then (i) to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred and (ii) the Company shall immediately pay to the Buyer a dollar amount equal to the amount that was for any reason (i) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Buyer, or (ii) required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action).
p. Failure or Indulgence Not Waiver. No failure or delay on the part of the Buyer in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Buyer existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
GOLDEN STAR ENTERPRISES LTD.
| By: /s/Eliav Kling |
| Name: ELIAV KlING |
| Title: CHIEF EXECUTIVE OFFICER |
MAST HILL FUND, L.P.
| By: /s/ Patrick Hassani |
| Name: PATRICK HASSANI |
| Title: CHIEF INVESTMENT OFFICER |
SUBSCRIPTION AMOUNT:
| Principal Amount of Note: $370,000.00 |
| Actual Amount of Purchase Price of Note: $333,000.00 |
EXHIBIT A
FORM OF NOTE
[attached hereto]
EXHIBIT B
REGISTRATION RIGHTS
All of the Conversion Shares, Exercise Shares, and Commitment Shares shall be deemed “Registrable Securities” subject to the provisions of this Exhibit B. All capitalized terms used but not defined in this Exhibit B shall have the meanings ascribed to such terms in the Securities Purchase Agreement to which this Exhibit is attached.
1. Piggy-Back Registration.
1.1 Piggy-Back Rights. If at any time on or after the date of the Closing the Company proposes to file any Registration Statement under the 1933 Act (a “Registration Statement”) with respect to any offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan on Form S-8, (ii) for a dividend reinvestment plan or (iii) in connection with a merger or acquisition, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities appearing on the books and records of the Company as such a holder as soon as practicable but in no event less than ten (10) days before the anticipated filing date of the Registration Statement, which notice shall describe the amount and type of securities to be included in such Registration Statement, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such holders may request in writing within three (3) days following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Registrable Securities to be included in such registration and shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof (with the understanding that the Company shall file the initial prospectus covering the Buyer’s sale of the Registrable Securities at prevailing market prices on the same date that the Registration Statement is declared effective by the SEC).
1.2 Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 1.5 below.
1.3 The Company shall notify the holders of Registrable Securities at any time when a prospectus relating to such holder’s Registrable Securities is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. At the request of such holder, the Company shall also prepare, file and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. The holders of Registrable Securities shall not to offer or sell any Registrable Securities covered by the Registration Statement after receipt of such notification until the receipt of such supplement or amendment.
1.4 The Company may request a holder of Registrable Securities to furnish the Company such information with respect to such holder and such holder’s proposed distribution of the Registrable Securities pursuant to the Registration Statement as the Company may from time to time reasonably request in writing or as shall be required by law or by the SEC in connection therewith, and such holders shall furnish the Company with such information.
1.5 All fees and expenses incident to the performance of or compliance with this Exhibit B by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the SEC, (B) with respect to filings required to be made with any trading market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) with respect to any filing that may be required to be made by any broker through which a holder of Registrable Securities intends to make sales of Registrable Securities with the FINRA, (ii) printing expenses, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) 1933 Act liability insurance, if the Company so desires such insurance, (vi) fees and expenses of all other persons or entities retained by the Company in connection with the consummation of the transactions contemplated by this Exhibit B and (vii) reasonable fees and disbursements of a single special counsel for the holders of Registrable Securities (selected by holders of the majority of the Registrable Securities requesting such registration). In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any holder of Registrable Securities.
1.6 The Company and its successors and assigns shall indemnify and hold harmless the Buyer, each holder of Registrable Securities, the officers, directors, members, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each individual or entity who controls the Buyer or any such holder of Registrable Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling individual or entity (each, an “Indemnified Party”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any related prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any such prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Exhibit B, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based upon information regarding the Buyer or such holder of Registrable Securities furnished to the Company by such party for use therein. The Company shall notify the Buyer and each holder of Registrable Securities promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Exhibit B of which the Company is aware.
1.7 If the indemnification under Section 1.6 is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then the Company shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Company and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of the Company and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, the Company or the Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in Section 1.6 was available to such party in accordance with its terms. It is agreed that it would not be just and equitable if contribution pursuant to this Section 1.7 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding sentence. Notwithstanding the provisions of this Section 1.7, neither the Buyer nor any holder of Registrable Securities shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such party from the sale of all of their Registrable Securities pursuant to such Registration Statement or related prospectus exceeds the amount of any damages that such party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
[End of Exhibit B]
EXHIBIT C
FORM OF SECURITY AGREEMENT
[attached hereto]
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
[attached hereto]
EXHIBIT 10.12
THIS INSTRUMENT CONTAINS AN AFFIDAVIT OF CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS BORROWER MAY HAVE AND ALLOWS THE HOLDER TO OBTAIN A JUDGMENT AGAINST BORROWER WITHOUT ANY FURTHER NOTICE.
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $370,000.00 | Issue Date: May 20, 2022 |
| Actual Amount of Purchase Price: $333,000.00 | |
SENIOR SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (hereinafter called the “Borrower” or the “Company”) (Trading Symbol: GSPT), hereby promises to pay to the order of MAST HILL FUND, L.P., a Delaware limited partnership, or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $370,000.00 (the “Principal Amount”) (subject to adjustment herein), which amount is the $333,000.00 actual amount of the purchase price hereof plus an original issue discount in the amount of $37,000.00 (the “OID”), and to pay interest on the unpaid Principal Amount hereof at the rate of twelve percent (12%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein. The maturity date shall be twelve (12) months from the Issue Date (the “Maturity Date”), and is the date upon which the Principal Amount (which includes the OID) and any accrued and unpaid interest and other fees, shall be due and payable.
This Note may not be prepaid or repaid in whole or in part except as otherwise explicitly set forth herein.
Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) sixteen percent (16%) per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid (“Default Interest”). Interest and Default Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed.
All payments due hereunder (to the extent not converted into shares of common stock, $0.0001 par value per share, of the Borrower (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day.
Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement, dated as of the Issue Date, pursuant to which this Note was originally issued (the “Purchase Agreement”). As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall also apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right, on any calendar day, at any time on or following the Issue Date, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any Default Interest) into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified, at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that notwithstanding anything to the contrary contained herein, the a Holder shall not have the right to convert any portion of this Note, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after conversion as set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons (as defined below) acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1.1, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1.1, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof. The limitations contained in this paragraph shall apply to a successor holder of this Note. The number of Conversion Shares to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower or Borrower’s transfer agent by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2).
1.2 Conversion Price.
(a) Calculation of Conversion Price. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares of Common Stock hereunder (the “Conversion Price”) shall equal $0.01, subject to adjustment as provided in this Note. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. Holder shall be entitled to deduct $1,750.00 from the conversion amount in each Notice of Conversion to cover Holder’s fees associated with each Notice of Conversion. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, rights offerings, reclassification or similar transaction that proportionately decreases or increases the Common Stock. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to the immediately preceding sentence shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. “Common Stock Equivalents” means any securities of the Company or the Company’s subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
1.3 Authorized and Reserved Shares. The Borrower covenants that at all times until the Note is satisfied in full, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of a number of Conversion Shares equal to the greater of: (a) 74,000,000 shares of Common Stock or (b) the sum of (i) the number of Conversion Shares issuable upon the full conversion of this Note (assuming no payment of Principal Amount or interest) at the time of such calculation (taking into consideration any adjustments to the Conversion Price as provided in this Note)multiplied by (ii) two (2) (the “Reserved Amount”). The Borrower represents that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Conversion Shares or instructions to have the Conversion Shares issued as contemplated by Section 1.4(f) hereof, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates or cause the Company to electronically issue shares of Common Stock to execute and issue the necessary certificates for the Conversion Shares or cause the Conversion Shares to be issued as contemplated by Section 1.4(f) hereof in accordance with the terms and conditions of this Note.
If, at any time, the Borrower does not maintain the Reserved Amount, it will be considered an Event of Default (as defined in this Note) under this Note.
1.4 Method of Conversion.
(a) Mechanics of Conversion. This Note may be converted by the Holder in whole or in part, on any calendar day, at any time on or following the Issue Date, by submitting to the Borrower or Borrower’s transfer agent a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 11:59 p.m., New York, New York time). Any Notice of Conversion submitted after 11:59 p.m., New York, New York time, shall be deemed to have been delivered and received on the next Trading Day.
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid Principal Amount is so converted. The Holder and the Borrower shall maintain records showing the Principal Amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid Principal Amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower or Borrower’s transfer agent from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(f) hereof) within one (1) Trading Day after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid Principal Amount and interest (including any Default Interest) under this Note, surrender of this Note). If the Company shall fail for any reason or for no reason to issue to the Holder on or prior to the Deadline a certificate for the number of Conversion Shares or to which the Holder is entitled hereunder and register such Conversion Shares on the Company’s share register or to credit the Holder’s balance account with DTC (as defined below) for such number of Conversion Shares to which the Holder is entitled upon the Holder’s conversion of this Note (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, (i) the Company shall pay in cash to the Holder on each day after the Deadline and during such Conversion Failure an amount equal to 2.0% of the product of (A) the sum of the number of Conversion Shares not issued to the Holder on or prior to the Deadline and to which the Holder is entitled and (B) the closing sale price of the Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such Conversion Shares to the Holder without violating this Section 1.4(d); and (ii) the Holder, upon written notice to the Company, may void all or any portion of such Notice of Conversion; provided that the voiding of all or any portion of a Notice of Conversion shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice. In addition to the foregoing, if on or prior to the Deadline the Company shall fail to issue and deliver a certificate to the Holder and register such Conversion Shares on the Company’s share register or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company, then the Company shall, within two (2) Trading Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable and customary out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Conversion Shares) or credit such Holder’s balance account with DTC for such Conversion Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Conversion Shares or credit such Holder’s balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the closing sales price of the Common Stock on the date of exercise. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing the Conversion Shares (or to electronically deliver such Conversion Shares) upon the conversion of this Note as required pursuant to the terms hereof.
(e) Obligation of Borrower to Deliver Common Stock. At the time that the Holder submits the Notice of Conversion to the Borrower or Borrower’s transfer agent, the Holder shall be deemed to be the holder of record of the Conversion Shares issuable upon such conversion, the outstanding Principal Amount and the amount of accrued and unpaid interest (including any Default Interest) under this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(f) hereof) shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is sent to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time, on such date.
(f) Delivery of Conversion Shares by Electronic Transfer. In lieu of delivering physical certificates representing the Conversion Shares issuable upon conversion hereof, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Conversion Shares issuable upon conversion hereof to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
1.5 Concerning the Shares. The Conversion Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be the Legal Counsel Opinion (as defined in the Purchase Agreement)) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption, or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the Conversion Shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for the Conversion Shares that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
| | “NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S UNDER SAID ACT, OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.” | |
The legend set forth above shall be removed and the Company shall issue to the Holder a certificate for the applicable Conversion Shares without such legend upon which it is stamped or (as requested by the Holder) issue the applicable Conversion Shares by electronic delivery by crediting the account of such holder’s broker with DTC, if, unless otherwise required by applicable state securities laws: (a) such Conversion Shares are registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) the Company or the Holder provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 4(m) of the Purchase Agreement) to the effect that a public sale or transfer of such Conversion Shares may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Holder agrees to sell all Conversion Shares, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Conversion Shares pursuant to an exemption from registration, such as Rule 144, Rule 144A, Regulation S, or other applicable exemption, at the Deadline, notwithstanding that the conditions of Rule 144, Rule 144A, Regulation S, or other applicable exemption, as applicable, have been met, it will be considered an Event of Default under this Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in this Note) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of this Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not effectuate any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, at least thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Purchase Rights. If, at any time when all or any portion of this Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(e) Dilutive Issuance. If the Borrower, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock or other securities convertible into, exercisable for, or otherwise entitle any person or entity the right to acquire, shares of Common Stock (including, without limitation, upon conversion of this Note, and any convertible notes or warrants outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or other securities are issued. By way of example, and for the avoidance of doubt, if the Company issues a convertible promissory note (including but not limited to a Variable Rate Transaction), and the holder of such convertible promissory note has the right to convert it into Common Stock at an effective price per share that is lower than the then Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations for the Common Stock), then the Holder has the right to reduce the Conversion Price to such Base Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations for the Common Stock) in perpetuity regardless of whether the holder of such convertible promissory note ever effectuated a conversion at the Base Conversion Price. In the event of an issuance of securities involving multiple tranches or closings, any adjustment pursuant to this Section 1.6(e) shall be calculated as if all such securities were issued at the initial closing.
(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6 of this Note, the Borrower shall, at its expense and within one (1) calendar day after the occurrence of each respective adjustment or readjustment of the Conversion Price, compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. In addition, the Borrower shall, within one (1) calendar day after each written request from the Holder, furnish to such Holder a like certificate setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment. For the avoidance of doubt, each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6 of this Note shall occur without any action by the Holder and regardless of whether the Borrower complied with the notification provisions in Section 1.6 of this Note.
1.7 [Intentionally Omitted].
1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the Conversion Shares covered thereby (other than the Conversion Shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure to convert this Note.
1.9 Prepayment. At any time prior to the date that an Event of Default occurs under this Note, the Borrower shall have the right, exercisable on seven (7) Trading Days prior written notice to the Holder of the Note, to prepay the outstanding Principal Amount and interest then due under this Note in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be seven (7) Trading Days from the date of the Optional Prepayment Notice (the “Optional Prepayment Date”). The Holder shall have the right, during the period beginning on the date of Holder’s receipt of the Optional Prepayment Notice and until the Holder’s actual receipt of the full prepayment amount on the Optional Prepayment Date (the “Prepayment Conversion Period”), to instead convert all or any portion of the Note pursuant to the terms of this Note, including the amount of this Note to be prepaid by the Borrower in accordance with this Section 1.9. On the Optional Prepayment Date, the Borrower shall make payment of the amounts designated below to or upon the order of the Holder as specified by the Holder in writing to the Borrower. If the Borrower exercises its right to prepay the Note in accordance with this Section 1.9, the Borrower shall make payment to the Holder of an amount in cash equal to the sum of: (w) 100% multiplied by the Principal Amount then outstanding plus (x) accrued and unpaid interest on the Principal Amount to the Optional Prepayment Date plus (y) $750.00 to reimburse Holder for administrative fees.
If the Borrower delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note as provided in this Section 1.9, then the Borrower shall forever forfeit its right to prepay any part of the Note pursuant to this Section 1.9.
1.10 Repayment from Proceeds. If, at any time prior to the full repayment or full conversion of all amounts owed under this Note, the Company receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an Equity Line of Credit (as defined in this Note) of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the Holder of or publicly disclose such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply up to 50% of such proceeds to repay all or any portion of the outstanding Principal Amount and interest (including any Default Interest) then due under this Note. Failure of the Borrower to comply with this provision shall constitute an Event of Default. “Equity Line of Credit” shall mean any transaction involving a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put” its Common Stock to the investor or underwriter over an agreed period of time and at an agreed price or price formula (such Common Stock must be registered pursuant to a registration statement of the Company for the investor’s or underwriter’s resale).
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. This Note shall be a senior secured obligation of the Borrower, with priority over all existing and future indebtedness of the Borrower, as provided in that certain security agreement entered into between the Borrower and the Holder on the Issue Date (the “Security Agreement”).
2.2 Other Indebtedness. In addition to all obligations under the Security Agreement, and so long as the Borrower shall have any obligation under this Note, the Borrower shall not (directly or indirectly through any Subsidiary or affiliate) incur or suffer to exist or guarantee any indebtedness that is senior to or pari passu with (in priority of payment and performance) the Borrower’s obligations hereunder, including but not limited to (a) all indebtedness of the Borrower for borrowed money or for the deferred purchase price of property or services, including any type of letters of credit, (b) all obligations of the Borrower evidenced by notes, bonds, debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Borrower to finance the purchase of fixed or capital assets, including all capital lease obligations of the Borrower which do not exceed the purchase price of the assets funded, (d) all guarantee obligations of the Borrower in respect of obligations of the kind referred to in clauses (a) through (c) above that the Borrower would not be permitted to incur or enter into, and (e) all obligations of the kind referred to in clauses (a) through (d) above that the Borrower is not permitted to incur or enter into that are secured and/or unsecured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured by) any lien or encumbrance on property (including accounts and contract rights) owned by the Borrower, whether or not the Borrower has assumed or become liable for the payment of such obligation.
2.3 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.
2.4 Restriction on Stock Repurchases and Debt Repayments. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares, or repay any pari passu or subordinated indebtedness of Borrower.
2.5 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent by the Holder to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.6 Advances and Loans; Affiliate Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit, make advances to or enter into any transaction with any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business or (c) in regard to transactions with unaffiliated third parties, not in excess of $100,000. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with any indebtedness or accrued amounts owed to any such party.
2.7 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(10) Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $25,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of a cash payment or added to the balance of this Note (under Holder's and Borrower's expectation that this amount will tack back to the Issue Date).
2.8 Preservation of Business and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) change the nature of its business; (b) sell, divest, change the structure of any material assets other than in the ordinary course of business; (c) enter into a Variable Rate Transaction; or (d) enter into any merchant cash advance transactions. In addition, so long as the Borrower shall have any obligation under this Note, the Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
2.9 Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.10 Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the Principal Amount hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise, or fails to fully comply with Section 1.10 of this Note.
3.2 Conversion and the Shares. The Borrower (i) fails to issue Conversion Shares to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) fails to reserve the Reserved Amount at all times, (iv) the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) Trading Days after the Holder shall have delivered a Notice of Conversion, and/or (v) fails to remain current in its obligations to its transfer agent (including but not limited to payment obligations to its transfer agent). It shall be an Event of Default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be added to the principal balance of the Note.
3.3 Breach of Agreements and Covenants. The Borrower breaches any covenant, agreement, or other term or condition contained in the Purchase Agreement, this Note, Irrevocable Transfer Agent Instructions, Registration Rights Agreement (as defined in the Purchase Agreement) (the “Registration Rights Agreement”), Warrants (as defined in the Purchase Agreement) (the “Warrants”), Security Agreement, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.
3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made in the Purchase Agreement, this Note, Irrevocable Transfer Agent Instructions, Registration Rights Agreement, Warrants, Security Agreement, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made.
3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.8 Failure to Comply with the 1934 Act. At any time after the date that is one hundred eighty (180) calendar days after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.9 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.10 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.11 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.12 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding.
3.13 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.14 Cross-Default. The declaration of an event of default by any lender or other extender of credit to the Company under any notes, loans, agreements or other instruments of the Company evidencing any indebtedness of the Company (including those filed as exhibits to or described in the Company’s filings with the SEC), after the passage of all applicable notice and cure or grace periods.
3.15 Variable Rate Transactions. The Borrower consummates a Variable Rate Transaction at any time on or after the Issue Date.
3.16 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
3.17 Unavailability of Rule 144. If, at any time on or after the date that is six (6) calendar months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and/or (ii) thereupon deposit such shares into the Holder’s brokerage account.
3.18 Delisting, Suspension, or Quotation of Trading of Common Stock. If, at any time on or after the Issue Date, the Borrower’s Common Stock (i) is suspended from trading, (ii) halted from trading, and/or (iii) fails to be quoted or listed (as applicable) on a Principal Market.
3.19 Registration Statement Failures. The Borrower fails to (i) file a registration statement (the “Registration Statement”) covering the Holder’s resale at prevailing market prices (and not fixed prices) of all of the Conversion Shares (as defined in the Purchase Agreement) (the “Conversion Shares”), Commitment Shares (as defined in the Purchase Agreement) (the “Commitment Shares”), and Exercise Shares (as defined in the Purchase Agreement) (the “Exercise Shares”) within one hundred twenty (120) calendar days following the Issue Date, (ii) cause the Registration Statement to become effective within one hundred eighty (180) calendar days following the date that the Registration Statement is initially filed, (iii) cause the Registration Statement to remain effective until the Holder no longer owns the Note, Warrants, Conversion Shares, Commitment Shares, or Exercise Shares, (iv) comply with the provisions of the Registration Rights Agreement in all respects, or (v) immediately amend the Registration Statement or file a new Registration Statement (and cause such Registration Statement to become effective as provided in the Registration Rights Agreement) if there are no longer sufficient shares registered under the initial Registration Statement for the Holder’s resale at prevailing market prices (and not fixed prices) of all of the Conversion Shares, Exercise Shares, and Commitment Shares.
3.20 OTCQB. At any time after the date that is one hundred eighty (180) calendar days after the Issue Date, the Common Stock fails to be quoted or listed for trading on the OTCQB or a national securities exchange.
3.21 Failure to Comply with OTC Markets. At any time after the Issue Date, the Borrower shall fail to comply with the reporting and disclosure requirements of the OTC Markets.
3.22 Market Capitalization. The Borrower fails to maintain a market capitalization of at least $2,000,000 on any Trading Day, which shall be calculated by multiplying (i) the closing price of the Borrower’s common stock on the Trading Day immediately preceding the respective date of calculation by (ii) the total shares of the Borrower’s common stock issued and outstanding on the Trading Day immediately preceding the respective date of calculation.
3.23 Rights and Remedies Upon an Event of Default. Upon the occurrence of any Event of Default specified in this Article III, this Note shall become immediately due and payable, and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by 125% (collectively the “Default Amount”), as well as all costs, including, without limitation, legal fees and expenses, of collection, all without demand, presentment or notice, all of which hereby are expressly waived by the Borrower. Holder may, in its sole discretion, determine to accept payment part in Common Stock and part in cash. For purposes of payments in Common Stock, the conversion formula set forth in Section 1.2 shall apply as well as all other provisions of this Note. The Holder shall be entitled to exercise all other rights and remedies available at law or in equity.
Upon the occurrence of any Event of Default, and in addition to any other right or remedy of the Holder hereunder, under the related transaction documents, or otherwise at law or in equity, the Borrower hereby irrevocably authorizes and empowers Holder or its legal counsel, each as the Borrower’s attorney-in-fact, to appear ex parte and with notice to the Borrower to confess judgment against the Borrower for the unpaid amount of this Note. The judgment shall set forth the amount then due hereunder, plus attorney’s fees and cost of suit, and to release all errors, and waive all rights of appeal. The Borrower waives the right to contest Holder’s rights under this section, including without limitation the right to any stay of execution and the benefit of all exemption laws now or hereafter in effect. No single exercise of the foregoing right and power to confess judgment will be deemed to exhaust such power, whether or not any such exercise shall be held by any court to be invalid, voidable, or void, and such power shall continue undiminished and may be exercised from time to time as the Holder may elect until all amounts owing on this Note have been paid in full. The Borrower shall provide a signed and notarized copy of the of the affidavit of confession of judgment attached hereto as Exhibit “B” on or before the Closing Date.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
GOLDEN STAR ENTERPRISES LTD.
2803 Philadelphia Pike, Suite B
Claymont, DE 19703
Attention: Eliav Kling
e-mail: info@goldenstarenterprisesltd.com
If to the Holder:
MAST HILL FUND, L.P.
48 Parker Road
Wellesley, MA 02482
e-mail: admin@masthillfund.com
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. The Borrower shall not assign this Note or any rights or obligations hereunder without the prior written consent of the Holder. The Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the state courts located in the Commonwealth of Massachusetts or federal courts located in the Commonwealth of Massachusetts. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
4.8 Purchase Agreement. The Company and the Holder shall be bound by the applicable terms of the Purchase Agreement, Security Agreement, and the documents entered into in connection herewith and therewith.
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any change in control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.11 Construction; Headings. This Note shall be deemed to be jointly drafted by the Company and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
4.12 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Company under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Company may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Holder’s election.
4.13 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security, or amendment to a security that was originally issued before the Issue Date, with any term that the Holder reasonably believes is more favorable to the holder of such security or with a term in favor of the holder of such security that the Holder reasonably believes was not similarly provided to the Holder in this Note, then (i) the Borrower shall notify the Holder of such additional or more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Holder’s option, shall become a part of the transaction documents with the Holder (regardless of whether the Borrower complied with the notification provision of this Section 4.14). The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts.
4.15 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Issue, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within one (1) Trading Day after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within one (1) Trading Day of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within one (1) Trading Day, submit (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than one (1) Trading Day from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.
4.16 Right of First Refusal. If at any time while this Note is outstanding, the Borrower has a bona fide offer of capital or financing from any 3rd party, that the Borrower intends to act upon, then the Borrower must first offer such opportunity to the Holder to provide such capital or financing to the Borrower on the same terms as each respective 3rd party’s terms. Should the Holder be unwilling or unable to provide such capital or financing to the Borrower within five (5) Trading Days from Holder’s receipt of written notice of the offer (the “Offer Notice”) from the Borrower, then the Borrower may obtain such capital or financing from that respective 3rd party upon the exact same terms and conditions offered by the Borrower to the Holder, which transaction must be completed within 30 days after the date of the Offer Notice. If the Borrower does not receive the capital or financing from the respective 3rd party within 30 days after the date of the respective Offer Notice, then the Borrower must again offer the capital or financing opportunity to the Holder as described above, and the process detailed above shall be repeated. The Offer Notice must be sent via electronic mail to admin@masthillfund.com.
[signature page follows]
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on May 20, 2022.
GOLDEN STAR ENTERPRISES LTD.
| By: | /s/ Eliav Kling | |
| Name: | Eliav Kling | |
| Title: | Chief Executive Officer | |
EXHIBIT A -- NOTICE OF CONVERSION
The undersigned hereby elects to convert $ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Borrower”), according to the conditions of the senior secured promissory note of the Borrower dated as of May 20, 2022 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
| ☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). |
| | Name of DTC Prime Broker: |
| | Account Number: |
| ☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
| Date of Conversion: | |
| Applicable Conversion Price: | $ |
| Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Note: | |
| Amount of Principal Balance Due remaining Under the Note after this conversion: | |
EXHIBIT B – CONFESSION OF JUDGMENT
(see attached)
Affidavit of Confession of Judgment
| COMMONWEALTH OF MASSACHUSETTS | X | | |
| Mast Hill Fund, L.P., | | | |
| | | | Index No. |
| Plaintiff, | | | |
| | | | AFFIDAVIT OF CONFESSION OF |
| - against - | | | JUDGMENT |
| | | | |
| GOLDEN STAR ENTERPRISES LTD., | | | |
| Defendant. | | | |
| | X | | |
| | | | |
| COMMONWEALTH OF MASSACHUSETTS | ) | | |
| | ) | ss.: | |
| | | | |
Eliav Kling, being duly sworn, hereby deposes and says:
1. I am the Chief Executive Officer of defendant GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (“Borrower”). As such, I am fully familiar with all the facts and circumstances recited herein on personal knowledge. Borrower has its principal place of business at 2803 Philadelphia Pike, Suite B, Claymont, DE 19703. On behalf of the Borrower, I hereby confess judgment in favor of MAST HILL FUND, L.P. (“Holder”), residing at 48 Parker Road, Wellesley, MA 02482, in the amount of $370,000.00, less any payments made on or after the date of this affidavit of confession of judgment, plus Default Interest (as defined in the Note (as defined herein)) on said amount and all other applicable penalties under the Note. In no event shall interest payable hereunder exceed the maximum permissible under applicable law.
2. I hereby authorize the federal courts and/or state courts located in the Commonwealth of Massachusetts to enter judgment against Borrower in the amount of in the amount of $370,000.00, less any payments made on or after the date of this affidavit of confession of judgment, plus Default Interest on said amount and all other applicable penalties under the Note, plus the costs and attorneys’ fees that are set forth below, less any payments made on or after the date of this affidavit of confession of judgment, upon Borrower’s failure for any reason to timely make any payment to Holder called for by the senior secured promissory note between of the parties, dated May 20, 2022 (the “Note”), due to the occurrence of an Event of Default (as defined in the Note) under the Note.
3. In order to secure these obligations, Borrower agreed to simultaneously deliver with the execution of the Note this Affidavit of Confession of Judgment.
4. The sums confessed pursuant to this affidavit of confession of judgment are justly due and owing to Holder under the following circumstances: Borrower entered into the Note pursuant to which Borrower promised to pay to the order of Holder the principal sum of $370,000.00 plus interest as provided for therein. The amounts confessed by this affidavit represent a senior secured promissory note investment by Holder in Borrower and arise out of Borrower’s breach of its obligations under the Note.
5. Borrower agrees to pay any and all costs and expenses incurred by Holder in enforcing the terms of this affidavit of confession of judgment, including reasonable attorneys’ fees and expenses at the rate of $475.00 per hour that Holder incurs or is billed for in connection with enforcing the terms of the affidavit of confession of judgment, entering any Judgment, collecting upon said Judgment, and defending or prosecuting any appeals.
[signature page to follow]
| | GOLDEN STAR ENTERPRISES LTD. | |
| | | | |
| By: | | |
| | Name: | Eliav Kling | |
| | Title: | Chief Executive Officer | |
| | | | |
STATE OF ______________ )
ss.:
COUNTY OF ______________ )
ACKNOWLEDGMENT
On __________, 2022 before me personally came ________________________________________, to me known, who, by me duly sworn, did depose and say that deponent is an officer of GOLDEN STAR ENTERPRISES LTD., the corporation described in, and which executed the foregoing affidavit of confession of judgment, that deponent knows the seal of the corporation, that the seal affixed to the affidavit of confession of judgment is the corporation’s seal, that it was affixed by order of the board of directors of the corporation and that deponent signed deponent’s name by like order.
_____________________________
Notary Public
SEAL:
[Signature Page to Affidavit of Confession of Judgment]
EXHIBIT 10.13
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
GOLDEN STAR ENTERPRISES LTD.
Warrant Shares: 15,000,000
Date of Issuance: May 20, 2022 (“Issuance Date”)
This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the senior secured promissory note in the principal amount of $370,000.00 to the Holder (as defined below) of even date) (the “Note”), Mast Hill Fund, L.P., a Delaware limited partnership (including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), 15,000,000 shares of Common Stock (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated May 20, 2022, by and among the Company and the Holder (the “Purchase Agreement”).
Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $0.04, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the date that is five (5) years after the Issuance Date.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise (or deliver such shares of Common Stock in electronic format if requested by the Holder). Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause its transfer agent to issue to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under this Warrant, or otherwise, and such failure shall also be deemed an event of default under the Note, a material breach under this Warrant, and a material breach under the Purchase Agreement.
If the Market Price of one share of Common Stock is greater than the Exercise Price, then the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and an Exercise Notice, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:
X = Y (A-B)
A
| Where | X = | the number of Shares to be issued to Holder. |
| | | |
| | Y= | the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation). |
| | | |
| | A= | the Market Price (at the date of such calculation). |
| | | |
| | B= | Exercise Price (as adjusted to the date of such calculation). |
(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c) Holder’s Exercise Limitations. Notwithstanding anything to the contrary contained herein, the Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
(d) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder, within one (1) business day of Holder’s request, the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder within one (1) business day of Holder’s request the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases, or effectuates a cashless exercise hereunder for, Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
2. ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and
(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).
(b) Anti-Dilution Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities (including but not limited to Common Stock Equivalents) entitling any person or entity (for purposes of clarification, including but not limited to the Holder pursuant to (i) any other security of the Company currently held by Holder, (ii) any other security of the Company issued to Holder on or after the Issuance Date (including but not limited to the Note), or (iii) any other agreement entered into between the Company and Holder) to acquire shares of Common Stock (upon conversion, exercise or otherwise), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price, and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment (for the avoidance of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment). By way of example, if E is the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation), F is the Exercise Price in effect immediately prior to such adjustment, and G is the Base Share Price, the adjustment to the number of Warrant Shares can be expressed in the following formula: Total number of Warrant Shares after such Dilutive Issuance = the number obtained from dividing [E x F] by G. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued, regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price by the holder thereof (for the avoidance of doubt, the Holder may utilize the Base Share Price even if the Company did not actually issue shares of its common stock at the Base Share Price under the respective Common stock Equivalents). The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, regardless of whether (i) the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b) upon the occurrence of any Dilutive Issuance or (ii) the Holder accurately refers to the Base Share Price in the Exercise Notice, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price as well as the Base Share Price at all times on and after the date of such Dilutive Issuance.
(c) Subdivision or Combination of Common Stock. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective. Each such adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively whenever any event covered by this Section 2(c) shall occur.
3. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.
4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, two (2) times the number of shares of Common Stock into which the Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
7. TRANSFER. This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of the Holder, which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void if the Company does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without the need to obtain the Company’s consent thereto.
8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
9. AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
10. GOVERNING LAW AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts located in the Commonwealth of Massachusetts or federal courts located in the Commonwealth of Massachusetts. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or any other transaction document entered into in connection with this Warrant by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) [Intentionally Omitted].
(b) “Closing Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market, as reported by Quotestream or other similar quotation service provider designated by the Holder, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., New York time, as reported by Quotestream or other similar quotation service provider designated by the Holder, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Quotestream or other similar quotation service provider designated by the Holder, or (iii) if no last trade price is reported for such security by Quotestream or other similar quotation service provider designated by the Holder, the average of the bid and ask prices of any market makers for such security as reported by Quotestream or other similar quotation service provider designated by the Holder. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(c) “Common Stock” means the Company’s common stock, par value $0.0001, and any other class of securities into which such securities may hereafter be reclassified or changed.
(d) “Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(e) “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(f) “Principal Market” means the principal securities exchange or trading market where such Common Stock is listed or quoted, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
(g) “Market Price” means the highest traded price of the Common Stock during the one hundred and fifty Trading Days prior to the date of the respective Exercise Notice.
(h) “Trading Day” means any day on which the Common Stock is listed or quoted on its Principal Market, provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.
* * * * * * *
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.
| | GOLDEN STAR ENTERPRISES LTD. | |
| | | | |
| | /s/ Eliav Kling | |
| | | Name: Eliav Kling | |
| | | Title: Chief Executive Officer | |
| | | | |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)
THE UNDERSIGNED holder hereby exercises the right to purchase of the shares of Common Stock (“Warrant Shares”) of GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one):
| | ☐ | a cash exercise with respect to__________________________Warrant Shares; or |
| | ☐ | by cashless exercise pursuant to the Warrant. |
2. Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $__________________to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder_______________________Warrant Shares in accordance with the terms of the Warrant.
| Date: | | | |
| | | | |
| | | | |
| | | | (Print Name of Registered Holder) |
| | | | |
| | | | By: |
| | | | Name: |
| | | | Title: |
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of common stock of GOLDEN STAR ENTERPRISES LTD., to which the within Common Stock Purchase Warrant relates and appoints , as attorney-in-fact, to transfer said right on the books of GOLDEN STAR ENTERPRISES LTD. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
| Dated: | | | |
| | | | |
| | | | |
| | | | (Signature) * |
| | | | |
| | | | (Name) |
| | | | |
| | | | (Address) |
| | | | |
| | | | (Social Security or Tax Identification No.) |
* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity.
EXHIBIT 10.14
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
GOLDEN STAR ENTERPRISES LTD.
Warrant Shares: 2,000,000
Date of Issuance: May 20, 2022 (“Issuance Date”)
This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the senior secured promissory note in the principal amount of $370,000.00 to the Holder (as defined below) of even date) (the “Note”), Mast Hill Fund, L.P., a Delaware limited partnership (including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), 2,000,000 shares of Common Stock (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated May 20, 2022, by and among the Company and the Holder (the “Purchase Agreement”).
Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $0.10, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the date that is five (5) years after the Issuance Date.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise (or deliver such shares of Common Stock in electronic format if requested by the Holder). Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause its transfer agent to issue to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under this Warrant, or otherwise, and such failure shall also be deemed an event of default under the Note, a material breach under this Warrant, and a material breach under the Purchase Agreement.
If the Market Price of one share of Common Stock is greater than the Exercise Price, then, unless there is an effective non-stale registration statement of the Company which contains a prospectus that complies with Section 5(b) and Section 10 of the Securities Act of 1933 at the time of exercise and covers the Holder’s immediate resale of all of the Warrant Shares at prevailing market prices (and not fixed prices) without any limitation, the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and an Exercise Notice, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:
X = Y (A-B)
A
Where X = the number of Shares to be issued to Holder.
Y = the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).
A = the Market Price (at the date of such calculation).
B = Exercise Price (as adjusted to the date of such calculation).
(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c) Holder’s Exercise Limitations. Notwithstanding anything to the contrary contained herein, the Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
(d) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder, within one (1) business day of Holder’s request, the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder within one (1) business day of Holder’s request the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases, or effectuates a cashless exercise hereunder for, Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
2. ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and
(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).
(b) Anti-Dilution Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities (including but not limited to Common Stock Equivalents) entitling any person or entity (for purposes of clarification, including but not limited to the Holder pursuant to (i) any other security of the Company currently held by Holder, (ii) any other security of the Company issued to Holder on or after the Issuance Date (including but not limited to the Note), or (iii) any other agreement entered into between the Company and Holder) to acquire shares of Common Stock (upon conversion, exercise or otherwise), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price, and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment (for the avoidance of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment). By way of example, if E is the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation), F is the Exercise Price in effect immediately prior to such adjustment, and G is the Base Share Price, the adjustment to the number of Warrant Shares can be expressed in the following formula: Total number of Warrant Shares after such Dilutive Issuance = the number obtained from dividing [E x F] by G. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued, regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price by the holder thereof (for the avoidance of doubt, the Holder may utilize the Base Share Price even if the Company did not actually issue shares of its common stock at the Base Share Price under the respective Common stock Equivalents). The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, regardless of whether (i) the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b) upon the occurrence of any Dilutive Issuance or (ii) the Holder accurately refers to the Base Share Price in the Exercise Notice, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price as well as the Base Share Price at all times on and after the date of such Dilutive Issuance. Notwithstanding anything to the contrary herein, the Holder shall not be entitled to utilize any of the adjustments under this Section 2(b) with respect to a specific Exercise Notice if, as of the date of such Exercise Notice, there is an effective non-stale registration statement of the Company which contains a prospectus that complies with Section 5(b) and Section 10 of the Securities Act of 1933 at the time of exercise and covers the Holder’s immediate resale of all of the Warrant Shares at prevailing market prices (and not fixed prices) without any limitation.
(c) Subdivision or Combination of Common Stock. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective. Each such adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively whenever any event covered by this Section 2(c) shall occur.
3. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.
4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, two (2) times the number of shares of Common Stock into which the Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
7. TRANSFER. This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of the Holder, which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void if the Company does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without the need to obtain the Company’s consent thereto.
8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
9. AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
10. GOVERNING LAW AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts located in the Commonwealth of Massachusetts or federal courts located in the Commonwealth of Massachusetts. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or any other transaction document entered into in connection with this Warrant by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) [Intentionally Omitted].
(b) “Closing Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market, as reported by Quotestream or other similar quotation service provider designated by the Holder, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., New York time, as reported by Quotestream or other similar quotation service provider designated by the Holder, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Quotestream or other similar quotation service provider designated by the Holder, or (iii) if no last trade price is reported for such security by Quotestream or other similar quotation service provider designated by the Holder, the average of the bid and ask prices of any market makers for such security as reported by Quotestream or other similar quotation service provider designated by the Holder. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(c) “Common Stock” means the Company’s common stock, par value $0.0001, and any other class of securities into which such securities may hereafter be reclassified or changed.
(d) “Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(e) “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(f) “Principal Market” means the principal securities exchange or trading market where such Common Stock is listed or quoted, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
(g) “Market Price” means the highest traded price of the Common Stock during the one hundred and fifty Trading Days prior to the date of the respective Exercise Notice.
(h) “Trading Day” means any day on which the Common Stock is listed or quoted on its Principal Market, provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.
* * * * * * *
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.
| | GOLDEN STAR ENTERPRISES LTD. | |
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| By: | /s/ Eliav Kling | |
| | | Name: Eliav Kling | |
| | | Title: Chief Executive Officer | |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)
THE UNDERSIGNED holder hereby exercises the right to purchaseof the shares of Common Stock (“Warrant Shares”) of GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one):
☐ a cash exercise with respect toWarrant Shares; or
☐ by cashless exercise pursuant to the Warrant.
2. Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holderWarrant Shares in accordance with the terms of the Warrant.
Date:
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| | | (Print Name of Registered Holder) | |
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| | | By: | |
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| | | Name: | |
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| | | Title: | |
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of common stock of GOLDEN STAR ENTERPRISES LTD., to which the within Common Stock Purchase Warrant relates and appoints , as attorney-in-fact, to transfer said right on the books of GOLDEN STAR ENTERPRISES LTD. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
Dated:
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| | (Signature) * |
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| | (Name) |
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| | (Address) |
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| | (Social Security or Tax Identification No.) |
* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity.
EXHIBIT 10.15
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
GOLDEN STAR ENTERPRISES LTD.
Warrant Shares: 1,000,000
Date of Issuance: May 20, 2022 (“Issuance Date”)
This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the senior secured promissory note in the principal amount of $370,000.00 to the Holder (as defined below) of even date) (the “Note”), Mast Hill Fund, L.P., a Delaware limited partnership (including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), 1,000,000 shares of Common Stock (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated May 20, 2022, by and among the Company and the Holder (the “Purchase Agreement”).
Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $0.20, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the date that is five (5) years after the Issuance Date.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise (or deliver such shares of Common Stock in electronic format if requested by the Holder). Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause its transfer agent to issue to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under this Warrant, or otherwise, and such failure shall also be deemed an event of default under the Note, a material breach under this Warrant, and a material breach under the Purchase Agreement.
If the Market Price of one share of Common Stock is greater than the Exercise Price, then, unless there is an effective non-stale registration statement of the Company which contains a prospectus that complies with Section 5(b) and Section 10 of the Securities Act of 1933 at the time of exercise and covers the Holder’s immediate resale of all of the Warrant Shares at prevailing market prices (and not fixed prices) without any limitation, the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and an Exercise Notice, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:
X = Y (A-B)
A
Where X = the number of Shares to be issued to Holder.
Y = the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).
A = the Market Price (at the date of such calculation).
B = Exercise Price (as adjusted to the date of such calculation).
(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c) Holder’s Exercise Limitations. Notwithstanding anything to the contrary contained herein, the Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
(d) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder, within one (1) business day of Holder’s request, the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder within one (1) business day of Holder’s request the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases, or effectuates a cashless exercise hereunder for, Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
2. ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and
(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).
(b) Anti-Dilution Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities (including but not limited to Common Stock Equivalents) entitling any person or entity (for purposes of clarification, including but not limited to the Holder pursuant to (i) any other security of the Company currently held by Holder, (ii) any other security of the Company issued to Holder on or after the Issuance Date (including but not limited to the Note), or (iii) any other agreement entered into between the Company and Holder) to acquire shares of Common Stock (upon conversion, exercise or otherwise), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price, and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment (for the avoidance of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment). By way of example, if E is the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation), F is the Exercise Price in effect immediately prior to such adjustment, and G is the Base Share Price, the adjustment to the number of Warrant Shares can be expressed in the following formula: Total number of Warrant Shares after such Dilutive Issuance = the number obtained from dividing [E x F] by G. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued, regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price by the holder thereof (for the avoidance of doubt, the Holder may utilize the Base Share Price even if the Company did not actually issue shares of its common stock at the Base Share Price under the respective Common stock Equivalents). The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, regardless of whether (i) the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b) upon the occurrence of any Dilutive Issuance or (ii) the Holder accurately refers to the Base Share Price in the Exercise Notice, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price as well as the Base Share Price at all times on and after the date of such Dilutive Issuance. Notwithstanding anything to the contrary herein, the Holder shall not be entitled to utilize any of the adjustments under this Section 2(b) with respect to a specific Exercise Notice if, as of the date of such Exercise Notice, there is an effective non-stale registration statement of the Company which contains a prospectus that complies with Section 5(b) and Section 10 of the Securities Act of 1933 at the time of exercise and covers the Holder’s immediate resale of all of the Warrant Shares at prevailing market prices (and not fixed prices) without any limitation.
(c) Subdivision or Combination of Common Stock. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective. Each such adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively whenever any event covered by this Section 2(c) shall occur.
3. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.
4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, two (2) times the number of shares of Common Stock into which the Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
7. TRANSFER. This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of the Holder, which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void if the Company does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without the need to obtain the Company’s consent thereto.
8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
9. AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
10. GOVERNING LAW AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts located in the Commonwealth of Massachusetts or federal courts located in the Commonwealth of Massachusetts. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or any other transaction document entered into in connection with this Warrant by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) [Intentionally Omitted].
(b) “Closing Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market, as reported by Quotestream or other similar quotation service provider designated by the Holder, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., New York time, as reported by Quotestream or other similar quotation service provider designated by the Holder, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Quotestream or other similar quotation service provider designated by the Holder, or (iii) if no last trade price is reported for such security by Quotestream or other similar quotation service provider designated by the Holder, the average of the bid and ask prices of any market makers for such security as reported by Quotestream or other similar quotation service provider designated by the Holder. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(c) “Common Stock” means the Company’s common stock, par value $0.0001, and any other class of securities into which such securities may hereafter be reclassified or changed.
(d) “Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(e) “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(f) “Principal Market” means the principal securities exchange or trading market where such Common Stock is listed or quoted, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
(g) “Market Price” means the highest traded price of the Common Stock during the one hundred and fifty Trading Days prior to the date of the respective Exercise Notice.
(h) “Trading Day” means any day on which the Common Stock is listed or quoted on its Principal Market, provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.
* * * * * * *
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.
| | GOLDEN STAR ENTERPRISES LTD. | |
| | | | |
| By: | /s/ Eliav Kling | |
| | | Name: Eliav Kling | |
| | | Title: Chief Executive Officer | |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)
THE UNDERSIGNED holder hereby exercises the right to purchaseof the shares of Common Stock (“Warrant Shares”) of GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one):
☐ a cash exercise with respect toWarrant Shares; or
☐ by cashless exercise pursuant to the Warrant.
2. Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holderWarrant Shares in accordance with the terms of the Warrant.
Date:
| _______________________________________ |
| | (Print Name of Registered Holder) |
| | |
| | By: |
| | Name: |
| | Title: |
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of common stock of GOLDEN STAR ENTERPRISES LTD., to which the within Common Stock Purchase Warrant relates and appoints , as attorney-in-fact, to transfer said right on the books of GOLDEN STAR ENTERPRISES LTD. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
Dated:
| |
| | (Signature) * |
| | |
| | |
| | (Name) |
| | |
| | |
| | (Address) |
| | |
| | |
| | (Social Security or Tax Identification No.) |
* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity.
EXHIBIT 10.16
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
GOLDEN STAR ENTERPRISES LTD.
Warrant Shares: 1,000,000
Date of Issuance: May 20, 2022 (“Issuance Date”)
This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the senior secured promissory note in the principal amount of $370,000.00 to the Holder (as defined below) of even date) (the “Note”), Mast Hill Fund, L.P., a Delaware limited partnership (including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), 1,000,000 shares of Common Stock (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated May 20, 2022, by and among the Company and the Holder (the “Purchase Agreement”).
Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $0.50, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the date that is five (5) years after the Issuance Date.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise (or deliver such shares of Common Stock in electronic format if requested by the Holder). Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause its transfer agent to issue to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under this Warrant, or otherwise, and such failure shall also be deemed an event of default under the Note, a material breach under this Warrant, and a material breach under the Purchase Agreement.
If the Market Price of one share of Common Stock is greater than the Exercise Price, then, unless there is an effective non-stale registration statement of the Company which contains a prospectus that complies with Section 5(b) and Section 10 of the Securities Act of 1933 at the time of exercise and covers the Holder’s immediate resale of all of the Warrant Shares at prevailing market prices (and not fixed prices) without any limitation, the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and an Exercise Notice, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:
X = Y (A-B)
A
Where X = the number of Shares to be issued to Holder.
Y = the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).
A = the Market Price (at the date of such calculation).
B = Exercise Price (as adjusted to the date of such calculation).
(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c) Holder’s Exercise Limitations. Notwithstanding anything to the contrary contained herein, the Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
(d) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder, within one (1) business day of Holder’s request, the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder within one (1) business day of Holder’s request the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases, or effectuates a cashless exercise hereunder for, Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
2. ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and
(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).
(b) Anti-Dilution Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities (including but not limited to Common Stock Equivalents) entitling any person or entity (for purposes of clarification, including but not limited to the Holder pursuant to (i) any other security of the Company currently held by Holder, (ii) any other security of the Company issued to Holder on or after the Issuance Date (including but not limited to the Note), or (iii) any other agreement entered into between the Company and Holder) to acquire shares of Common Stock (upon conversion, exercise or otherwise), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price, and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment (for the avoidance of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment). By way of example, if E is the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation), F is the Exercise Price in effect immediately prior to such adjustment, and G is the Base Share Price, the adjustment to the number of Warrant Shares can be expressed in the following formula: Total number of Warrant Shares after such Dilutive Issuance = the number obtained from dividing [E x F] by G. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued, regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price by the holder thereof (for the avoidance of doubt, the Holder may utilize the Base Share Price even if the Company did not actually issue shares of its common stock at the Base Share Price under the respective Common stock Equivalents). The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, regardless of whether (i) the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b) upon the occurrence of any Dilutive Issuance or (ii) the Holder accurately refers to the Base Share Price in the Exercise Notice, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price as well as the Base Share Price at all times on and after the date of such Dilutive Issuance. Notwithstanding anything to the contrary herein, the Holder shall not be entitled to utilize any of the adjustments under this Section 2(b) with respect to a specific Exercise Notice if, as of the date of such Exercise Notice, there is an effective non-stale registration statement of the Company which contains a prospectus that complies with Section 5(b) and Section 10 of the Securities Act of 1933 at the time of exercise and covers the Holder’s immediate resale of all of the Warrant Shares at prevailing market prices (and not fixed prices) without any limitation.
(c) Subdivision or Combination of Common Stock. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective. Each such adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively whenever any event covered by this Section 2(c) shall occur.
3. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.
4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, two (2) times the number of shares of Common Stock into which the Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
7. TRANSFER. This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of the Holder, which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void if the Company does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without the need to obtain the Company’s consent thereto.
8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
9. AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
10. GOVERNING LAW AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts located in the Commonwealth of Massachusetts or federal courts located in the Commonwealth of Massachusetts. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or any other transaction document entered into in connection with this Warrant by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) [Intentionally Omitted].
(b) “Closing Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market, as reported by Quotestream or other similar quotation service provider designated by the Holder, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., New York time, as reported by Quotestream or other similar quotation service provider designated by the Holder, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Quotestream or other similar quotation service provider designated by the Holder, or (iii) if no last trade price is reported for such security by Quotestream or other similar quotation service provider designated by the Holder, the average of the bid and ask prices of any market makers for such security as reported by Quotestream or other similar quotation service provider designated by the Holder. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(c) “Common Stock” means the Company’s common stock, par value $0.0001, and any other class of securities into which such securities may hereafter be reclassified or changed.
(d) “Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(e) “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(f) “Principal Market” means the principal securities exchange or trading market where such Common Stock is listed or quoted, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
(g) “Market Price” means the highest traded price of the Common Stock during the one hundred and fifty Trading Days prior to the date of the respective Exercise Notice.
(h) “Trading Day” means any day on which the Common Stock is listed or quoted on its Principal Market, provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.
* * * * * * *
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.
| | GOLDEN STAR ENTERPRISES LTD. | |
| | | | |
| By: | /s/ Eliav Kling | |
| | | Name: Eliav Kling | |
| | | Title: Chief Executive Officer | |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)
THE UNDERSIGNED holder hereby exercises the right to purchase of the shares of Common Stock (“Warrant Shares”) of GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one):
☐ a cash exercise with respect to Warrant Shares; or
☐ by cashless exercise pursuant to the Warrant.
2. Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder Warrant Shares in accordance with the terms of the Warrant.
Date:
| | | |
| | | (Print Name of Registered Holder) | |
| | | By:_______________________________________________________ | |
| | | Name:_____________________________________________________ | |
| | | Title: _____________________________________________________ | |
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of common stock of GOLDEN STAR ENTERPRISES LTD., to which the within Common Stock Purchase Warrant relates and appoints , as attorney-in-fact, to transfer said right on the books of GOLDEN STAR ENTERPRISES LTD. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
Dated:
| |
| | (Social Security or Tax Identification No.) |
* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity.
EXHIBIT 10.17
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of May 20, 2022 (this “Agreement”), is among Golden Star Enterprises Ltd., a Delaware corporation (the “Company”), all of the Subsidiaries of the Company(such subsidiaries, the “Guarantors” and together with the Company, the “Debtors”) and Mast Hill Fund, L.P., a Delaware limited partnership (collectively with its endorsees, transferees and assigns, the “Secured Parties”).
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (as defined in the Note (as defined below)), the Company has agreed to issue that certain 12% senior secured promissory note dated May 20, 2022, in the original principal amount of $370,000.00 (the “Note”);
WHEREAS, in order to induce the Secured Parties to enter into the investment evidenced by the Note, each Debtor has agreed to execute and deliver to the Secured Parties this Agreement and to grant the Secured Parties, a security interest in certain property of such Debtor to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Note.
NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have the respective meanings given such terms in Article 9 of the UCC.
(a) “Collateral” means the collateral in which the Secured Parties are granted a security interest by this Agreement and which shall include the following personal property of the Debtors, whether presently owned or existing or hereafter acquired or coming into existence, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the Collateral and of insurance covering the same and of any tort claims in connection therewith, and all dividends, interest, cash, notes, securities, equity interest or other property at any time and from time to time acquired, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Securities (as defined below):
(i) All goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures, test and quality control devices and other equipment of every kind and nature and wherever situated, together with all documents of title and documents representing the same, all additions and accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of the foregoing and all other items used and useful in connection with any Debtor’s businesses and all improvements thereto; and (B) all inventory;
(ii) All contract rights and other general intangibles, including, without limitation, all partnership interests, membership interests, stock or other securities, rights under any of the Organizational Documents, agreements related to the Pledged Securities, licenses, distribution and other agreements, computer software (whether “off-the-shelf”, licensed from any third party or developed by any Debtor), computer software development rights, leases, franchises, customer lists, quality control procedures, grants and rights, goodwill, Intellectual Property and income tax refunds;
(iii) All accounts, together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising, goods, equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties with respect to each account, including any right of stoppage in transit;
(iv) All documents, letter-of-credit rights, instruments and chattel paper;
(v) All commercial tort claims;
(vi) All deposit accounts and all cash (whether or not deposited in such deposit accounts);
(vii) All investment property;
(viii) All supporting obligations; and
(ix) All files, records, books of account, business papers, and computer programs; and
(x) the products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the “Collateral” shall include all investment property and general intangibles respecting ownership and/or other equity interests in each Guarantor, including, without limitation, the shares of capital stock and the other equity interests disclosed in the SEC Documents (as defined in the Purchase Agreement) (the “SEC Documents”), as the same may be modified from time to time pursuant to the terms hereof, and any other shares of capital stock and/or other equity interests of any other direct or indirect subsidiary of any Debtor obtained in the future, and, in each case, all certificates representing such shares and/or equity interests and, in each case, all rights, options, warrants, stock, other securities and/or equity interests that may hereafter be received, receivable or distributed in respect of, or exchanged for, any of the foregoing and all rights arising under or in connection with the Pledged Securities, including, but not limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law); provided, however, that to the extent permitted by applicable law, this Agreement shall create a valid security interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in the proceeds of such asset.
(b) “Intellectual Property” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes of action for infringement of the foregoing.
(c) [Intentionally Omitted].
(d) “Necessary Endorsement” means undated stock powers endorsed in blank or other proper instruments of assignment duly executed and such other instruments or documents as the Secured Parties may reasonably request.
(e) “Obligations” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of any Debtor to the Secured Parties, including, without limitation, all obligations under this Agreement, the Note, and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from any of the Secured Parties as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal, interest, and penalties under the Note and all other amounts owed thereunder; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Debtors from time to time under or in connection with this Agreement, the Note, and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts (including but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Debtor.
(f) “Organizational Documents” means with respect to any Debtor, the documents by which such Debtor was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Debtor (such as bylaws, a partnership agreement or an operating, limited liability or members agreement).
(g) “Pledged Interests” shall have the meaning ascribed to such term in Section 4(j).
(h) “Pledged Securities” shall have the meaning ascribed to such term in Section 4(i).
(i) “UCC” means the Uniform Commercial Code of the State of Delaware and or any other applicable law of any state or states which has jurisdiction with respect to all, or any portion of, the Collateral or this Agreement, from time to time. It is the intent of the parties that defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed in its broadest sense. Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones shall be controlling.
2. Grant of Security Interest in Collateral. As an inducement for the Secured Parties to enter into the investment as evidenced by the Note and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Secured Parties a security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security Interests”).
3. Delivery of Certain Collateral. Contemporaneously or prior to the execution of this Agreement, each Debtor shall deliver or cause to be delivered to the Secured Parties (a) any and all certificates and other instruments representing or evidencing the Pledged Securities, and (b) any and all certificates and other instruments or documents representing any of the other Collateral, in each case, together with all Necessary Endorsements. The Debtors are, contemporaneously with the execution hereof, delivering to Secured Parties, or have previously delivered to Secured Parties, a true and correct copy of each Organizational Document governing any of the Pledged Securities.
4. Representations, Warranties, Covenants and Agreements of the Debtors. Except as set forth under the corresponding section of the disclosure schedules delivered to the Secured Parties concurrently herewith (the “Disclosure Schedules”), which Disclosure Schedules shall be deemed a part hereof, each Debtor represents and warrants to, and covenants and agrees with, the Secured Parties as follows:
(a) Each Debtor has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and performance by each Debtor of this Agreement and the filings contemplated therein have been duly authorized by all necessary action on the part of such Debtor and no further action is required by such Debtor. This Agreement has been duly executed by each Debtor. This Agreement constitutes the legal, valid and binding obligation of each Debtor, enforceable against each Debtor in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.
(b) The Debtors have no place of business or offices where their respective books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule A attached hereto. Except as specifically set forth on Schedule A, each Debtor is the record owner of the real property where such Collateral is located, and there exist no mortgages or other liens on any such real property. Except as disclosed on Schedule A, none of such Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor.
(c) Except as set forth in the SEC Documents , the Debtors are the sole owner of the Collateral (except for non-exclusive licenses granted by any Debtor in the ordinary course of business), free and clear of any liens, security interests, encumbrances, rights or claims. The Debtors are fully authorized to grant the Security Interests. Except as set forth in the SEC Documents, there is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in favor of the Secured Parties pursuant to this Agreement) covering or affecting any of the Collateral. Except as set forth in the SEC Documents prior to the date of this Agreement and except pursuant to this Agreement, as long as this Agreement shall be in effect, the Debtors shall not execute and shall not knowingly permit to be on file in any such office or agency any other financing statement or other document or instrument (except to the extent filed or recorded in favor of the Secured Parties pursuant to the terms of this Agreement).
(d) No written claim has been received that any Collateral or any Debtor's use of any Collateral violates the rights of any third party. There has been no adverse decision to any Debtor's claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to any Debtor's right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of any Debtor, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.
(e) Each Debtor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and its Collateral at the locations set forth on Schedule A attached hereto and may not relocate such books of account and records or tangible Collateral unless it delivers to the Secured Parties at least 30 days prior to such relocation (i) written notice of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing statements under the UCC and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security Interests to create in favor of the Secured Parties a valid, perfected and continuing perfected lien in the Collateral.
(f) This Agreement creates in favor of the Secured Parties a valid security interest in the Collateral securing the payment and performance of the Obligations. Upon making the filings described in the immediately following paragraph, all security interests created hereunder in any Collateral which may be perfected by filing UCC financing statements shall have been duly perfected. Except for the filing of the UCC financing statements referred to in the immediately following paragraph, the recordation of this Agreement with respect to copyrights and copyright applications in the United States Copyright Office referred to in paragraph (m), the execution and delivery of deposit account control agreements satisfying the requirements of Section 9-104 of the UCC with respect to each deposit account of the Debtors,and the delivery of the certificates and other instruments provided in Section 3, no action is necessary to create, perfect or protect the security interests created hereunder. Without limiting the generality of the foregoing, except for the filing of said financing statements, the recordation of this Agreement, and the execution and delivery of said deposit account control agreements, no consent of any third parties and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for (i) the execution, delivery and performance of this Agreement, (ii) the creation or perfection of the Security Interests created hereunder in the Collateral or (iii) the enforcement of the rights of the Secured Parties hereunder.
(g) Each Debtor hereby authorizes the Secured Parties to file one or more financing statements under the UCC, with respect to the Security Interests, with the proper filing and recording agencies in any jurisdiction deemed proper by it.
(h) The execution, delivery and performance of this Agreement by the Debtors does not violate any of the provisions of any Organizational Documents of any Debtor or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law, rule or regulation applicable to any Debtor, conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing any Debtor's debt or otherwise) or other understanding to which any Debtor is a party or by which any property or asset of any Debtor is bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors of any Debtor) necessary for any Debtor to enter into and perform its obligations hereunder have been obtained.
(i)The capital stock and other equity interests listed in the SEC Documents (the “Pledged Securities”) represent all of the capital stock and other equity interests of the Guarantors, and represent all capital stock and other equity interests owned, directly or indirectly, by the Company. All of the Pledged Securities are validly issued, fully paid and nonassessable, and the Company is the legal and beneficial owner of the Pledged Securities, free and clear of any lien, security interest or other encumbrance except for the security interests created by this Agreement.
(j) The ownership and other equity interests in partnerships and limited liability companies (if any) included in the Collateral (the “Pledged Interests”) by their express terms do not provide that they are securities governed by Article 8 of the UCC and are not held in a securities account or by any financial intermediary.
(k) Each Debtor shall at all times maintain the liens and Security Interests provided for hereunder as valid and perfected first priority liens and security interests in the Collateral in favor of the Secured Parties until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 14 hereof. Each Debtor hereby agrees to defend the same against the claims of any and all persons and entities. Each Debtor shall safeguard and protect all Collateral for the account of the Secured Parties. At the request of the Secured Parties, each Debtor will sign and deliver to the Secured Parties on behalf of the Secured Parties at any time or from time to time one or more financing statements pursuant to the UCC in form reasonably satisfactory to the Secured Parties and will pay the cost of filing the same in all public offices wherever filing is, or is deemed by the Secured Parties to be, necessary or desirable to effect the rights and obligations provided for herein. Without limiting the generality of the foregoing, each Debtor shall pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security Interests hereunder, and each Debtor shall obtain and furnish to the Secured Parties from time to time, upon demand, such releases and/or subordinations of claims and liens which may be required to maintain the priority of the Security Interests hereunder.
(l) No Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for non-exclusive licenses granted by a Debtor in its ordinary course of business and sales of inventory by a Debtor in its ordinary course of business) without the prior written consent of the Secured Parties.
(m) Each Debtor shall keep and preserve its equipment, inventory and other tangible Collateral in good condition, repair and order and shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.
(n) Each Debtor shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover the full replacement cost thereof. Each Debtor shall cause each insurance policy issued in connection herewith to provide, and the insurer issuing such policy to certify to the Secured Parties, that (a) the Secured Parties will be named as lender loss payee and additional insured under each such insurance policy; (b) if such insurance be proposed to be cancelled or materially changed for any reason whatsoever, such insurer will promptly notify the Secured Parties and such cancellation or change shall not be effective as to the Secured Parties for at least thirty (30) days after receipt by the Secured Parties of such notice, unless the effect of such change is to extend or increase coverage under the policy; and (c) the Secured Parties will have the right (but no obligation) at its election to remedy any default in the payment of premiums within thirty (30) days of notice from the insurer of such default. If no Event of Default (as defined in the Note) exists and if the proceeds arising out of any claim or series of related claims do not exceed $100,000, loss payments in each instance will be applied by the applicable Debtor to the repair and/or replacement of property with respect to which the loss was incurred to the extent reasonably feasible, and any loss payments or the balance thereof remaining, to the extent not so applied, shall be payable to the applicable Debtor; provided, however, that payments received by any Debtor after an Event of Default occurs and is continuing or in excess of $100,000 for any occurrence or series of related occurrences shall be paid to the Secured Parties and accordingly, if received by such Debtor, shall be held in trust for the Secured Parties and immediately paid over to the Secured Parties. Copies of such policies or the related certificates, in each case, naming the Secured Parties as lender loss payee and additional insured shall be delivered to the Secured Parties at least annually and at the time any new policy of insurance is issued.
(o) Each Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the Secured Parties promptly, in sufficient detail, of any material adverse change in the Collateral, and of the occurrence of any event which would have a material adverse effect on the value of the Collateral or on the Secured Parties’ security interest therein.
(p) Each Debtor shall promptly execute and deliver to the Secured Parties such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Secured Parties may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce the Secured Parties’ security interest in the Collateral.
(q) Each Debtor shall permit the Secured Parties and its representatives and agents to inspect the Collateral during normal business hours and upon reasonable prior notice, and to make copies of records pertaining to the Collateral as may be reasonably requested by the Secured Parties from time to time.
(r) Each Debtor shall take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims, causes of action and accounts receivable in respect of the Collateral.
(s) Each Debtor shall promptly notify the Secured Parties in sufficient detail upon becoming aware of any attachment, garnishment, execution or other legal process levied against any Collateral and of any other information received by such Debtor that may materially affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.
(t) All information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of any Debtor with respect to the Collateral is accurate and complete in all material respects as of the date furnished.
(u) The Debtors shall at all times preserve and keep in full force and effect their respective valid existence and good standing and any rights and franchises material to its business.
(v) No Debtor will change its name, type of organization, jurisdiction of organization, organizational identification number (if it has one), legal or corporate structure, or identity, or add any new fictitious name unless it provides at least 30 days prior written notice to the Secured Parties of such change and, at the time of such written notification, such Debtor provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.
(w) Except in the ordinary course of business, no Debtor may consign any of its inventory or sell any of its inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale without the consent of the Secured Parties which shall not be unreasonably withheld.
(x) No Debtor may relocate its chief executive office to a new location without providing 30 days prior written notification thereof to the Secured Parties and so long as, at the time of such written notification, such Debtor provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.
(y) Each Debtor was organized and remains organized solely under the laws of the state set forth next to such Debtor’s name in Schedule B attached hereto, which Schedule B sets forth each Debtor’s organizational identification number or, if any Debtor does not have one, states that one does not exist.
(z) (i) The actual name of each Debtor is the name set forth in Schedule B attached hereto; (ii) no Debtor has any trade names except as set forth in the SEC Documents; (iii) no Debtor has used any name other than that stated in the preamble hereto or as set forth in the SEC Documents for the preceding five years; and (iv) no entity has merged into any Debtor or been acquired by any Debtor within the past five years except as set forth in the SEC Documents.
(aa) At any time and from time to time that any Collateral consists of instruments, certificated securities or other items that require or permit possession by the Secured Parties to perfect the security interest created hereby, the applicable Debtor shall deliver such Collateral to the Secured Parties.
(bb) Each Debtor, in its capacity as issuer, hereby agrees to comply with any and all orders and instructions of Secured Parties regarding the Pledged Interests consistent with the terms of this Agreement without the further consent of any Debtor as contemplated by Section 8-106 (or any successor section) of the UCC. Further, each Debtor agrees that it shall not enter into a similar agreement (or one that would confer “control” within the meaning of Article 8 of the UCC) with any other person or entity.
(cc) Each Debtor shall cause all tangible chattel paper constituting Collateral to be delivered to the Secured Parties, or, if such delivery is not possible, then to cause such tangible chattel paper to contain a legend noting that it is subject to the security interest created by this Agreement. To the extent that any Collateral consists of electronic chattel paper, the applicable Debtor shall cause the underlying chattel paper to be “marked” within the meaning of Section 9-105 of the UCC (or successor section thereto).
(dd) If there is any investment property or deposit account included as Collateral that can be perfected by “control” through an account control agreement, the applicable Debtor shall cause such an account control agreement, in form and substance in each case satisfactory to the Secured Parties, to be entered into and delivered to the Secured Parties.
(ee) To the extent that any Collateral consists of letter-of-credit rights, the applicable Debtor shall cause the issuer of each underlying letter of credit to consent to an assignment of the proceeds thereof to the Secured Parties.
(ff) To the extent that any Collateral is in the possession of any third party, the applicable Debtor shall join with the Secured Parties in notifying such third party of the Secured Parties’ security interest in such Collateral and shall use its best efforts to obtain an acknowledgement and agreement from such third party with respect to the Collateral, in form and substance reasonably satisfactory to the Secured Parties.
(gg) If any Debtor shall at any time hold or acquire a commercial tort claim, such Debtor shall promptly notify the Secured Parties in a writing signed by such Debtor of the particulars thereof and grant to the Secured Parties in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Secured Parties.
(hh) Each Debtor shall immediately provide written notice to the Secured Parties of any and all accounts which arise out of contracts with any governmental authority and, to the extent necessary to perfect or continue the perfected status of the Security Interests in such accounts and proceeds thereof, shall execute and deliver to the Secured Parties an assignment of claims for such accounts and cooperate with the Secured Parties in taking any other steps required, in its judgment, under the Federal Assignment of Claims Act or any similar federal, state or local statute or rule to perfect or continue the perfected status of the Security Interests in such accounts and proceeds thereof.
(ii) Each Debtor shall cause each subsidiary of such Debtor to immediately become a party hereto (an “Additional Debtor”), by executing and delivering an Additional Debtor Joinder in substantially the form of Annex A attached hereto and comply with the provisions hereof applicable to the Debtors. Concurrent therewith, the Additional Debtor shall deliver replacement schedules for, or supplements to all other Schedules to (or referred to in) this Agreement, as applicable, which replacement schedules shall supersede, or supplements shall modify, the Schedules then in effect. The Additional Debtor shall also deliver such opinions of counsel, authorizing resolutions, good standing certificates, incumbency certificates, organizational documents, financing statements and other information and documentation as the Secured Parties may reasonably request. Upon delivery of the foregoing to the Secured Parties, the Additional Debtor shall be and become a party to this Agreement with the same rights and obligations as the Debtors, for all purposes hereof as fully and to the same extent as if it were an original signatory hereto and shall be deemed to have made the representations, warranties and covenants set forth herein as of the date of execution and delivery of such Additional Debtor Joinder, and all references herein to the “Debtors” shall be deemed to include each Additional Debtor.
(jj) Each Debtor shall vote the Pledged Securities to comply with the covenants and agreements set forth herein and in the Note.
(kk) Each Debtor shall register the pledge of the applicable Pledged Securities on the books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities to register the pledge of the applicable Pledged Securities in the name of the Secured Parties on the books of such issuer. Further, except with respect to certificated securities delivered to the Secured Parties, the applicable Debtor shall deliver to Secured Parties an acknowledgement of pledge (which, where appropriate, shall comply with the requirements of the relevant UCC with respect to perfection by registration) signed by the issuer of the applicable Pledged Securities, which acknowledgement shall confirm that: (a) it has registered the pledge on its books and records; and (b) at any time directed by the Secured Parties during the continuation of an Event of Default, such issuer will transfer the record ownership of such Pledged Securities into the name of the Secured Parties or any designee of Secured Parties, will take such steps as may be necessary to effect the transfer, and will comply with all other instructions of Secured Parties regarding such Pledged Securities without the further consent of the applicable Debtor.
(ll) In the event that, upon an occurrence of an Event of Default, Secured Parties shall sell all or any of the Pledged Securities to another party or parties (herein called the “Transferee”) or shall purchase or retain all or any of the Pledged Securities, each Debtor shall, to the extent applicable: (i) deliver to Secured Parties or the Transferee, as the case may be, the articles of incorporation, bylaws, minute books, stock certificate books, corporate seals, deeds, leases, indentures, agreements, evidences of indebtedness, books of account, financial records and all other Organizational Documents and records of the Debtors and their direct and indirect subsidiaries; (ii) use its best efforts to obtain resignations of the persons then serving as officers and directors of the Debtors and their direct and indirect subsidiaries, if so requested; and (iii) use its best efforts to obtain any approvals that are required by any governmental or regulatory body in order to permit the sale of the Pledged Securities to the Transferee or the purchase or retention of the Pledged Securities by Secured Parties and allow the Transferee or Secured Parties to continue the business of the Debtors and their direct and indirect subsidiaries.
(mm) Without limiting the generality of the other obligations of the Debtors hereunder, each Debtor shall promptly (i) cause to be registered at the United States Copyright Office all of its material copyrights, (ii) cause the security interest contemplated hereby with respect to all Intellectual Property registered at the United States Copyright Office or United States Patent and Trademark Office to be duly recorded at the applicable office, and (iii) give the Secured Parties notice whenever it acquires (whether absolutely or by license) or creates any additional material Intellectual Property.
(nn) Each Debtor will from time to time, at the joint and several expense of the Debtors, promptly execute and deliver all such further instruments and documents, and take all such further action as may be necessary or desirable, or as the Secured Parties may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Parties to exercise and enforce their rights and remedies hereunder and with respect to any Collateral or to otherwise carry out the purposes of this Agreement.
(oo) The SEC Documents list all of the patents, patent applications, trademarks, trademark applications, registered copyrights, and domain names owned by any of the Debtors as of the date hereof. The SEC Documents list all material licenses in favor of any Debtor for the use of any patents, trademarks, copyrights and domain names as of the date hereof. All material patents and trademarks of the Debtors have been duly recorded at the United States Patent and Trademark Office and all material copyrights of the Debtors have been duly recorded at the United States Copyright Office.
(pp) Except as set forth in the SEC Documents, none of the account debtors or other persons or entities obligated on any of the Collateral is a governmental authority covered by the Federal Assignment of Claims Act or any similar federal, state or local statute or rule in respect of such Collateral.
5. Effect of Pledge on Certain Rights. If any of the Collateral subject to this Agreement consists of nonvoting equity or ownership interests (regardless of class, designation, preference or rights) that may be converted into voting equity or ownership interests upon the occurrence of certain events (including, without limitation, upon the transfer of all or any of the other stock or assets of the issuer), it is agreed that the pledge of such equity or ownership interests pursuant to this Agreement or the enforcement of any of Secured Parties’ rights hereunder shall not be deemed to be the type of event which would trigger such conversion rights notwithstanding any provisions in the Organizational Documents or agreements to which any Debtor is subject or to which any Debtor is party.
6. Defaults. The following events shall be “Events of Default”:
(a) The occurrence of an Event of Default (as defined in the Note) under the Note;
(b) Any representation or warranty of any Debtor in this Agreement shall prove to have been incorrect in any material respect when made;
(c) The failure by any Debtor to observe or perform any of its obligations hereunder for five (5) days after delivery to such Debtor of notice of such failure by or on behalf of the Secured Parties unless such default is capable of cure but cannot be cured within such time frame and such Debtor is using best efforts to cure same in a timely fashion; or
(d) If any provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by any governmental authority having jurisdiction over any Debtor, seeking to establish the invalidity or unenforceability thereof, or any Debtor shall deny that any Debtor has any liability or obligation purported to be created under this Agreement.
7. Duty To Hold In Trust.
(a) Upon the occurrence of any Event of Default and at any time thereafter, each Debtor shall, upon receipt of any revenue, income, dividend, interest or other sums subject to the Security Interests, whether payable pursuant to the Note or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Secured Parties, pro-rata in proportion to their respective then-currently outstanding principal amount of Note for application to the satisfaction of the Obligations.
(b) If any Debtor shall become entitled to receive or shall receive any securities or other property (including, without limitation, shares of Pledged Securities or instruments representing Pledged Securities acquired after the date hereof, or any options, warrants, rights or other similar property or certificates representing a dividend, or any distribution in connection with any recapitalization, reclassification or increase or reduction of capital, or issued in connection with any reorganization of such Debtor or any of its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise), such Debtor agrees to (i) accept the same as the agent of the Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of the Secured Parties; and (iii) to deliver any and all certificates or instruments evidencing the same to Secured Parties on or before the close of business on the fifth business day following the receipt thereof by such Debtor, in the exact form received together with the Necessary Endorsements, to be held by Secured Parties subject to the terms of this Agreement as Collateral.
8. Rights and Remedies Upon Default.
(a) Upon the occurrence of any Event of Default and at any time thereafter, the Secured Parties, shall have the right to exercise all of the remedies conferred hereunder and under the Note, and the Secured Parties shall have all the rights and remedies of a secured party under the UCC. Without limitation, the Secured Parties shall have the following rights and powers:
(i) The Secured Parties shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and each Debtor shall assemble the Collateral and make it available to the Secured Parties at places which the Secured Parties shall reasonably select, whether at such Debtor's premises or elsewhere, and make available to the Secured Parties, without rent, all of such Debtor’s respective premises and facilities for the purpose of the Secured Parties taking possession of, removing or putting the Collateral in saleable or disposable form.
(ii) Upon notice to the Debtors by Secured Parties, all rights of each Debtor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise and all rights of each Debtor to receive the dividends and interest which it would otherwise be authorized to receive and retain, shall cease. Upon such notice, the Secured Parties shall have the right to receive any interest, cash dividends or other payments on the Collateral and, at the option of Secured Parties, to exercise in such Secured Parties’ discretion all voting rights pertaining thereto. Without limiting the generality of the foregoing, Secured Parties shall have the right (but not the obligation) to exercise all rights with respect to the Collateral as it were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange, at its sole discretion, any or all of the Collateral in connection with a merger, reorganization, consolidation, recapitalization or other readjustment concerning or involving the Collateral or any Debtor or any of its direct or indirect subsidiaries.
(iii) The Secured Parties shall have the right to operate the business of each Debtor using the Collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Secured Parties may deem commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon or notice to any Debtor or right of redemption of a Debtor, which are hereby expressly waived. Upon each such sale, lease, assignment or other transfer of Collateral, the Secured Parties, may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of any Debtor, which are hereby waived and released.
(iv) The Secured Parties shall have the right (but not the obligation) to notify any account debtors and any obligors under instruments or accounts to make payments directly to the Secured Parties, on behalf of the Secured Parties, and to enforce the Debtors’ rights against such account debtors and obligors.
(v) The Secured Parties may (but are not obligated to) direct any financial intermediary or any other person or entity holding any investment property to transfer the same to the Secured Parties or its designee.
(vi) The Secured Parties may (but is not obligated to) transfer any or all Intellectual Property registered in the name of any Debtor at the United States Patent and Trademark Office and/or Copyright Office into the name of the Secured Parties or any designee or any purchaser of any Collateral.
(b) The Secured Parties shall comply with any applicable law in connection with a disposition of Collateral and such compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Secured Parties may sell the Collateral without giving any warranties and may specifically disclaim such warranties. If the Secured Parties sell any of the Collateral on credit, the Debtors will only be credited with payments actually made by the purchaser. In addition, each Debtor waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of the Secured Parties’ rights and remedies hereunder, including, without limitation, its right following an Event of Default to take immediate possession of the Collateral and to exercise its rights and remedies with respect thereto.
(c) For the purpose of enabling the Secured Parties to further exercise rights and remedies under this Section 8 or elsewhere provided by agreement or applicable law, each Debtor hereby grants to the Secured Parties, for the benefit of the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Debtor) to use, license or sublicense following an Event of Default, any Intellectual Property now owned or hereafter acquired by such Debtor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.
9. Applications of Proceeds. The proceeds of any such sale, lease or other disposition of the Collateral hereunder or from payments made on account of any insurance policy insuring any portion of the Collateral shall be applied first, to the expenses of retaking, holding, storing, processing and preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs incurred in connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by the Secured Parties in enforcing the Secured Parties’ rights hereunder and in connection with collecting, storing and disposing of the Collateral, and then to satisfaction of the Obligations pro rata among the Secured Parties (based on then-outstanding principal amounts of Note at the time of any such determination), and to the payment of any other amounts required by applicable law, after which the Secured Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally entitled, the Debtors will be liable for the deficiency, together with interest thereon, at the rate of the Default Interest (as defined in the Note), and the reasonable fees of any attorneys employed by the Secured Parties to collect such deficiency. To the extent permitted by applicable law, each Debtor waives all claims, damages and demands against the Secured Parties arising out of the repossession, removal, retention or sale of the Collateral, unless due solely to the gross negligence or willful misconduct of the Secured Parties as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction.
10. Securities Law Provision. Each Debtor recognizes that Secured Parties may be limited in its ability to effect a sale to the public of all or part of the Pledged Securities by reason of certain prohibitions in the Securities Act of 1933, as amended, or other federal or state securities laws (collectively, the “Securities Laws”), and may be compelled to resort to one or more sales to a restricted group of purchasers who may be required to agree to acquire the Pledged Securities for their own account, for investment and not with a view to the distribution or resale thereof. Each Debtor agrees that sales so made may be at prices and on terms less favorable than if the Pledged Securities were sold to the public, and that Secured Parties have no obligation to delay the sale of any Pledged Securities for the period of time necessary to register the Pledged Securities for sale to the public under the Securities Laws. Each Debtor shall cooperate with Secured Parties in its attempt to satisfy any requirements under the Securities Laws (including, without limitation, registration thereunder if requested by Secured Parties) applicable to the sale of the Pledged Securities by Secured Parties.
11. Costs and Expenses. Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in connection with any filing required hereunder, including without limitation, any financing statements pursuant to the UCC, continuation statements, partial releases and/or termination statements related thereto or any expenses of any searches reasonably required by the Secured Parties. The Debtors shall also pay all other claims and charges which in the reasonable opinion of the Secured Parties is reasonably likely to prejudice, imperil or otherwise affect the Collateral or the Security Interests therein. The Debtors will also, upon demand, pay to the Secured Parties the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Secured Parties may incur in connection with the creation, perfection, protection, satisfaction, foreclosure, collection or enforcement of the Security Interest and the preparation, administration, continuance, amendment or enforcement of this Agreement and pay to the Secured Parties the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Secured Parties may incur in connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise or enforcement of any of the rights of the Secured Parties under the Note. Until so paid, any fees payable hereunder shall be added to the principal amount of the Note and shall bear interest at the rate of the Default Interest (as defined in the Note).
12. Responsibility for Collateral. The Debtors assume all liabilities and responsibility in connection with all Collateral, and the Obligations shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for any reason. Without limiting the generality of the foregoing, (a) the Secured Parties do not (i) have any duty (either before or after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) have any obligation to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor shall remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed by such Debtor thereunder. The Secured Parties shall not have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Secured Parties of any payment relating to any of the Collateral, nor shall the Secured Parties be obligated in any manner to perform any of the obligations of any Debtor under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Secured Parties in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which the Secured Parties may be entitled at any time or times.
13. Security Interests Absolute. All rights of the Secured Parties and all obligations of the Debtors hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of this Agreement, the Note or any agreement entered into in connection with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Note or any other agreement entered into in connection with the foregoing; (c) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guarantee, or any other security, for all or any of the Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to a Debtor, or a discharge of all or any part of the Security Interests granted hereby. Until the Obligations shall have been paid and performed in full, the rights of the Secured Parties shall continue even if the Obligations are barred for any reason, including, without limitation, the running of the statute of limitations or bankruptcy. Each Debtor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral or any payment received by the Secured Parties hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Secured Parties, then, in any such event, each Debtor’s obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof. Each Debtor waives all right to require the Secured Parties to proceed against any other person or entity or to apply any Collateral which the Secured Parties may hold at any time, or to marshal assets, or to pursue any other remedy. Each Debtor waives any defense arising by reason of the application of the statute of limitations to any obligation secured hereby.
14. Term of Agreement. This Agreement and the Security Interests shall terminate on the date on which all payments under the Note have been indefeasibly paid in full and all other Obligations have been paid or discharged; provided, however, that all indemnities of the Debtors contained in this Agreement (including, without limitation, Annex B hereto) shall survive and remain operative and in full force and effect regardless of the termination of this Agreement.
15. Power of Attorney; Further Assurances.
(a) Each Debtor authorizes the Secured Parties, and does hereby make, constitute and appoint the Secured Parties and its officers, agents, successors or assigns with full power of substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in the name of the Secured Parties or such Debtor, to, after the occurrence and during the continuance of an Event of Default, (i) endorse any note, checks, drafts, money orders or other instruments of payment (including payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Secured Parties; (ii) to sign and endorse any financing statement pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes, liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; (v) to transfer any Intellectual Property or provide licenses respecting any Intellectual Property; and (vi) generally, at the option of the Secured Parties, and at the expense of the Debtors, at any time, or from time to time, to execute and deliver any and all documents and instruments and to do all acts and things which the Secured Parties deem necessary to protect, preserve and realize upon the Collateral and the Security Interests granted therein in order to effect the intent of this Agreement and the Note all as fully and effectually as the Debtors might or could do; and each Debtor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding. The designation set forth herein shall be deemed to amend and supersede any inconsistent provision in the Organizational Documents or other documents or agreements to which any Debtor is subject or to which any Debtor is a party. Without limiting the generality of the foregoing, after the occurrence and during the continuance of an Event of Default, the Secured Parties are specifically authorized to execute and file any applications for or instruments of transfer and assignment of any patents, trademarks, copyrights or other Intellectual Property with the United States Patent and Trademark Office and the United States Copyright Office.
(b) On a continuing basis, each Debtor will make, execute, acknowledge, deliver, file and record, as the case may be, with the proper filing and recording agencies in any jurisdiction, including, without limitation, the State of Delaware, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or as reasonably requested by the Secured Parties, to perfect the Security Interests granted hereunder and otherwise to carry out the intent and purposes of this Agreement, or for assuring and confirming to the Secured Parties the grant or perfection of a perfected security interest in all the Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Secured Parties as such Debtor’s attorney-in-fact, with full authority in the place and instead of such Debtor and in the name of such Debtor, from time to time in the Secured Parties’ discretion, to take any action and to execute any instrument which the Secured Parties may deem necessary or advisable to accomplish the purposes of this Agreement, pertaining to the filing, in its sole discretion, of one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of such Debtor where permitted by law, which financing statements may (but need not) describe the Collateral as “all assets” or “all personal property” or words of like import, and ratifies all such actions taken by the Secured Parties. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding.
16. Notices. All notices, requests, demands and other communications hereunder shall be subject to the notice provision of the Purchase Agreement (as such term is defined in the Note).
17. Other Security. To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Secured Parties shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.
18. [Intentionally Omitted].
19. Miscellaneous.
(a) No course of dealing between the Debtors and the Secured Parties, nor any failure to exercise, nor any delay in exercising, on the part of the Secured Parties, any right, power or privilege hereunder or under the Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Parties with respect to the Collateral, whether established hereby or by the Note or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement, together with the exhibits and schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement and the exhibits and schedules hereto. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Debtors and the Secured Parties holding 67% or more of the principal amount of Note then outstanding, or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.
(d) If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(e) No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
(f) This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company and the Guarantors may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Secured Parties (other than by merger as provided in this Agreement and the Note). The Secured Parties may assign any or all of its rights under this Agreement to any party to whom such Secured Parties assigns or transfers any Obligations, provided such transferee agrees in writing to be bound, with respect to the transferred Obligations, by the provisions of this Agreement that apply to the “Secured Parties.”
(g) Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.
(h) Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, all questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, each Debtor agrees that all proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Note (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 Commonwealth of Massachusetts, and each Debtor hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction of any such court or that such proceeding is improper. Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, each Debtor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the Commonwealth of Massachusetts 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 proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
(i) This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.
(j) All Debtors shall jointly and severally be liable for the obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold harmless the Secured Parties and their respective partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions) (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, “Indemnitees”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result from the gross negligence or willful misconduct of the Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction. This indemnification provision is in addition to, and not in limitation of, any other indemnification provision in the Note, the Purchase Agreement (as such term is defined in the Note) or any other agreement, instrument or other document executed or delivered in connection herewith or therewith.
(l) Nothing in this Agreement shall be construed to subject the Secured Parties to liability as a partner in any Debtor or any if its direct or indirect subsidiaries that is a partnership or as a member in any Debtor or any of its direct or indirect subsidiaries that is a limited liability company, nor shall the Secured Parties be deemed to have assumed any obligations under any partnership agreement or limited liability company agreement, as applicable, of any such Debtor or any of its direct or indirect subsidiaries or otherwise, unless and until any such Secured Parties exercise its right to be substituted for such Debtor as a partner or member, as applicable, pursuant hereto.
(m) To the extent that the grant of the security interest in the Collateral and the enforcement of the terms hereof require the consent, approval or action of any partner or member, as applicable, of any Debtor or any direct or indirect subsidiary of any Debtor or compliance with any provisions of any of the Organizational Documents, the Debtors hereby grant such consent and approval and waive any such noncompliance with the terms of said documents.
[SIGNATURE PAGE FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed on the day and year first above written.
| GOLDEN STAR ENTERPRISES LTD. | |
| | | |
| By: | /s/ Eliav Kling | |
| Name: | Eliav Kling | |
| Title: | Chief Executive Officer | |
| Enigmai Ltd. | |
| | | |
| By: | /s/ Eliav Kling | |
| Name: | Eliav Kling | |
| Title: | Director | |
| MAST HILL FUND, L.P. | |
| | | |
| By: | /s/ Patrick Hassani | |
| Name: | Patrick Hassani | |
| Title: | Chief Investment Officer | |
SCHEDULE A
Principal Place of Business of Debtors: 2803 Philadelphia Pike, Suite B, Claymont, DE 19703
Locations Where Collateral is Located or Stored:
2803 Philadelphia Pike, Suite B, Claymont, DE 19703
SCHEDULE B
Jurisdiction of Organization
| Debtor | | Jurisdiction of Organization |
| Golden Star Enterprises Ltd. Enigmai Ltd. | | Delaware Israel |
ANNEX A
to
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of May 20, 2022 made by
Golden Star Enterprises Ltd.
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (the “Security Agreement”)
Reference is made to the Security Agreement as defined above; capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in, or by reference in, the Security Agreement.
The undersigned hereby agrees that upon delivery of this Additional Debtor Joinder to the Secured Parties referred to above, the undersigned shall (a) be an Additional Debtor under the Security Agreement, (b) have all the rights and obligations of the Debtors under the Security Agreement as fully and to the same extent as if the undersigned was an original signatory thereto and (c) be deemed to have made the representations and warranties set forth therein as of the date of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached hereto are supplemental and/or replacement Schedules to the Security Agreement, as applicable.
An executed copy of this Joinder shall be delivered to the Secured Parties, and the Secured Parties may rely on the matters set forth herein on or after the date hereof. This Joinder shall not be modified, amended or terminated without the prior written consent of the Secured Parties.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in the name and on behalf of the undersigned.
| NONE | | |
| | [Name of Additional Debtor] | |
| | | | |
| By: | | |
| | Name: | | |
| | Title: | | |
| | Address: | | |
| | | | |
| Dated: | | | |
EXHIBIT 10.18
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 20, 2022, by and between GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the "Company"), and MAST HILL FUND, L.P., a Delaware limited partnership (together with it permitted assigns, the “Investor”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the securities purchase agreement by and between the parties hereto, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement").
WHEREAS:
The Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to sell to the Investor the Securities (as defined in the Purchase Agreement) and to induce the Investor to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "Securities Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings:
a. "Investor" shall have the meaning set forth above.
b. "Person" means any individual or entity including but not limited to any corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
c. "Register," "registered," and "registration" refer to a registration effected by preparing and filing one or more registration statements of the Company in compliance with the Securities Act and/or pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis ("Rule 415"), and the declaration or ordering of effectiveness of such registration statement(s) by the United States Securities and Exchange Commission (the "SEC").
d. "Registrable Securities" means all of the Conversion Shares (as defined in the Purchase Agreement) (the “Conversion Shares”), Exercise Shares (as defined in the Purchase Agreement) (the “Exercise Shares”), Commitment Shares (as defined in the Purchase Agreement) (the “Commitment Shares”) and shares of Common Stock issued to the Investor as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on purchases under the Purchase Agreement, Note (as defined in the Purchase Agreement) (the “Note”), or Warrants (as defined in the Purchase Agreement) (the “Warrants”).
e. "Registration Statement" means one or more registration statements of the Company covering only the sale of the Registrable Securities.
2. REGISTRATION.
a. Mandatory Registration. The Company shall, within one hundred twenty (120) calendar days from the date of this Agreement, file with the SEC an initial Registration Statement covering the maximum number of Registrable Securities as shall be permitted to be included thereon in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Investor, including but not limited to under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), subject to the aggregate number of authorized shares of the Company’s Common Stock then available for issuance in its Certificate of Incorporation. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such Registration Statement and any amendment or supplement to such Registration Statement and any related prospectus prior to its filing with the SEC, and the Company shall give due consideration to all reasonable comments. The Investor shall furnish all information reasonably requested by the Company for inclusion therein. The Company shall have the Registration Statement and any amendment declared effective by the SEC within one hundred eighty (180) calendar days from the date hereof (or at the earliest possible date if prior to one hundred eighty (180) calendar days from the date hereof). The Company shall keep the Registration Statement effective, including but not limited to pursuant to Rule 415 promulgated under the Securities Act and available for the resale by the Investor of all of the Registrable Securities covered thereby at all times until the the date on which the Investor shall have sold all the Registrable Securities covered thereby (the "Registration Period"). The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. In the event that the Registration Statement becomes stale, the Company shall immediately file one or more post-effective amendments to obtain an effective Registration Statement.
b. Rule 424 Prospectus. The Company shall, as required by applicable securities regulations, from time to time file (in each case, at the earliest possible date) with the SEC, pursuant to Rule 424 promulgated under the Securities Act, the prospectus and prospectus supplements, if any, to be used in connection with sales of the Registrable Securities under the Registration Statement. The Company shall file such initial prospectus covering the Investor’s sale of the Registrable Securities on the same date that the Registration Statement is declared effective by the SEC. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such prospectus prior to its filing with the SEC, and the Company shall give due consideration to all such comments. The Investor shall use its reasonable best efforts to comment upon such prospectus within one (1) Business Day from the date the Investor receives the final pre-filing version of such prospectus.
c. Sufficient Number of Shares Registered. In the event the number of shares available under the Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Registration Statement or file a new Registration Statement (a “New Registration Statement”), so as to cover all of such Registrable Securities (subject to the limitations set forth in Section 2(a)) as soon as practicable, but in any event not later than ten (10) Business Days after the necessity therefor arises, subject to any limits that may be imposed by the SEC pursuant to Rule 415 under the Securities Act. The Company shall use it reasonable best efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof. In the event that any of the Registrable Securities are not included in the Registration Statement, or have not been included in any New Registration Statement and the Company files any other registration statement under the Securities Act (other than on Form S-4, Form S-8, or with respect to other employee related plans or rights offerings) (“Other Registration Statement”) then the Company shall include such remaining Registrable Securities in such Other Registration Statement. The Company agrees that it shall not file any such Other Registration Statement unless all of the Registrable Securities have been included in such Other Registration Statement or otherwise have been registered for resale as described above.
d. Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such Registration Statement to become effective and be used for resales by the Investor under Rule 415 at then prevailing market prices (and not fixed prices), or if after the filing of the initial Registration Statement with the SEC pursuant to Section 2(a), the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in such initial Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such initial Registration Statement (with the prior consent, which shall not be unreasonably withheld, of the Investor and its legal counsel as to the specific Registrable Securities to be removed therefrom) until such time as the Staff and the SEC shall so permit such Registration Statement to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall file one or more New Registration Statements in accordance with Section 2(c) until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the prospectus contained therein is available for use by the Investor. Notwithstanding any provision herein or in the Purchase Agreement to the contrary, the Company’s obligations to register Registrable Securities (and any related conditions to the Investor’s obligations) shall be qualified as necessary to comport with any requirement of the SEC or the Staff as addressed in this Section 2(d).
3. RELATED OBLIGATIONS.
With respect to the Registration Statement and whenever any Registrable Securities are to be registered pursuant to Section 2 including on any New Registration Statement, the Company shall use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:
a. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to any registration statement and the prospectus used in connection with such registration statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep the Registration Statement or any New Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement or any New Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such registration statement.
b. The Company shall permit the Investor to review and comment upon the Registration Statement or any New Registration Statement and all amendments and supplements thereto at least two (2) Business Days prior to their filing with the SEC, and not file any document in a form to which Investor reasonably objects. The Investor shall use its reasonable best efforts to comment upon the Registration Statement or any New Registration Statement and any amendments or supplements thereto within two (2) Business Days from the date the Investor receives the final version thereof. The Company shall furnish to the Investor, without charge any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to the Registration Statement or any New Registration Statement.
c. Upon request of the Investor, the Company shall furnish to the Investor, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such registration statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any registration statement, a copy of the prospectus included in such registration statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor. For the avoidance of doubt, any filing available to the Investor via the SEC’s live EDGAR system shall be deemed “furnished to the Investor” hereunder.
d. The Company shall use reasonable best efforts to (i) register and qualify the Registrable Securities covered by a registration statement under such other securities or "blue sky" laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or "blue sky" laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event or facts, the Company shall notify the Investor in writing of the happening of any event or existence of such facts as a result of which the prospectus included in any registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and promptly prepare a supplement or amendment to such registration statement to correct such untrue statement or omission, and deliver a copy of such supplement or amendment to the Investor (or such other number of copies as the Investor may reasonably request). The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a registration statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by email on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to any registration statement or related prospectus or related information, and (iii) of the Company's reasonable determination that a post-effective amendment to a registration statement would be appropriate.
f. The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of any registration statement, or the suspension of the qualification of any Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall (i) cause all the Registrable Securities to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure designation and quotation of all the Registrable Securities on the Principal Market (as defined in the Purchase Agreement). The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section.
h. The Company shall cooperate with the Investor to facilitate the timely preparation and delivery of the Registrable Securities (not bearing any restrictive legend) either by DWAC, DRS, or in certificated form if DWAC or DRS is unavailable, to be offered pursuant to any registration statement and enable such Registrable Securities to be in such denominations or amounts as the Investor may reasonably request and registered in such names as the Investor may request.
i. The Company shall at all times provide a transfer agent and registrar with respect to its Common Stock.
j. If reasonably requested by the Investor, the Company shall (i) immediately incorporate in a prospectus supplement or post-effective amendment such information as the Investor believes should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities; (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as practicable upon notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any registration statement.
k. The Company shall use its reasonable best efforts to cause the Registrable Securities covered by any registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.
l. Within one (1) Business Day after any registration statement which includes the Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such registration statement has been declared effective by the SEC in the form attached hereto as Exhibit A. Thereafter, if requested by the Investor at any time, the Company shall require its counsel to deliver to the Investor a written confirmation whether or not the effectiveness of such registration statement has lapsed at any time for any reason (including, without limitation, the issuance of a stop order) and whether or not the registration statement is current and available to the Investor for sale of all of the Registrable Securities.
m. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to any registration statement.
4. OBLIGATIONS OF THE INVESTOR.
a. The Company shall notify the Investor in writing of the information the Company reasonably requires from the Investor in connection with any registration statement hereunder. The Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
b. The Investor agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any registration statement hereunder.
c. The Investor agrees that, upon receipt of any notice from the Company of the happening of any event or existence of facts of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any registration statement(s) covering such Registrable Securities until the Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding anything to the contrary, the Company shall cause its transfer agent to promptly deliver shares of Common Stock without any restrictive legend in accordance with the terms of the Purchase Agreement, Note, and Warrants as applicable in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor's receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of Section 3(e) and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.
6. INDEMNIFICATION.
a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, each Person, if any, who controls the Investor, the members, the directors, officers, partners, employees, agents, representatives of the Investor and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act") (each, an "Indemnified Person"), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint or several, (collectively, "Claims") incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto ("Indemnified Damages"), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement, any New Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other "blue sky" laws of any jurisdiction in which Registrable Securities are offered ("Blue Sky Filing"), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement or any New Registration Statement or (iv) any material violation by the Company of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, "Violations"). The Company shall reimburse each Indemnified Person promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information about the Investor furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement, any New Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superseded prospectus, shall not inure to the benefit of any such person from whom the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the superseded prospectus was corrected in the revised prospectus, as then amended or supplemented, if such revised prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it; (iii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investor pursuant to Section 9.
b. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.
c. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.
d. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.
With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration ("Rule 144"), the Company agrees, at the Company’s sole expense, to:
a. make and keep public information available, as those terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144;
c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting and or disclosure provisions of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration; and
d. take such additional action as is requested by the Investor to enable the Investor to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s Transfer Agent as may be requested from time to time by the Investor and otherwise fully cooperate with Investor and Investor’s broker to effect such sale of securities pursuant to Rule 144.
The Company agrees that damages may be an inadequate remedy for any breach of the terms and provisions of this Section 8 and that Investor shall, whether or not it is pursuing any remedies at law, be entitled to equitable relief in the form of a preliminary or permanent injunctions, without having to post any bond or other security, upon any breach or threatened breach of any such terms or provisions.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor.
10. AMENDMENT OF REGISTRATION RIGHTS.
No provision of this Agreement may be amended or waived by the parties from and after the date that is one Business Day immediately preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, no provision of this Agreement may be (i) amended other than by a written instrument signed by both parties hereto or (ii) waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. 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.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by email (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:
If to the Company, to:
GOLDEN STAR ENTERPRISES LTD.
2803 Philadelphia Pike, Suite B
Claymont, DE 19703
Email: info@goldenstarenterprisesltd.com
Attention: Eliav Kling
If to the Investor:
MAST HILL FUND, L.P.
48 Parker Road
Wellesley, MA 02482
e-mail: admin@masthillfund.com
or at such other address and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's email account containing the time, date, recipient email address, as applicable, and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by, or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
c. The corporate laws of the State of Delaware shall govern all issues concerning this Agreement. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state courts sitting in the Commonwealth of Massachusetts and federal courts sitting in the Commonwealth of Massachusetts, 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 suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
d. The Agreement, Purchase Agreement, Note, Warrants, and ancillary documentation entered into between the Company and Investor therewith constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. The Agreement, Purchase Agreement, Note, Warrants, and ancillary documentation entered into between the Company and Investor therewith supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.
e. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto.
f. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
g. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by e-mail in a “.pdf” format data file of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
h. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
i. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.
j. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of day and year first above written.
THE COMPANY:
GOLDEN STAR ENTERPRISES LTD.
| By: | /s/ Eliav Kling | |
| Name: ELIAV KLING | |
| Title: CHIEF EXECUTIVE OFFICER | |
INVESTOR:
MAST HILL FUND, L.P.
| By: | /s/ Patrick Hassani | |
| | Name: PATRICK HASSANI | |
| | Title: CHIEF INVESTMENT OFFICER | |
[Signature Page to registration rights agreement]
EXHIBIT A
TO REGISTRATION RIGHTS AGREEMENT
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
______, 2022
________________
________________
________________
Re: Effectiveness of Registration Statement
Ladies and Gentlemen:
We are counsel to GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), and have represented the Company in connection with that certain Purchase Agreement, dated as of May 20, 2022 (the “Purchase Agreement”), entered into by and between the Company and MAST HILL FUND, L.P., a Delaware limied partnership (the “Investor”) pursuant to which the Company has agreed to issue to the Investor shares of common stock of the Company, par value $0.0001 per share, consisting of the Conversion Shares (as defined in the Purchase Agreement) (the “Conversion Shares”) and Exercise Shares (as defined in the Purchase Agreement) (the “Exercise Shares”), and Commitment Shares (as defined in the Purchase Agreement) (the “Commitment Shares”) in accordance with the terms of the Purchase Agreement, Note (as defined below), and Warrants (as defined below). In connection with the transactions contemplated by the Purchase Agreement, the Company has registered with the U.S. Securities & Exchange Commission the following shares of Common Stock:
__________ Conversion Shares issued and/or to be issued to the Investor upon conversion of the Note (as defined in the Purchase Agreement) (the “Note”) in accordance with the Note; and
__________ Exercise Shares issued and/or to be issued to the Investor upon exerciseconversion of the Warrants (as defined in the Purchase Agreement) (the “Warrants”) in accordance with the Warrants; and
__________ Commitment Shares issued to the Investor pursuant to the Purchase Agreement.
Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement, of even date with the Purchase Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Conversion Shares and, Exercise Shares, and Commitment Shares under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company's obligations under the Purchase Agreement and the Registration Rights Agreement, on [_____], 2022, the Company filed a Registration Statement (File No. 333-[_________]) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the resale of the Conversion Shares and, Exercise Shares, and Commitment Shares.
In connection with the foregoing, we advise you that a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [_____] [A.M./P.M.] on [__________], 2022 and we have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Conversion Shares and, Exercise Shares, and Commitment Shares are available for resale under the Securities Act pursuant to the Registration Statement and may be issued without any restrictive legend.
| Very truly yours, [Company Counsel] | |
| | | |
| By: | | |
| | | |
| | | |
| cc: MAST HILL FUND, L.P. | | | |
EXHIBIT 10.19
EQUITY PURCHASE AGREEMENT
This equity purchase agreement is entered into as of May 27, 2022 (this "Agreement"), by and between Golden Star Enterprises Ltd., a Delaware corporation (the "Company"), and Mast Hill Fund, L.P., a Delaware limited partnership (the "Investor").
WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase up to Five Million Dollars ($5,000,000.00) of the Company’s Common Stock (as defined below);
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"Agreement" shall have the meaning specified in the preamble hereof.
“Average Daily Trading Value” shall mean the average trading volume of the Company’s Common Stock on the Principal Market during the seven (7) Trading Days immediately preceding the respective Put Date multiplied by the lowest volume weighted average price of the Company’s Common Stock on the Principal Market during the seven (7) Trading Days immediately preceding the respective Put Date.
“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
"Claim Notice" shall have the meaning specified in Section 9.3(a).
“Clearing Costs” shall mean all fees of the Placement Agent with respect to the transactions contemplated by this Agreement, as well as all of the Investor’s brokerage firm, clearing firm, Transfer Agent fees, and attorney fees, with respect to the Put Shares.
“Clearing Date” shall be the date on which the Investor receives the Put Shares in its brokerage account.
"Closing" shall mean one of the closings of a purchase and sale of shares of Common Stock pursuant to Section 2.3.
"Closing Certificate" shall mean the closing certificate of the Company in the form of Exhibit B hereto.
“Closing Date” shall mean the date of any Closing hereunder.
"Commitment Period" shall mean the period commencing on the Execution Date, and ending on the earlier of (i) the date on which the Investor shall have purchased Put Shares pursuant to this Agreement equal to the Maximum Commitment Amount, (ii) twenty four (24) months after the date of this Agreement, (iii) written notice of termination by the Company to the Investor (which shall not occur at any time that the Investor holds any of the Put Shares), (iv) the Registration Statement is no longer effective after the initial effective date of the Registration Statement, or (v) the date that, pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property or the Company makes a general assignment for the benefit of its creditors; provided, however, that the provisions of Articles III, IV, V, VI, IX and the agreements and covenants of the Company and the Investor set forth in Article X shall survive the termination of this Agreement.
"Common Stock" shall mean the Company's common stock, $0.0001 par value per share, and any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and assets (upon liquidation of the Company).
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
"Company" shall have the meaning specified in the preamble to this Agreement.
“Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
"Damages" shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys' fees and disbursements and costs and expenses of expert witnesses and investigation).
"Dispute Period" shall have the meaning specified in Section 9.3(a).
“DTC” shall mean The Depository Trust Company, or any successor performing substantially the same function for the Company.
“DTC/FAST Program” shall mean the DTC’s Fast Automated Securities Transfer Program.
“DWAC” shall mean Deposit Withdrawal at Custodian as defined by the DTC.
“DWAC Eligible” shall mean that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements, including, without limitation, transfer through DTC’s DWAC system, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, (d) the Warrant Shares or Put Shares, as applicable, are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Warrant Shares or Put Shares, as applicable, via DWAC.
“DWAC Shares” means shares of Common Stock that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale and (iii) timely credited by the Company to the Investor’s or its designee’s specified DWAC account with DTC under the DTC/FAST Program, or any similar program hereafter adopted by DTC performing substantially the same function.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchange Cap” shall have the meaning set forth in Section 7.1(c).
"Execution Date" shall mean the date of this Agreement.
"FINRA" shall mean the Financial Industry Regulatory Authority, Inc.
"Investment Amount" shall mean the Put Shares referenced in the Put Notice multiplied by the Purchase Price, minus the Clearing Costs.
"Indemnified Party" shall have the meaning specified in Section 9.2.
"Indemnifying Party" shall have the meaning specified in Section 9.2.
"Indemnity Notice" shall have the meaning specified in Section 9.3(e).
"Investor" shall have the meaning specified in the preamble to this Agreement.
“Lien” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
"Market Price" shall mean the lowest closing bid price of the Company’s Common Stock on the Principal Market during the fourteen (14) Trading Days immediately preceding the Put Date of the respective Put Notice, in each case as reported by Quotestream or other reputable source designated by the Investor.
"Material Adverse Effect" shall mean any effect on the business, operations, properties, or financial condition of the Company and the Subsidiaries that is material and adverse to the Company and the Subsidiaries and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform its obligations under any Transaction Document.
"Maximum Commitment Amount" shall mean Five Million Dollars ($5,000,000.00).
"Person" shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"Principal Market" shall mean any of the national exchanges (i.e. NYSE, NYSE AMEX, and Nasdaq), or principal quotation systems (i.e. OTCQX, OTCQB, and OTC Pink), or other principal exchange or recognized quotation system which is at the time the principal trading platform or market for the Common Stock.
"Purchase Price" shall mean 70% of the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions of this Agreement.
"Put" shall mean the right of the Company to require the Investor to purchase shares of Common Stock, subject to the terms and conditions of this Agreement.
"Put Date" shall mean any Trading Day during the Commitment Period that a Put Notice is deemed delivered pursuant to Section 2.2(b).
"Put Notice" shall mean a written notice, substantially in the form of Exhibit A hereto, to Investor setting forth the Put Shares which the Company intends to require Investor to purchase pursuant to the terms of this Agreement.
"Put Shares" shall mean all shares of Common Stock issued, or that the Company shall be entitled to issue, per any applicable Put Notice in accordance with the terms and conditions of this Agreement.
"Registration Statement" shall have the meaning specified in Section 6.4.
"Regulation D" shall mean Regulation D promulgated under the Securities Act.
“Required Minimum” shall mean, as of any date, the maximum aggregate number of shares of Common Stock potentially issuable at such time pursuant to the Transaction Document, which shall be calculated on each such date as follows: the then remaining Maximum Commitment Amount divided by the Purchase Price on each such date plus any Warrant Shares, ignoring any beneficial ownership limitations set forth herein and therein.
"Rule 144" shall mean Rule 144 under the Securities Act or any similar provision then in force under the Securities Act.
"SEC" shall mean the United States Securities and Exchange Commission.
“SEC Documents” shall have the meaning specified in Section 4.5.
“Securities" means, collectively, the Put Shares, Warrant, and Warrant Shares.
"Securities Act" shall mean the Securities Act of 1933, as amended.
“Short Sales” shall mean all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.
“Subsidiary” means any Person the Company wholly-owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.
"Third Party Claim" shall have the meaning specified in Section 9.3(a).
“Trading Day” shall mean a day on which the Principal Market shall be open for business.
“Transaction Documents” shall mean this Agreement, the registration rights agreement of even date, and all exhibits hereto and thereto.
"Transfer Agent" shall mean VStock Transfer LLC, the current transfer agent of the Company, with a mailing address of 18 Lafayette Place, Woodmere, NY 11598, and any successor transfer agent of the Company.
“Transfer Agent Instruction Letter” means the letter from the Company to the Transfer Agent entered into on or around the date of this Agreement that instructs the Transfer Agent to issue the Put Shares and the Warrant Shares pursuant to the Transaction Documents.
“Warrant” shall mean that certain common stock purchase warrant for the purchase of 10,000,000 shares of the Company’s common stock which shall be issued to Investor on the date of this Agreement.
“Warrant Shares” shall mean all of the shares of the Company’s common stock underlying the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 PUTS. Upon the terms and conditions set forth herein (including, without limitation, the provisions of Article VII), the Company shall have the right, but not the obligation, to direct the Investor, by its delivery to the Investor of a Put Notice from time to time, to purchase Put Shares (i) in a minimum amount not less than $50,000.00 and (ii) in a maximum amount up to the lesser of (a) $100,000.00 or (b) 110% of the Average Daily Trading Value.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time and from time to time during the Commitment Period, except as provided in this Agreement, the Company may deliver a Put Notice to Investor, subject to satisfaction of the conditions set forth in Section 7.2 and otherwise provided herein. The Company shall deliver, or cause to be delivered, the Put Shares as DWAC Shares to the Investor within one (1) Trading Day following the Put Date.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on (i) the Trading Day it is received by email by the Investor if such notice is received on or prior to 9:00 a.m. EST or (ii) the immediately succeeding Trading Day if it is received by email after 9:00 a.m. EST on a Trading Day or at any time on a day which is not a Trading Day. The Company shall not deliver a Put Notice to the Investor during the period beginning on the Put Date of the immediately prior Put Notice and ending on the date that is ten (10) Trading Days after the Clearing Date associated with the Common Stock of the immediately prior Put Notice.
Section 2.3 CLOSINGS. If the value of the Put Shares delivered to the Investor causes the Company to exceed the Maximum Commitment Amount, then the Investor shall return to the Company the surplus amount of Put Shares associated with such Put. The Closing of a Put shall occur within three (3) Trading Days following the Put Date associated with the applicable Put Notice, whereby the Investor shall deliver the Investment Amount by wire transfer of immediately available funds to an account designated by the Company. If, during the period beginning on the date that is fourteen (14) Trading Days immediately preceding the Put Date of the respective Put Notice and continuing through the date that is ten (10) Trading Days following the Put Date of the respective Put Notice (the “Coverage Period”), the Company shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock at a price per share less than Purchase Price associated with the respective Put Notice (such lower price, the “Base Share Price”), then the Adjustment Amount (as defined in this Agreement) for such Put shall be deducted from the Investment Amount of the immediate subsequent Put. “Adjustment Amount” shall mean an amount in cash equal to the total number of shares of Common Stock associated with a Put multiplied by the Price Difference (as defined in this Agreement). “Price Difference” shall mean the Purchase Price associated with the respective Put Notice minus the Adjusted Share Price (as defined below) during the Coverage Period associated with the respective Put. The “Adjusted Share Price” shall mean the number that is 90% of the Base Share Price
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1 INTENT. The Investor is entering into this Agreement for its own account and the Investor has no present arrangement (whether or not legally binding) at any time to sell the Securities to or through any Person in violation of the Securities Act or any applicable state securities laws; provided, however, that the Investor reserves the right to dispose of the Securities at any time in accordance with federal and state securities laws applicable to such disposition.
Section 3.2 NO LEGAL ADVICE FROM THE COMPANY. The Investor acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.
Section 3.3 ACCREDITED INVESTOR. The Investor is an accredited investor as defined in Rule 501(a)(3) of Regulation D, and the Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities. The Investor acknowledges that an investment in the Securities is speculative and involves a high degree of risk.
Section 3.4 AUTHORITY. The Investor has the requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action and no further consent or authorization of the Investor is required. Each Transaction Document to which it is a party has been duly executed by the Investor, and when delivered by the Investor in accordance with the terms hereof, will constitute the valid and binding obligation of the Investor enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.
Section 3.5 NOT AN AFFILIATE. The Investor is not an officer, director or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of the Company.
Section 3.6 ORGANIZATION AND STANDING. The Investor is an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and the other Transaction Documents.
Section 3.7 ABSENCE OF CONFLICTS. The execution and delivery of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby and compliance with the requirements hereof and thereof, will not (a) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Investor, (b) violate any provision of any indenture, instrument or agreement to which the Investor is a party or is subject, or by which the Investor or any of its assets is bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by the Investor to any third party, or (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument, agreement, relationship or legal obligation to which the Investor is subject or to which any of its assets, operations or management may be subject.
Section 3.8 DISCLOSURE; ACCESS TO INFORMATION. The Investor had an opportunity to review copies of the SEC Documents filed on behalf of the Company and has had access to all publicly available information with respect to the Company.
Section 3.9 MANNER OF SALE. At no time was the Investor presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
Section 4.2 AUTHORITY. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required. Each of this Agreement and the other Transaction Documents has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.
Section 4.3 CAPITALIZATION. Except as set forth in the SEC Documents, the Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth in the SEC Documents and except as a result of the purchase and sale of the Securities, 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 shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investor) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
Section 4.4 LISTING AND MAINTENANCE REQUIREMENTS. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company has not, in the twelve (12) months preceding the date hereof, received notice from the Principal Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Principal Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.
Section 4.5 SEC DOCUMENTS; DISCLOSURE. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one (1) year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Documents”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments). Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Investor or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Investor will rely on the foregoing representation in effecting transactions in securities of the Company.
Section 4.6 VALID ISSUANCES. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid, and non-assessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.
Section 4.7 NO CONFLICTS. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Put Shares and the Warrant Shares, do not and will not: (a) result in a violation of the Company’s or any Subsidiary’s certificate or articles of incorporation, by-laws or other organizational or charter documents, (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, instrument or any "lock-up" or similar provision of any underwriting or similar agreement to which the Company or any Subsidiary is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or the other Transaction Documents (other than any SEC, FINRA or state securities filings that may be required to be made by the Company subsequent to any Closing or any registration statement that may be filed pursuant hereto); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of Investor herein.
Section 4.8 NO MATERIAL ADVERSE CHANGE. No event has occurred that would have a Material Adverse Effect on the Company that has not been disclosed in subsequent SEC Documents.
Section 4.9 LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the SEC Documents, there are no actions, suits, investigations, inquiries or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties, nor has the Company received any written or oral notice of any such action, suit, proceeding, inquiry or investigation, which would have a Material Adverse Effect. No judgment, order, writ, injunction or decree or award has been issued by or, to the knowledge of the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any Subsidiary or any current or former director or officer of the Company or any Subsidiary.
Section 4.10 REGISTRATION RIGHTS. Except as set forth in the SEC Documents, no Person (other than the Investor) has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
Section 4.11 No Solicitation;NO BROKERS. Except with respect to J. H. Darbie & Co., a registered broker-dealer (CRD#: 43520) (the “Placement Agent”), the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. The Company acknowledges and agrees that neither the Investor nor its employee(s), member(s), beneficial owner(s), or partner(s) solicited the Company to enter into this Agreement and consummate the transactions described in this Agreement.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW; TRADING IN SECURITIES. The Investor's trading activities with respect to shares of Common Stock will be in compliance with all applicable state and federal securities laws and regulations and the rules and regulations of FINRA and the Principal Market.
Section 5.2 SHORT SALES AND CONFIDENTIALITY. Neither the Investor, nor any affiliate of the Investor acting on its behalf or pursuant to any understanding with it, will execute any Short Sales during the period from the date hereof to the end of the Commitment Period. For the purposes hereof, and in accordance with Regulation SHO, the sale after delivery of a Put Notice of such number of shares of Common Stock reasonably expected to be purchased under a Put Notice shall not be deemed a Short Sale. The Investor shall, until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company in accordance with the terms of this Agreement, maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 RESERVATION OF COMMON STOCK. The Company shall maintain a reserve from its duly authorized shares of Common Stock equal to the Required Minimum in accordance with the terms of this Agreement.
Section 6.2 LISTING OR QUOTATION OF COMMON STOCK. The Company shall promptly secure the listing or quotation of all of the Put Shares to be issued to the Investor hereunder and Warrant Shares on the Principal Market (subject to official notice of issuance) and shall maintain the listing or quotation of all such Put Shares issuable hereunder and the Warrant Shares. The Company shall maintain the (i) listing or quotation and (ii) trading of the Common Stock on the Principal Market (including, without limitation, maintaining sufficient net tangible assets) and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of FINRA and the Principal Market.
Section 6.3 OTHER EQUITY LINES AND TRANSACTIONS. So long as this Agreement remains in effect, the Company covenants and agrees that it will not, without the prior written consent of the Investor, enter into any other Equity Line of Credit (as defined below) or Variable Rate Transaction (as defined below) with any other party. “Equity Line of Credit” shall mean any transaction involving a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put” its securities to the investor or underwriter over an agreed period of time and at an agreed price or price formula. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) issues securities at a future determined price.
Section 6.4 FILING OF CURRENT REPORT AND REGISTRATION STATEMENT. The Company agrees that it shall file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the SEC within the time required by the Exchange Act, relating to the transactions contemplated by, and describing the material terms and conditions of, the Transaction Documents (the “Current Report”). The Company shall permit the Investor to review and comment upon the final pre-filing draft version of the Current Report at least one (1) Trading Day prior to its filing with the SEC, and the Company shall give reasonable consideration to all such comments. The Investor shall use its reasonable best efforts to comment upon the final pre-filing draft version of the Current Report within one (1) Trading Day from the date the Investor receives it from the Company. The Company shall also file with the SEC, within one hundred twenty (120) calendar days after the date of this Agreement, a new registration statement (the “Registration Statement”) covering only the resale of the Put Shares and the Warrant Shares. The Company shall use its reasonable best efforts to have the Registration Statement declared effective by the SEC within one hundred eighty (180) calendar days from the date hereof (or at the earliest possible date if prior to one hundred eighty (180) calendar days from the date hereof).
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO ISSUE AND SELL PUT SHARES. In addition to the other provisions of this Agreement, the right of the Company to issue and sell the Put Shares to the Investor is subject to the satisfaction of each of the conditions set forth below:
(a) ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Investor shall be true and correct in all material respects as of the date of this Agreement and as of the date of each Closing as though made at each such time.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investor at or prior to such Closing.
(c) PRINCIPAL MARKET REGULATION. The Company shall not issue any Put Shares, and the Investor shall not have the right to receive any Put Shares, if the issuance of such Put Shares would exceed the aggregate number of shares of Common Stock which the Company may issue without breaching the Company’s obligations under the rules or regulations of the Principal Market (the “Exchange Cap”).
Section 7.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The obligation of the Investor hereunder to purchase Put Shares is subject to the satisfaction of each of the following conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement, and any amendment or supplement thereto, shall remain effective for the resale by the Investor of the Put Shares and the Warrant Shares at prevailing market prices (and not fixed prices) and (i) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so and (ii) no other suspension of the use of, or withdrawal of the effectiveness of, such Registration Statement or related prospectus shall exist.
(b) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company shall be true and correct in all material respects as of the date of this Agreement and as of the date of each Closing (except for representations and warranties specifically made as of a particular date).
(c) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company.
(d) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits or directly and materially adversely affects any of the transactions contemplated by the Transaction Documents, and no proceeding shall have been commenced that may have the effect of prohibiting or materially adversely affecting any of the transactions contemplated by the Transaction Documents.
(e) ADVERSE CHANGES. Since the date of filing of the Company's most recent SEC Document, no event that had or is reasonably likely to have a Material Adverse Effect has occurred.
(f) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock shall not have been suspended by the SEC, the Principal Market or FINRA, or otherwise halted for any reason, and the Common Stock shall have been approved for listing or quotation on and shall not have been delisted from the Principal Market. In the event of a suspension, delisting, or halting for any reason, of the trading of the Common Stock, as contemplated by this Section 7.2(f), the Investor shall have the right to return to the Company any remaining amount of Put Shares associated with such Put, and the Purchase Price with respect to such Put shall be reduced accordingly.
(g) BENEFICIAL OWNERSHIP LIMITATION. The number of Put Shares then to be purchased by the Investor shall not exceed the number of such shares that, when aggregated with all other shares of Common Stock then owned by the Investor beneficially or deemed beneficially owned by the Investor, would result in the Investor owning more than the Beneficial Ownership Limitation (as defined below), as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder. For purposes of this Section 7.2(g), in the event that the amount of Common Stock outstanding, as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder, is greater on a Closing Date than on the date upon which the Put Notice associated with such Closing Date is given, the amount of Common Stock outstanding on such Closing Date shall govern for purposes of determining whether the Investor, when aggregating all purchases of Common Stock made pursuant to this Agreement, would own more than the Beneficial Ownership Limitation following such Closing Date. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable pursuant to a Put Notice.
(h) PRINCIPAL MARKET REGULATION. The issuance of the Put Shares shall not exceed the Exchange Cap if applicable.
(i) NO KNOWLEDGE. The Company shall have no knowledge of any event more likely than not to have the effect of causing the Registration Statement to be suspended or otherwise ineffective (which event is more likely than not to occur within the fifteen (15) Trading Days following the Trading Day on which such Put Notice is deemed delivered).
(j) NO VIOLATION OF SHAREHOLDER APPROVAL REQUIREMENT. The issuance of the Put Shares shall not violate the shareholder approval requirements of the Principal Market.
(k) OFFICER’S CERTIFICATE. On the date of delivery of each Put Notice, the Investor shall have received the Closing Certificate executed by an executive officer of the Company and to the effect that all the conditions to such Closing shall have been satisfied as of the date of each such certificate.
(l) DWAC ELIGIBLE. The Common Stock must be DWAC Eligible and not subject to a “DTC chill.”
(m) SEC DOCUMENTS. All reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC pursuant to the reporting requirements of the Exchange Act shall have been filed with the SEC within the applicable time periods prescribed for such filings under the Exchange Act.
(n) RESERVE. The Company shall have reserved the Required Minimum for the Investor’s benefit under this Agreement, the Company shall have satisfied the reserve requirements with respect to all other contracts between the Company and Investor, and the Transfer Agent Instruction Letter shall have been executed by the Company and the Transfer Agent as well as acknowledged and agreed to in writing by the Transfer Agent.
(o) MINIMUM PRICING. The lowest traded price of the Common Stock in the seven (7) Trading Days immediately preceding the respective Put Date must exceed $0.01 per share.
(p) 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 not be instituted by or against the Company or any subsidiary of the Company (the “Bankruptcy Proceedings”), and the Company shall have no knowledge of any event more likely than not to have the effect of causing Bankruptcy Proceedings to arise. In the event of Bankruptcy Proceedings as contemplated by this Section 7.2(p), the Investor shall have the right to return to the Company any remaining amount of Put Shares associated with such Put, and the Purchase Price with respect to such Put shall be reduced accordingly.
ARTICLE VIII
LEGENDS
Section 8.1 NO RESTRICTIVE STOCK LEGEND. No restrictive stock legend shall be placed on the share certificates representing the Put Shares.
Section 8.2 INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall affect in any way the Investor's obligations hereunder to comply with all applicable securities laws upon the sale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 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 (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, or email as a PDF, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by email at the address 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 (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company:
Golden Star Enterprises Ltd.
2803 Philadelphia Pike, Suite B
Claymont, DE 19703
Email: info@goldenstarenterprisesltd.com
Attention: Eliav Kling
If to the Investor:
Mast Hill Fund, L.P.
48 Parker Road
Wellesley, MA 02482
Email: admin@masthillfund.com
Either party hereto may from time to time change its address or email for notices under this Section 9.1 by giving at least ten (10) days' prior written notice of such changed address to the other party hereto.
Section 9.2 INDEMNIFICATION. Each party (an “Indemnifying Party”) agrees to indemnify and hold harmless the other party along with its officers, directors, employees, and authorized agents, and each Person or entity, if any, who controls such party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (an “Indemnified Party”) from and against any Damages, joint or several, and any action in respect thereof to which the Indemnified Party becomes subject to, resulting from, arising out of or relating to (i) any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Indemnifying Party contained in this Agreement, (ii) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any post-effective amendment thereof or supplement thereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the light of the circumstances under which the statements therein were made, not misleading, or (iv) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law, as such Damages are incurred, except to the extent such Damages result primarily from the Indemnified Party's failure to perform any covenant or agreement contained in this Agreement or the Indemnified Party's negligence, recklessness or bad faith in performing its obligations under this Agreement; provided, however, that the foregoing indemnity agreement shall not apply to any Damages of an Indemnified Party to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made by an Indemnifying Party in reliance upon and in conformity with written information furnished to the Indemnifying Party by the Indemnified Party expressly for use in the Registration Statement, any post-effective amendment thereof or supplement thereto, or any preliminary prospectus or final prospectus (as amended or supplemented).
Section 9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for indemnification by any Indemnified Party under Section 9.2 shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 9.2 is asserted against or sought to be collected from such Indemnified Party by a Person other than a party hereto or an affiliate thereof (a "Third Party Claim"), the Indemnified Party shall deliver a written notification, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party's claim for indemnification that is being asserted under any provision of Section 9.2 against an Indemnifying Party, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party shall not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party's ability to defend has been prejudiced by such failure of the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party as soon as practicable within the period ending thirty (30) calendar days following receipt by the Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party under Section 9.2 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall have the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings shall be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the consent of the Indemnified Party in the case of any settlement that provides for any relief other than the payment of monetary damages or that provides for the payment of monetary damages as to which the Indemnified Party shall not be indemnified in full pursuant to Section 9.2). The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party's delivery of the notice referred to in the first sentence of this clause (i), file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its interests; and provided, further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting any Third Party Claim that the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this clause (i), and except as provided in the preceding sentence, the Indemnified Party shall bear its own costs and expenses with respect to such participation. Notwithstanding the foregoing, the Indemnified Party may takeover the control of the defense or settlement of a Third Party Claim at any time if it irrevocably waives its right to indemnity under Section 9.2 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice but fails to prosecute vigorously and diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Dispute Period, then the Indemnified Party shall have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings shall be prosecuted by the Indemnified Party in a reasonable manner and in good faith or will be settled at the discretion of the Indemnified Party(with the consent of the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting. Notwithstanding the foregoing provisions of this clause (ii), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes its liability or the amount of its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party's defense pursuant to this clause (ii) or of the Indemnifying Party's participation therein at the Indemnified Party's request, and the Indemnified Party shall reimburse the Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this clause (ii), and the Indemnifying Party shall bear its own costs and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability or the amount of its liability to the Indemnified Party with respect to the Third Party Claim under Section 9.2 or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party with respect to such Third Party Claim, the amount of Damages specified in the Claim Notice shall be conclusively deemed a liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems appropriate.
(b) In the event any Indemnified Party should have a claim under Section 9.2 against the Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver a written notification of a claim for indemnity under Section 9.2 specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim (an "Indemnity Notice") with reasonable promptness to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder except to the extent that the Indemnifying Party demonstrates that it has been irreparably prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim or the amount of the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim or the amount of the claim described in such Indemnity Notice, the amount of Damages specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems appropriate.
(c) The Indemnifying Party agrees to pay the Indemnified Party, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim.
(d) The indemnity provisions contained herein shall be in addition to (i) any cause of action or similar rights of the Indemnified Party against the Indemnifying Party or others, and (ii) any liabilities the Indemnifying Party may be subject to.
ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law. Each of the Company and the Investor hereby submits to the exclusive jurisdiction of the United States federal and state courts located in the Commonwealth of Massachusetts, with respect to any dispute arising under the Transaction Documents or the transactions contemplated thereby.
Section 10.2 [Intentionally Omitted.]
Section 10.3 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Company and the Investor and their respective successors. Neither this Agreement nor any rights of the Investor or the Company hereunder may be assigned by either party to any other Person.
Section 10.4 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the Company and the Investor and their respective successors, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as set forth in Section 9.3.
Section 10.5 TERMINATION. The Company may terminate this Agreement at any time by written notice to the Investor, except during any time that the Investor holds any of the Put Shares. In addition, this Agreement shall automatically terminate at the end of the Commitment Period. Notwithstanding anything in this Agreement to the contrary, (i) the provisions of Articles III, IV, VI, IX of this Agreement and the agreements and covenants of the Company and the Investor set forth in Article X of this Agreement shall survive the termination of this Agreement and (ii) the Investor shall retain all rights to the Warrant and Warrant Shares even if this Agreement is terminated.
Section 10.6 ENTIRE AGREEMENT. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the Company and the Investor with respect to the matters covered herein and therein and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
Section 10.7 FEES AND EXPENSES. Except as expressly set forth in the Transaction Documents or any other writing to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Investor. Upon execution of this Agreement, the Company shall issue the Warrant to Investor for its commitment to enter into this Agreement. The Warrant shall be earned in full upon the execution of this Agreement, and the issuance of the Warrant is not contingent upon any other event or condition, including but not limited to the effectiveness of the Registration Statement or the Company’s submission of a Put Notice to the Investor. In addition, the Investor shall withhold $5,000.00 from the Investment Amount with respect to the first Put under this Agreement for reimbursement of Investor’s expenses relating to the preparation of this Agreement.
Section 10.8 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. This Agreement may be delivered to the other parties hereto by email of a copy of this Agreement bearing the signature of the parties so delivering this Agreement.
Section 10.9 SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party.
Section 10.10 FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
Section 10.11 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
Section 10.12 EQUITABLE RELIEF. The Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to the Investor. The Company therefore agrees that the Investor shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.
Section 10.13 TITLE AND SUBTITLES. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement.
Section 10.14 AMENDMENTS; WAIVERS. No provision of this Agreement may be amended or waived by the parties from and after the date that is one (1) Trading Day immediately preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, (i) no provision of this Agreement may be amended other than by a written instrument signed by both parties hereto and (ii) no provision of this Agreement may be waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
Section 10.15 PUBLICITY. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement, other than as required by law, without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Investor without the prior written consent of the Investor, except to the extent required by law. The Investor acknowledges that this Agreement and all or part of the Transaction Documents may be deemed to be "material contracts," as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
| | THE COMPANY: | |
| | | |
| | GOLDEN STAR ENTERPRISES LTD. | |
| | | | |
| By: | /s/ Eliav Kling | |
| | | Name: Eliav Kling | |
| | | Title: Chief Executive Officer | |
| | INVESTOR: | |
| | | |
| | MAST HILL FUND, L.P. | |
| | | | |
| By: | /s/ Patrick Hassani | |
| | | Name: Patrick Hassani | |
| | | Title: Chief Investment Officer | |
[Signature Page to equity purchase agreement]
EXHIBIT A
FORM OF PUT NOTICE
TO: MAST HILL FUND, L.P.
DATE: ____________________
We refer to the equity purchase agreement, dated May 27, 2022 (the “Agreement”), entered into by and between Golden Star Enterprises Ltd. and you. Capitalized terms defined in the Agreement shall, unless otherwise defined herein, have the same meaning when used herein.
We hereby:
1) Give you notice that we require you to purchase ____________ Put Shares pursuant to the Agreement; and
2) The Purchase Price pursuant to the Agreement is ____________; and
2) Certify that, as of the date hereof, the conditions set forth in Section 7.2 of the Agreement are satisfied.
| | GOLDEN STAR ENTERPRISES LTD. | |
| | | | |
| By: | | |
| | Name: | Eliav Kling | |
| | Title: | Chief Executive Officer | |
EXHIBIT B
FORM OF OFFICER’S CERTIFICATE
OF GOLDEN STAR ENTERPRISES LTD.
Pursuant to Section 7.2(k) of that certain equity purchase agreement, dated May 27, 2022 (the “Agreement”), by and between Golden Star Enterprises Ltd. (the “Company”) and Mast Hill Fund, L.P. (the “Investor”), the undersigned, in his capacity as Chief Executive Officer of the Company, and not in his individual capacity, hereby certifies, as of the date hereof (such date, the “Condition Satisfaction Date”), the following:
1. The representations and warranties of the Company are true and correct in all material respects as of the Condition Satisfaction Date as though made on the Condition Satisfaction Date (except for representations and warranties specifically made as of a particular date) with respect to all periods, and as to all events and circumstances occurring or existing to and including the Condition Satisfaction Date, except for any conditions which have temporarily caused any representations or warranties of the Company set forth in the Agreement to be incorrect and which have been corrected with no continuing impairment to the Company or the Investor; and
2. All of the conditions precedent to the obligation of the Investor to purchase Put Shares set forth in the Agreement, including but not limited to Section 7.2 of the Agreement, have been satisfied as of the Condition Satisfaction Date.
Capitalized terms used herein shall have the meanings set forth in the Agreement unless otherwise defined herein.
IN WITNESS WHEREOF, the undersigned has hereunto affixed his hand as of the ________, 20__.
| | | |
| | | | |
| By: | | |
| | Name: | Eliav Kling | |
| | Title: | Chief Executive Officer | |
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EXHIBIT 10.20
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
GOLDEN STAR ENTERPRISES LTD.
Warrant Shares: 10,000,000
Date of Issuance: May 27, 2022 (“Issuance Date”)
This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the execution of the Purchase Agreement (as defined below)), Mast Hill Fund, L.P., a Delaware limited partnership (including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from Golden Star Enterprises Ltd., a Delaware corporation (the “Company”), 10,000,000 shares of Common Stock (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain equity purchase agreement dated May 27, 2022, by and among the Company and the Holder (the “Purchase Agreement”).
Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $0.06, subject to adjustment as provided herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the five-year anniversary thereof.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price” and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise (or deliver such shares of Common Stock in electronic format if requested by the Holder). Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause its transfer agent to issue to the Holder the respective shares of Common Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under this Warrant, or otherwise, and such failure shall also be deemed a material breach under this Warrant and the Purchase Agreement.
If the Market Price of one share of Common Stock is greater than the Exercise Price, then the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and an Exercise Notice, in which event the Company shall issue to Holder a number of Common Stock computed using the following formula:
X = Y (A-B)
A
Where X = the number of Shares to be issued to Holder.
Y = the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).
A = the Market Price (at the date of such calculation).
B = Exercise Price (as adjusted to the date of such calculation).
(b) No Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c) Holder’s Exercise Limitations. Notwithstanding anything to the contrary contained herein, the Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding at the time of the respective calculation hereunder. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
(d) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions of this Warrant (including but not limited to Section 1(a) above) pursuant to an exercise on or before the respective Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder, within one (1) business day of Holder’s request, the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the product of (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder within one (1) business day of Holder’s request the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases, or effectuates a cashless exercise hereunder for, Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
2. ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
(i) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding such record date; and
(ii) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided, however, that in the event that the Distribution is of shares of common stock of a company (other than the Company) whose common stock is traded on a national securities exchange or a national automated quotation system (“Other Shares of Common Stock”), then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant Shares calculated in accordance with the first part of this clause (ii).
(b) Anti-Dilution Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or securities (including but not limited to Common Stock Equivalents) entitling any person or entity (for purposes of clarification, including but not limited to the Holder pursuant to (i) any other security of the Company currently held by Holder or issued to Holder on or after the Issuance Date or (ii) any other agreement entered into between the Company and Holder (including but not limited to the Purchase Agreement)) to acquire shares of Common Stock (upon conversion, exercise or otherwise), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled or potentially entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price at any time while such Common Stock or Common Stock Equivalents are in existence, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder and only reduced to equal the Base Share Price, and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment (for the avoidance of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment). By way of example, if E is the total number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership Limitation), F is the Exercise Price in effect immediately prior to such adjustment, and G is the Base Share Price, the adjustment to the number of Warrant Shares can be expressed in the following formula: Total number of Warrant Shares after such Dilutive Issuance = the number obtained from dividing [E x F] by G. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued, regardless of whether the Common Stock or Common Stock Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price by the holder thereof (for the avoidance of doubt, the Holder may utilize the Base Share Price even if the Company did not actually issue shares of its common stock at the Base Share Price under the respective Common stock Equivalents). The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, regardless of whether (i) the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b) upon the occurrence of any Dilutive Issuance or (ii) the Holder accurately refers to the Base Share Price in the Exercise Notice, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price as well as the Base Share Price at all times on and after the date of such Dilutive Issuance.
(c) Subdivision or Combination of Common Stock. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective. Each such adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively whenever any event covered by this Section 2(c) shall occur.
3. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock) (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration.
4. NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, three (3) times the number of shares of Common Stock into which the Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6. REISSUANCE.
(a) Lost, Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
7. TRANSFER. This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of the Holder, which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void if the Company does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without the need to obtain the Company’s consent thereto.
8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
9. AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder.
10. GOVERNING LAW AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts located in the Commonwealth of Massachusetts or federal courts located in the Commonwealth of Massachusetts. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT, OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or any other transaction document entered into in connection with this Warrant by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) [Intentionally Omitted].
(b) “Closing Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market, as reported by Quotestream or other similar quotation service provider designated by the Holder, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00 p.m., New York time, as reported by Quotestream or other similar quotation service provider designated by the Holder, or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Quotestream or other similar quotation service provider designated by the Holder, or (iii) if no last trade price is reported for such security by Quotestream or other similar quotation service provider designated by the Holder, the average of the bid and ask prices of any market makers for such security as reported by Quotestream or other similar quotation service provider designated by the Holder. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(c) “Common Stock” means the Company’s common stock, par value $0.0001, and any other class of securities into which such securities may hereafter be reclassified or changed.
(d) “Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(e) “Person” and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(f) “Principal Market” means the principal securities exchange or trading market where such Common Stock is listed or quoted, including but not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
(g) “Market Price” means the highest traded price of the Common Stock during the one hundred and fifty Trading Days prior to the date of the respective Exercise Notice.
(h) “Trading Day” means any day on which the Common Stock is listed or quoted on its Principal Market, provided, however, that if the Common Stock is not then listed or quoted on any Principal Market, then any calendar day.
* * * * * * *
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date set forth above.
| | GOLDEN STAR ENTERPRISES LTD. | |
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| By: | /s/ Eliav Kling | |
| | Name: | Eliav Kling | |
| | Title: | Chief Executive Officer | |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)
THE UNDERSIGNED holder hereby exercises the right to purchase of the shares of Common Stock (“Warrant Shares”) of GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one):
☐ a cash exercise with respect to Warrant Shares; or
☐ by cashless exercise pursuant to the Warrant.
2. Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate Exercise Price in the sum of $ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder Warrant Shares in accordance with the terms of the Warrant.
Date:
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of common stock of GOLDEN STAR ENTERPRISES LTD., to which the within Common Stock Purchase Warrant relates and appoints , as attorney-in-fact, to transfer said right on the books of GOLDEN STAR ENTERPRISES LTD. with full power of substitution and re-substitution in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
Dated:
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* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such entity.
EXHIBIT 10.21
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 27, 2022, is entered into by and between GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the "Company"), and MAST HILL FUND, L.P., a Delaware limited partnership (together with it permitted assigns, the “Investor”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the equity purchase agreement by and between the parties hereto, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement").
WHEREAS:
The Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to sell to the Investor up to Five Million Dollars ($5,000,000.00) of Put Shares (as defined in the Purchase Agreement) and to induce the Investor to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "Securities Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings:
a. "Investor" shall have the meaning set forth above.
b. "Person" means any individual or entity including but not limited to any corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
c. "Register," "registered," and "registration" refer to a registration effected by preparing and filing one or more registration statements of the Company in compliance with the Securities Act and/or pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis ("Rule 415"), and the declaration or ordering of effectiveness of such registration statement(s) by the United States Securities and Exchange Commission (the "SEC").
d. "Registrable Securities" means all of the Put Shares which have been, or which may, from time to time be issued, including without limitation all of the shares of Common Stock which have been issued or will be issued to the Investor under the Purchase Agreement (without regard to any beneficial ownership limitation therein), the Warrant Shares (as defined in the Purchase Agreement) (the “Warrant Shares”) (without regard to any beneficial ownership limitation therein), and shares of Common Stock issued to the Investor as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise.
e. "Registration Statement" means one or more registration statements of the Company covering only the sale of the Registrable Securities.
2. REGISTRATION.
a. Mandatory Registration. The Company shall, within one hundred twenty (120) calendar days from the date of this Agreement, file with the SEC an initial Registration Statement covering the maximum number of Registrable Securities (beginning with the Warrant Shares with respect to Investor) as shall be permitted to be included thereon in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Investor, including but not limited to under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), subject to the aggregate number of authorized shares of the Company’s Common Stock then available for issuance in its Certificate of Incorporation. The initial Registration Statement shall register only the Registrable Securities. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such Registration Statement and any amendment or supplement to such Registration Statement and any related prospectus prior to its filing with the SEC, and the Company shall give due consideration to all reasonable comments. The Investor shall furnish all information reasonably requested by the Company for inclusion therein. The Company shall use its reasonable best efforts to have the Registration Statement declared effective by the SEC within one hundred eighty (180) calendar days from the date hereof (or at the earliest possible date if prior to one hundred eighty (180) calendar days from the date hereof), and any amendment declared effective by the SEC at the earliest possible date. The Company shall use reasonable best efforts to keep the Registration Statement effective, including but not limited to pursuant to Rule 415 promulgated under the Securities Act and available for the resale by the Investor of all of the Registrable Securities covered thereby at all times until the earlier of (i) the date as of which the Investor may sell all of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the Securities and (ii) the date on which the Investor shall have sold all the Registrable Securities covered thereby and the Maximum Commitment Amount (as defined in the Purchase Agreement) under the Purchase Agreement has been drawn down by the Company pursuant to a Registration Statement (the "Registration Period"). The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. In the event that the Registration Statement becomes stale, the Company shall immediately file one or more post-effective amendments to obtain an effective Registration Statement.
b. Rule 424 Prospectus. The Company shall, as required by applicable securities regulations, from time to time file (in each case, at the earliest possible date) with the SEC, pursuant to Rule 424 promulgated under the Securities Act, the prospectus and prospectus supplements, if any, to be used in connection with sales of the Registrable Securities under the Registration Statement. The Company shall file such initial prospectus covering the Investor’s sale of the Registrable Securities on the same date that the Registration Statement is declared effective by the SEC. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such prospectus prior to its filing with the SEC, and the Company shall give due consideration to all such comments. The Investor shall use its reasonable best efforts to comment upon such prospectus within one (1) Business Day from the date the Investor receives the final pre-filing version of such prospectus.
c. Sufficient Number of Shares Registered. In the event the number of shares available under the Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Registration Statement or file a new Registration Statement (a “New Registration Statement”), so as to cover all of such Registrable Securities (subject to the limitations set forth in Section 2(a)) as soon as practicable, but in any event not later than ten (10) Business Days after the necessity therefor arises, subject to any limits that may be imposed by the SEC pursuant to Rule 415 under the Securities Act. The Company shall use it reasonable best efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof. In the event that any of the Put Shares or Warrant Shares are not included in the Registration Statement, or have not been included in any New Registration Statement and the Company files any other registration statement under the Securities Act (other than on Form S-4, Form S-8, or with respect to other employee related plans or rights offerings) (“Other Registration Statement”) then the Company shall include in such Other Registration Statement first all of such Warrant Shares that have not been previously registered, second all of such Put Shares that not have been previously registered, and third any other securities the Company wishes to include in such Other Registration Statement. The Company agrees that it shall not file any such Other Registration Statement unless all of the Registrable Securities have been included in such Other Registration Statement or otherwise have been registered for resale as described above.
d. Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such Registration Statement to become effective and be used for resales by the Investor under Rule 415 at then-prevailing market prices (and not fixed prices), or if after the filing of the initial Registration Statement with the SEC pursuant to Section 2(a), the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in such initial Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such initial Registration Statement (with the prior consent, which shall not be unreasonably withheld, of the Investor and its legal counsel as to the specific Registrable Securities to be removed therefrom) until such time as the Staff and the SEC shall so permit such Registration Statement to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall file one or more New Registration Statements in accordance with Section 2(c) until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the prospectus contained therein is available for use by the Investor. Notwithstanding any provision herein or in the Purchase Agreement to the contrary, the Company’s obligations to register Registrable Securities (and any related conditions to the Investor’s obligations) shall be qualified as necessary to comport with any requirement of the SEC or the Staff as addressed in this Section 2(d).
3. RELATED OBLIGATIONS.
With respect to the Registration Statement and whenever any Registrable Securities are to be registered pursuant to Section 2 including on any New Registration Statement, the Company shall use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:
a. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to any registration statement and the prospectus used in connection with such registration statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep the Registration Statement or any New Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement or any New Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such registration statement.
b. The Company shall permit the Investor to review and comment upon the Registration Statement or any New Registration Statement and all amendments and supplements thereto at least two (2) Business Days prior to their filing with the SEC, and not file any document in a form to which Investor reasonably objects. The Investor shall use its reasonable best efforts to comment upon the Registration Statement or any New Registration Statement and any amendments or supplements thereto within two (2) Business Days from the date the Investor receives the final version thereof. The Company shall furnish to the Investor, without charge any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to the Registration Statement or any New Registration Statement.
c. Upon request of the Investor, the Company shall furnish to the Investor, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such registration statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any registration statement, a copy of the prospectus included in such registration statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor. For the avoidance of doubt, any filing available to the Investor via the SEC’s live EDGAR system shall be deemed “furnished to the Investor” hereunder.
d. The Company shall use reasonable best efforts to (i) register and qualify the Registrable Securities covered by a registration statement under such other securities or "blue sky" laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or "blue sky" laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event or facts, the Company shall notify the Investor in writing of the happening of any event or existence of such facts as a result of which the prospectus included in any registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and promptly prepare a supplement or amendment to such registration statement to correct such untrue statement or omission, and deliver a copy of such supplement or amendment to the Investor (or such other number of copies as the Investor may reasonably request). The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a registration statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by email or facsimile on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to any registration statement or related prospectus or related information, and (iii) of the Company's reasonable determination that a post-effective amendment to a registration statement would be appropriate.
f. The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of any registration statement, or the suspension of the qualification of any Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall (i) cause all the Registrable Securities to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure designation and quotation of all the Registrable Securities on the Principal Market (as defined in the Purchase Agreement). The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section.
h. The Company shall cooperate with the Investor to facilitate the timely preparation and delivery of the Registrable Securities (not bearing any restrictive legend) either by DWAC, DRS, or in certificated form if DWAC or DRS is unavailable, to be offered pursuant to any registration statement and enable such Registrable Securities to be in such denominations or amounts as the Investor may reasonably request and registered in such names as the Investor may request.
i. The Company shall at all times provide a transfer agent and registrar with respect to its Common Stock.
j. If reasonably requested by the Investor, the Company shall (i) immediately incorporate in a prospectus supplement or post-effective amendment such information as the Investor believes should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities; (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as practicable upon notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any registration statement.
k. The Company shall use its reasonable best efforts to cause the Registrable Securities covered by any registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.
l. Within one (1) Business Day after any registration statement which includes the Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such registration statement has been declared effective by the SEC in the form attached hereto as Exhibit A. Thereafter, if requested by the Investor at any time, the Company shall require its counsel to deliver to the Investor a written confirmation whether or not the effectiveness of such registration statement has lapsed at any time for any reason (including, without limitation, the issuance of a stop order) and whether or not the registration statement is current and available to the Investor for sale of all of the Registrable Securities.
m. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to any registration statement.
4. OBLIGATIONS OF THE INVESTOR.
a. The Company shall notify the Investor in writing of the information the Company reasonably requires from the Investor in connection with any registration statement hereunder. The Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
b. The Investor agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any registration statement hereunder.
c. The Investor agrees that, upon receipt of any notice from the Company of the happening of any event or existence of facts of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any registration statement(s) covering such Registrable Securities until the Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding anything to the contrary, the Company shall cause its transfer agent to promptly deliver shares of Common Stock without any restrictive legend in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale prior to the Investor's receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of Section 3(e) and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.
6. INDEMNIFICATION.
a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, each Person, if any, who controls the Investor, the members, the directors, officers, partners, employees, agents, representatives of the Investor and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act") (each, an "Indemnified Person"), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint or several, (collectively, "Claims") incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto ("Indemnified Damages"), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement, any New Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other "blue sky" laws of any jurisdiction in which Registrable Securities are offered ("Blue Sky Filing"), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement or any New Registration Statement or (iv) any material violation by the Company of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, "Violations"). The Company shall reimburse each Indemnified Person promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information about the Investor furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement, any New Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superseded prospectus, shall not inure to the benefit of any such person from whom the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the superseded prospectus was corrected in the revised prospectus, as then amended or supplemented, if such revised prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it; (iii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investor pursuant to Section 9.
b. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.
c. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.
d. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.
With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration ("Rule 144"), the Company agrees, at the Company’s sole expense, to:
a. make and keep public information available, as those terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144;
c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting and or disclosure provisions of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration; and
d. take such additional action as is requested by the Investor to enable the Investor to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s Transfer Agent as may be requested from time to time by the Investor and otherwise fully cooperate with Investor and Investor’s broker to effect such sale of securities pursuant to Rule 144.
The Company agrees that damages may be an inadequate remedy for any breach of the terms and provisions of this Section 8 and that Investor shall, whether or not it is pursuing any remedies at law, be entitled to equitable relief in the form of a preliminary or permanent injunctions, without having to post any bond or other security, upon any breach or threatened breach of any such terms or provisions.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor.
10. AMENDMENT OF REGISTRATION RIGHTS.
No provision of this Agreement may be amended or waived by the parties from and after the date that is one Business Day immediately preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, no provision of this Agreement may be (i) amended other than by a written instrument signed by both parties hereto or (ii) waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. 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.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by email (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:
If to the Company:
Golden Star Enterprises Ltd.
2803 Philadelphia Pike, Suite B
Claymont, DE 19703
Email: info@goldenstarenterprisesltd.com
Attention: Eliav Kling
If to the Investor:
Mast Hill Fund, L.P.
48 Parker Road
Wellesley, MA 02482
Email: admin@masthillfund.com
or at such other address and/or email address and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's email account containing the time, date, recipient email address, as applicable, and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
c. The corporate laws of the State of Delaware shall govern all issues concerning this Agreement. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state courts sitting in the Commonwealth of Massachusetts and federal courts sitting in the Commonwealth of Massachusetts, 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 suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
d. This Agreement and the Purchase Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.
e. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto.
f. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
g. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission or by e-mail in a “.pdf” format data file of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
h. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
i. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.
j. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of day and year first above written.
| | THE COMPANY: | |
| | | |
| | GOLDEN STAR ENTERPRISES LTD. | |
| | | | |
| By: | /s/ Eliav Kling | |
| | Name: | Eliav Kling | |
| | Title: | Chief Executive Officer | |
| | INVESTOR: | |
| | | |
| | MAST HILL FUND, L.P. | |
| | | | |
| By: | /s/ Patrick Hassani | |
| | Name: | Patrick Hassani | |
| | Title: | Chief Investment Officer | |
[Signature Page to registration rights agreement]
EXHIBIT A
TO REGISTRATION RIGHTS AGREEMENT
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
______, 2022
VStock Transfer LLC
18 Lafayette Place
Woodmere, NY 11598
Re: Effectiveness of Registration Statement
Ladies and Gentlemen:
We are counsel to GOLDEN STAR ENTERPRISES LTD., a Delaware corporation (the “Company”), and have represented the Company in connection with that certain Purchase Agreement, dated as of May 27, 2022 (the “Purchase Agreement”), entered into by and between the Company and Mast Hill Fund, L.P., a Delaware limited partnership (the “Investor”) pursuant to which the Company has agreed to issue to the Investor shares of the Company's Common Stock, $0.0001 par value (the “Common Stock”), in an amount up to Five Million Dollars ($5,000,000.00) (the “Put Shares”), in accordance with the terms of the Purchase Agreement. In connection with the transactions contemplated by the Purchase Agreement, the Company has registered with the U.S. Securities & Exchange Commission the following shares of Common Stock:
(1) __________ , which includes the Put Shares to be issued to the Investor upon purchase from the Company by the Investor from time to time in accordance with the Purchase Agreement and the Warrant Shares (as defined in the Purchase Agreement) (the “Warrant Shares”).
Pursuant to the Purchase Agreement, the Company also has entered into a registration rights agreement, of even date with the Purchase Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Put Shares and Warrant Shares under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company's obligations under the Purchase Agreement and the Registration Rights Agreement, on [_____], 2022, the Company filed a Registration Statement (File No. 333-[_________]) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the resale of the Put Shares and the Warrant Shares.
In connection with the foregoing, we advise you that a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [_____] [A.M./P.M.] on [__________], 2022 and we have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Put Shares and Warrant Shares are available for resale under the Securities Act pursuant to the Registration Statement and may be issued without any restrictive legend.
| | Very truly yours, [Company Counsel] | |
| | | | |
| By: | | |
| | | | |
| | | | |
| cc: Mast Hill Fund, L.P. | | | |
EXHIBIT 10.22
CONSULTING AGREEMENT
This Consulting Agreement (the “Agreement”) is made and effective 06.06.2022
BETWEEN: Beyond Media SEZC (the “Consultant”), a company organized and existing under the laws of the Cayman Islands with its head office located at:
90 North Church St
George Town
Cayman Islands
AND: Golden Star Enterprises Ltd. (the “Company”), a company organized and existing under the laws of the U.S.A with its head office located at:
In the event of a conflict in the provisions of any attachments hereto and the provisions set forth in this Agreement, the provisions of such attachments shall govern.
In consideration of the foregoing and of the mutual promises set forth herein, and intending to be legally bound, the parties hereto agree as follows:
1. WHEREAS:
a. the Consultant is in the business of assisting public companies in financial advisory, and investor and public relations strategies; and
b. the Company wishes to engage the services of the Consultant in relation to the development and execution of certain investor and public relations strategies for the Company
c. The Company desires to obtain the services of Consultant by means of services provided by Consultant’s employees dispatched by Consultant to provide services to Company hereunder (“Agents”), on its own behalf and on behalf of all existing and future Affiliated Companies (defined as any corporation or other business entity or entities that directly or indirectly controls, is controlled by, or is under common control with the Company), and Consultant desires to provide consulting services to the Company upon the following terms and conditions.
Consulting Agreement
2. SERVICES
The Company hereby engages the Consultant to provide The Consultant’s services (the “Services”) and the Consultant hereby accepts such engagement. The Services shall include all services customarily rendered by investor relations consultants within the capital investor and public relations industry including, without limitation, the following elements:
Consultation and investor Relations:
| (a) | Advising the company about positioning their story in the market. |
| (b) | Advising the company about their investor’s deck. |
| (c) | Advising the company about their investor pitch. |
| (d) | Reach out to the consultant ‘s personal network of institutions to tell them about the company. |
| (e) | Run prospects outreach campaigns with the objective of building Golden Star Enterprises Ltd. network of stock brokers, broker dealers, family offices, analysts and other institutions. The objective is to provide long term and sustainable relationships with institutional investors. |
** LIMITATION ON DUTIES
The Consultant will not disseminate any press release on behalf of the company.
3. INSIDER INFORMATION
The company and the Consultant acknowledges that pursuant to this Agreement the Consultant will not receive confidential insider information about the Company and/or its subsidiaries.
4. RELATIONSHIP AMONG THE PARTIES
Nothing contained in this Agreement shall be construed to (i) constitute the parties as joint venturers, partners, co-owners or otherwise as participants in a joint undertaking; (ii) constitute the Consultant as an agent, legal representative or employee of the Company; or (iii) authorize or permit the Consultant or any director, officer, employee, agent or other person acting on its behalf to incur on behalf of the other party any obligation of any kind, either express or implied, or do, sign or execute any things, deeds, or documents which may have the effect of legally binding or obligating the Company in any manner in favor of any individual, business, trust, unincorporated association, corporation, partnership, joint venture, limited liability company or other entity of any kind. The Company and the Consultant agree that the relationship among the parties shall be that of independent contractor.
3. CONSULTING PERIOD
Consulting Agreement
3.1. Basic Term
The Company hereby retains the Consultant and Consultant agrees to render to the Company for the period (the “Consulting Period”) commencing on the date of this Agreement for 12 months period.
4. COMPENSATION, BENEFITS AND EXPENSES
Upfront payment of $300,000 USD, paid in shares with share value of $0.04 USD for a total of 7,500,000 shares.
5. EFFECTIVE DATE, TERM AND TERMINATION
The term (the “Term”) of this Agreement shall commence on the last date of the final signature of this Agreement and shall continue for a period of 12 months.
a. The Company shall cause to be delivered the applicable share certificates to the Consultant. The Company represents and warrants that, when issued, the Securities will be issued free and clear of all liens, charges, and encumbrances of any kind whatsoever, subject only to the re-sale restrictions under applicable securities laws.
b. The parties agree that the Compensation hereunder shall be inclusive of any and all fees or expenses incurred by the Consultant pursuant to this Agreement including but not limited to the costs of implementing the investor Relations Strategy.
c. The Consultant is not a U.S. person and is not acquiring the Securities for the account or benefit of any U.S. person; or The Consultant agrees not to engage in hedging transactions with regard to the Securities unless in compliance with the US Securities Act.
6. SERVICES NOT EXCLUSIVE - The Consultant agrees that it shall, at all times, faithfully and in a professional manner perform all of the duties that may be reasonably required of the Consultant pursuant to the terms of this Agreement. The Company acknowledges that the Consultant is engaged in other business activities, and that it shall continue such activities during the term of this Agreement. The Consultant shall not be restricted from engaging in other business activities during the term of this Agreement.
7. CONFIDENTIALITY - The Consultant shall not disclose, without the consent of Client, any financial and business information concerning the business, affairs, plans and programs of Client which are delivered by Client to the Consultant in connection with the Consultant’s services hereunder, provided such information is plainly and prominently marked in writing by Client as being confidential (the “Confidential Information”). The Consultant shall not be bound by the foregoing limitation in the event (i) the Confidential Information is otherwise disseminated and becomes public information or (ii) the Consultant is required to disclose the Confidential Informational pursuant to a subpoena or other judicial order.
Consulting Agreement
8. INDEMNIFICATION -
a. Company agrees to indemnify and hold harmless the Consultant and its respective agents and employees, against any losses, claims, damages or liabilities incurred or suffered by the Consultant that result from any untrue statement or alleged untrue statement of any material fact contained in any registration statement, or prospectus of the Company; or that arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading.
b. The Consultant agrees to indemnify and hold harmless the Company, its partners, financiers parent, affiliated and related companies, and all of their respective individual shareholders, directors, officers, employees, licensees and assigns from and against any claims, actions, losses and expenses (including legal expenses) occasioned by any breach of the Consultant’s representations and warranties contained in, or by any breach of any other provision of, this Agreement by the Consultant.
9. MISCELLANEOUS PROVISIONS
(a) Currency. All currency referred to in this Agreement is in USD dollars.
(b) Further Action. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of this Agreement.
(c) Good Faith, Cooperation and Due Diligence. The parties hereto covenant, warrant and represent to each other good faith, complete cooperation, due diligence and honesty in fact in the performance of all obligations of the parties pursuant to this Agreement. All promises and covenants are mutual and dependent.
(d) Notices. All notices required or permitted to be given under this Agreement shall be given in writing and shall be delivered, either personally or by express delivery service, to the party to be notified. Notice to each party shall be deemed to have been duly given upon delivery, personally or by courier, addressed to the attention of the officer at the address set forth heretofore, or to such other officer or addresses as either party may designate upon at least ten days written notice to the other party.
(f) Entire agreement. This Agreement contains the entire understanding and agreement among the parties. There are no other agreements, conditions or representations, oral or written, express or implied, with regard thereto. This Agreement may be amended only in writing signed by all parties.
Consulting Agreement
(g) Waiver. A delay or failure by any party to exercise a right under this Agreement, or a partial or single exercise of that right, shall not constitute a waiver of that or any other right.
(h) Counterparts. This Agreement may be executed in duplicate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. In the event that the document is signed by one party and faxed (or emailed) to another the parties agree that a faxed (or emailed) signature shall be binding upon the parties to this agreement as though the signature was an original.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date first above written.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
| COMPANY | | CONSULTANT | |
| | | | |
| /s/ Eliav Kling | | /s/ Michael Kahiri | |
| Authorized Signature | | Authorized Signature | |
| | | | |
| Eliav Kling, CEO | | Michael Kahiri | |
| Print Name and Title | | Print Name and Title | |
Consulting Agreement
EXHIBIT 23.1
To Whom It May Concern:
We hereby consent to the use in the registration statement of Golden Star Enterprises LTD on Form S-1, filed on or about September 15, 2022, of our Report of Independent Registered Public Accounting Firm, dated May 24, 2022, on the consolidated balance sheet of Golden Star Enterprises LTD as of December 31, 2021 and 2020, and the related consolidated statements of operations and changes in consolidated stockholders equity (deficit) and consolidated cash flows for the years then ended and the related notes, which appear in the Form S-1.
/s/ Pinnacle Accountancy Group of Utah
Pinnacle Accountancy Group of Utah
(a dba of Heaton & Company, PLLC)
Farmington, UT
September 15, 2022
EXHIBIT 107
CALCULATION OF REGISTRATION FEE
FORM S-1
(Form Type)
GOLDEN STAR ENTERPRISES LTD.
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities and Registration of Securities for Selling Stockholders
| Security Type | | Security Class Title | | Fee Calculation Rule | | Amount to be Registered | | Proposed Maximum Offering Price Per Share | | | Maximum Aggregate Offering Price | | | Fee Rate | | | Amount of Registration Fee | |
| Equity (new common stock(1) to be sold) | | Common Stock, $0.0001 par value per share | | Rule 457(a) and (o) | | 40,000,000 Shares | | $ | 0.125 | | | $ | 5,000,000 | | | | 0.0000927 | | | $ | 463.50 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Equity(2) | | Common Stock underlying Share Purchase Warrants, $0.0001 par value per share | | Rule 457(a) and (o) | | 29,000,000 Shares | | $ | 0.04 | | | $ | 1,160,000 | | | | 0.0000927 | | | $ | 107.53 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Equity (3) | | Common Stock underlying Convertible Promissory Note | | Rule 457(a) and (o) | | 37,000,000 Shares | | $ | 0.01 | | | $ | 370,000 | | | | 0.0000927 | | | $ | 34.30 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Equity (4) | | Common Stock issued as Commitment fee, $0.0001 par value per share | | Rule 457(a) and (o) | | 4,920,000 Shares | | $ | 0.038 | | | $ | 186,960 | | | | 0.0000927 | | | $ | 17.33 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Equity (5) | | Common Stock, issued as consulting fees, $0.0001 par value per share | | Rule 457(a) and (o) | | 7,500,000 Shares | | $ | 0.04 | | | $ | 300,000 | | | | 0.0000927 | | | $ | 27.81 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Offering amounts | | | | | | 118,420,000 Shares | | | | | | $ | 7,016,960 | | | | | | | $ | 650.47 | |
| Total Fee Offsets | | | | | | | | | | | | | | | | | | | | $ | - | |
| Net Fee Due | | | | | | | | | | | | | | | | | | | | $ | 650.47 | |
| (1) | Represents common shares for resale by Mast Hill Fund L.P. (MHFLP), a Delaware limited partnership (the Selling Stockholder”), which shares are issuable by Golden Star Enterprises Ltd. (the “Company”) pursuant to the Equity Purchase Agreement (the “ MHFLP EPA”) entered into with Mast Hill Fund L.P. (MHFLP) on May 27, 2022. Although we are not mandated to sell shares under the Equity Purchase Agreement, the Equity Purchase Agreement gives us the option to sell to MHFLP, up to $5,000,000 worth of our common stock over the period ending twenty-four months following the Effect of this Registration Statement, and MHFLP is obligated to purchase the shares upon a Put notice from the Company. The $5,000,000 was stated as the total amount of available funding in the Equity Purchase Agreement because this was the maximum amount that MHFLP agreed to offer us in funding. Additionally, MHFLP will purchase the shares at a price equal to 70% of the volume weighted average price of the Company’s Common Stock on the Principal Market on the Trading Day during the seven days preceding the respective Put Date for the duration of the Offering (the “Offering”). |
| (2) | Represents common shares issuable upon exercise of 10,000,000 common stock purchase warrants included in the MHFLP EPA (described above in note #1) and 19,000,000 common stock purchase warrants included in the Securities Purchase Agreement (“SPA”) and Promissory Note (described below in note #3) for the purchase of cumulative 29,000,000 shares of our common stock (the “MHFLP Warrants”) at $0.04 per share. The warrants are exercisable immediately and the Company is obligated to issue the corresponding number of shares pursuant to the exercise notice. |
| (3) | Represents common shares issuable upon conversion of a convertible promissory note (the “Promissory Note”) previously issued to MHFLP in the amount of $370,000. We have received funds from this note in the amount of $301,360, following an original issuance discount of 10% or $37,000, payment of a finder’s fee in the amount of $26,640 and the investor’s legal fees of $5,000.00. |
| (4) | Represents common shares issued to MHFLP as a commitment fee in respect of the SPA and Promissory Note. The Company will not receive any proceeds from the sale of these shares. |
| (5) | Represents common shares issued to Michael Kahiri in relation to a consulting agreement with Beyond Media SEZC (“Beyond”). The Company will not receive any proceeds from the sale of these shares. |