Item
1.01 Entry into a Material Definitive Agreement.
On
March 19, 2018, we entered into the amendment no. 1, dated as of March 15, 2018, to the business services agreement, effective
as of December 29, 2017, with WENN Digital Inc. (
“WENN”
), pursuant to which we changed the scope of services
to provide WENN with the services in connection with WENN’s development of an image rights management and protection platform
(the
“Platform”
) using blockchain technology, including (i) the business development and technical services,
(ii) the business launch services and (iii) the post-business launch support services.
The
total fees for the services provided in connection with the development and launch of the Platform (the business development and
technical services and business launch services) are deemed earned on the date of execution of the business services agreement,
but we have waived WENN’s requirement to pay US$250,000 fixed fee in connection with the business development and technical
services and WENN has previously paid our company US$500,000 fixed fee in connection with the business launch services.
The
fees for the post-business launch support services (the
“Monthly Services”
) are US$35,000 per month and they
will be due at the beginning of each month in which the Monthly Services are performed.
In
addition, the work fees in the amount of US$4,175,000 are deemed earned on March 15, 2018 and will be subject to a Renegotiation
Obligation (as defined below). The additional fee of rights to receive an aggregate of 20,000,000 Platform tokens or coins (the
“Tokens”
) pursuant to a Simple Agreement for Future Tokens are also deemed earned on the date of execution
of the business services agreement and will be subject to a Renegotiation Obligation. If WENN does not raise more than US$40 million
in connection with its offer and sale for cash of (i) one or more Simple Agreements for Future Tokens (
“SAFTs”
),
which SAFTs will entitle the holders thereof to receive Tokens under certain circumstances, and/or, (ii) Tokens, in the event
that WENN determines to offer and sell Tokens in lieu of or in addition to SAFTs in connection with its fundraising efforts (collectively,
the
“WENN Offering”
), prior to May 31, 2018, we will be required to return the work fees and additional fees
to WENN and WENN and our company will be required to negotiate in good faith the amount of each of such fee (such requirement
to negotiate is referred to herein as the
“Renegotiation Obligation”
).
We
agreed that WENN will not be responsible for any out-of-pocket expenses incurred by our company in connection with our performance
of the services. In addition, we agreed to pay, and otherwise be financially responsible for (including through the reimbursement
of disbursements made by WENN and its affiliates), (i) all legal costs and expenses incurred by WENN, our company and any of their
affiliates in connection with the WENN Offering; (ii) all business and travel expenses incurred by WENN, our company and any of
their affiliates in connection the WENN Offering; and (iii) all fees and expenses incurred by WENN in connection with its conversion
of cryptocurrencies into US dollars in connection with the WENN Offering, including bank, exchange and other similar fees and
expenses. WENN will have the right to deduct any such amounts from the fees otherwise payable by it to our company and apply such
deducted amounts to the payments to our company.
The
business services agreement will continue for a period of one year unless earlier terminated by either our company or WENN. With
respect to the Monthly Services, we agreed to provide the Monthly Services for one year commencing on the date of the Platform
Launch (as defined below), after which the business services agreement and the provision of the Monthly Services will automatically
renew for a one year period and can be terminated by either our company or WENN with 30 days’ written notice. “Platform
Launch” means the publicized product launch of the Platform to the general public, including the ability of the general
public to use Tokens as the primary means of exchange for transactions on the Platform.
Either
we or WENN may terminate the business services agreement upon the provision of 30 days’ written notice to the other party.
If we provide such notice, WENN may immediately terminate the business services agreement and we will be entitled to no further
compensation except for any fees earned prior to the date of the termination. If WENN provides such notice, we may immediately
terminate the business services agreement and will be entitled to no further compensation, except for the following lump sum payments:
(i) any fees earned to the effective date of termination; and (ii) a lump sum payment of US$105,000.
Our
chairman and director, Cameron Chell, is a director, officer and an indirect shareholder of Business Instincts Group Inc. which
owns 10% of the common stock of WENN and he is also a director, officer and indirect shareholder of Blockchain Merchant Group,
Inc. which owns 2.5% of the common stock of WENN and we own 7.5% of the common stock of WENN. Mr. Chell is also a director of
WENN.