Notes
to Unaudited Condensed Consolidated Financial Statements
As
of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017
1.
NATURE AND CONTINUANCE OF OPERATIONS
ICOX
Innovations Inc. (formerly AppCoin Innovations Inc., formerly RedStone Literary Agents, Inc.) (the “Company”) was
incorporated under the laws of the State of Nevada on July 20, 2010, with an authorized capital of 75,000,000 common shares, having
a par value of $0.001 per share. During the period ended December 31, 2010, the Company commenced operations by issuing shares
and developing its publishing service business, focused on representing authors to publishers.
On
February 14, 2018, the Company changed its name from “AppCoin Innovations Inc.” to “ICOX Innovations Inc.”
The
Company’s new business model is to provide a turnkey set of services for companies to develop and integrate blockchain and
cryptocurrency technologies into their business operations. The Company will enable its customers to focus on their core competencies
while providing the necessary resources and expertise to execute a strategy that will enable companies to integrate new blockchain
plus cryptocurrency technologies into their business operations. The Company will be compensated on a fee-for-services model.
The Company may also accept tokens or coins in payment for its services, to the extent permitted under applicable law.
The
Company’s services will include strategic planning, project planning, structure development and administration, business
plan modeling, technology development support, whitepaper preparation, due diligence reporting, governance planning and management.
Going
Concern
These
consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize
its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred
losses since inception resulting in an accumulated deficit of $2,681,070 and $693,008 as of June 30, 2018 and December 31, 2017,
respectively, and further losses are anticipated in the pursuit of the Company’s new service business opportunity, raising
substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern
is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet
its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance
operating costs over the next twelve months with existing cash on hand, loans from directors and/or the private placement of common
stock.
In
order to address the above factors, during the six months ended June 30, 2018, the Company completed private placements of an
aggregate of 9,113,659 shares of common stock at a price of $0.60 per share for aggregate gross proceeds of $5,468,195.
The
financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts
and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
interim condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting
principles (“
GAAP
”) in the United States of America.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Basis
of Consolidation
The
interim condensed consolidated financial statements include the accounts of the Company and its subsidiary. All intercompany transactions
and balances have been eliminated.
Unaudited
Interim Financial Information
The
accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance
with U.S. GAAP for interim financial information, and with the rules and regulations of the United States Securities and Exchange
Commission (the “SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial
statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management,
necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily
indicative of the results for the full fiscal year. These unaudited interim condensed consolidated financial statements should
be read in conjunction with the financial statements of the Company for the year ended December 31, 2017 and notes thereto contained
in the information as part of the Company’s Annual Report on Form 10-K, which was filed with the SEC on April 2, 2018.
Use
of Estimates
The
preparation of interim condensed consolidated financial statements in conformity with 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates and these differences could be material.
Earnings
per Share
The
Company computes earnings (loss) per share in accordance with ASC 105, “Earnings per Share” which requires presentation
of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed
by dividing net loss available to common stockholders by the weighted average number of outstanding common shares during the period.
Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. At June
30, 2018, common shares from the conversion of debt (11,413,141 shares) (Note 3) and exercise of stock options (830,553 shares)
(Note 8) have been excluded as their effect is anti-dilutive. At June 30, 2017, common shares from the conversion of debt (6,956,969)
and exercise of stock options (nil) have been excluded as their effect is anti-dilutive.
Revenue
Recognition
Revenue
is recognized in accordance with FASB ASC Topic 606, Revenue Recognition.
The
Company primarily generates revenues from professional services consulting agreements. These arrangements are generally entered
into on a contingent fee basis. There is no prepayment or retainer required prior to performing services and the entire fees is
earned on a contingent basis. The Company also provides monthly post-business launch support services. The recurring monthly post-business
launch support services are recognized as revenue each month that the subscription is maintained.
The
Company generally enters into arrangements for which revenues are contingent upon achieving a pre-determined deliverable or future
outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability
is reasonably assured.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Differences
between the timing of billings and the recognition of revenue are recognized as either unbilled revenue (a component of accounts
receivable) or deferred revenue on the consolidated balance sheet. Revenues recognized for services performed but not yet billed
to clients are recorded as unbilled revenue.
Reimbursable
expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component
of revenues. Typically, an equivalent amount of reimbursable expenses are included in total direct client service costs. Taxes
collected from customers and remitted to governmental authorities are presented in the statement of operations on a net basis.
Service
costs
The
Company’s policy is to defer direct service costs that relate to the earning of contingent fee revenue. These deferred costs
are expensed when the contingent fee revenue is recognized or when the earning the contingent fee revenue is in doubt.
Reclassification
Certain
reclassifications have been made to the 2017 financial statements in order for them to conform to the 2018 presentation. Such
reclassifications have no impact on the Company’s financial position or results or operations.
Recently
Adopted Accounting Pronouncements
Statement
of Cash Flows (ASU 2016-15)
This
update provides specific guidance to clarify how entities should classify certain cash receipts and cash payments on the statement
of cash flows. The update also clarifies the application of the predominance principle when cash receipts and cash payments have
aspects of more than one class of cash flows. The Company adopted this standard effective January 1, 2018.
The
adoption of this update had no material effect on our financial statements.
Financial
Instruments – Recognition and Measurement (ASU 2016-01)
This
update retains the current accounting for classifying and measuring investments in debt securities and loans, but requires equity
investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under
the equity method or requiring consolidation. The Company adopted this standard effective January 1, 2018. The adoption of this
update had no material effect on our financial statements.
Future
Accounting Pronouncements
Leases
(ASU 2016-02)
In
February 2016, the FASB issued new guidance, ASU No. 2016-02, Leases (Topic 842). The main difference between current U.S. GAAP
and the new guidance is the recognition of lease liabilities based on the present value of remaining lease payments and corresponding
lease assets for operating leases under current U.S. GAAP with limited exception. Additional qualitative and quantitative disclosures
are also required by the new guidance. Topic 842 is effective for annual reporting periods (including interim reporting periods)
beginning after December 15, 2018. Early adoption is permitted. The Company is in the process of evaluating the amendments to
determine if they have a material impact on the Company’s financial position, results of operations, cash flows or disclosures.
In
June 2016, the FASB issued ASU 2016-13,
Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses
of Financial Instruments
, which changes the methodology for measuring credit losses on financial instruments and the timing
of when such losses are recorded. This guidance will be effective for reporting periods beginning after December 15, 2019, with
early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption of this ASU on the
Company’s consolidated financial statements.
3.
NOTES PAYABLE
The
Company has convertible notes outstanding as at June 30, 2018 and are as follows:
|
|
Start
Date
|
|
|
Maturity
Date
|
|
|
Rate
|
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
Note
1
(1)
|
|
|
09-14-2015
|
|
|
|
09-14-2020
|
|
|
|
18
|
%
|
|
$
|
73,825
|
|
|
$
|
37,099
|
|
|
$
|
110,924
|
|
Note
2
(1)
|
|
|
12-30-2016
|
|
|
|
12-30-2021
|
|
|
|
18
|
%
|
|
|
50,000
|
|
|
|
13,488
|
|
|
|
63,488
|
|
Note
3
(1)
|
|
|
12-30-2016
|
|
|
|
12-30-2021
|
|
|
|
18
|
%
|
|
|
21,500
|
|
|
|
5,800
|
|
|
|
27,300
|
|
Note
4
(1)
|
|
|
03-02-2017
|
|
|
|
03-02-2022
|
|
|
|
18
|
%
|
|
|
20,000
|
|
|
|
4,783
|
|
|
|
24,783
|
|
Note
5
(1)
|
|
|
06-08-2017
|
|
|
|
06-08-2022
|
|
|
|
18
|
%
|
|
|
10,000
|
|
|
|
1,908
|
|
|
|
11,908
|
|
Note
6
(2)
|
|
|
10-30-2017
|
|
|
|
10-30-2020
|
|
|
|
10
|
%
|
|
|
250,000
|
|
|
|
16,644
|
|
|
|
266,644
|
|
Note
7
(2)
|
|
|
10-30-2017
|
|
|
|
10-30-2020
|
|
|
|
10
|
%
|
|
|
75,000
|
|
|
|
4,993
|
|
|
|
79,993
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
500,325
|
|
|
$
|
84,715
|
|
|
$
|
585,040
|
|
(1)
The note may be converted into shares of common stock of the Company at a conversion price of $0.03 per share.
(2)
The note may be converted into shares of common stock of the Company at a conversion price of $0.10 per share.
The
balances of the convertible notes outstanding as at December 31, 2017 are as follows:
|
|
Start
Date
|
|
|
Maturity
Date
|
|
|
Rate
|
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
Note
1
(1)
|
|
|
09-14-2015
|
|
|
|
09-14-2020
|
|
|
|
18
|
%
|
|
$
|
73,825
|
|
|
$
|
30,509
|
|
|
$
|
104,334
|
|
Note
2
(1)
|
|
|
12-30-2016
|
|
|
|
12-30-2021
|
|
|
|
18
|
%
|
|
|
50,000
|
|
|
|
9,025
|
|
|
|
59,025
|
|
Note
3
(1)
|
|
|
12-30-2016
|
|
|
|
12-30-2021
|
|
|
|
18
|
%
|
|
|
21,500
|
|
|
|
3,880
|
|
|
|
25,380
|
|
Note
4
(1)
|
|
|
03-02-2017
|
|
|
|
03-02-2022
|
|
|
|
18
|
%
|
|
|
20,000
|
|
|
|
2,998
|
|
|
|
22,998
|
|
Note
5
(1)
|
|
|
06-08-2017
|
|
|
|
06-08-2022
|
|
|
|
18
|
%
|
|
|
10,000
|
|
|
|
1,016
|
|
|
|
11,016
|
|
Note
6
(2)
|
|
|
10-30-2017
|
|
|
|
10-30-2020
|
|
|
|
10
|
%
|
|
|
250,000
|
|
|
|
4,247
|
|
|
|
254,247
|
|
Note
7
(2)
|
|
|
10-30-2017
|
|
|
|
10-30-2020
|
|
|
|
10
|
%
|
|
|
75,000
|
|
|
|
1,274
|
|
|
|
76,274
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
500,325
|
|
|
$
|
52,949
|
|
|
$
|
553,274
|
|
Based
upon the balances as of June 30, 2018, the convertible notes and the related interest will come due in the following years:
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
2018
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
2020
|
|
|
398,825
|
|
|
|
58,736
|
|
|
|
457,561
|
|
2021
|
|
|
71,500
|
|
|
|
19,288
|
|
|
|
90,788
|
|
2022
|
|
|
30,000
|
|
|
|
6,691
|
|
|
|
36,691
|
|
Total
|
|
$
|
500,325
|
|
|
$
|
84,715
|
|
|
$
|
585,040
|
|
4.
LOANS PAYABLE – RELATED PARTY
On
March 13, 2018, we entered into a loan agreement with Michael Blum, our Chief Financial Officer, whereby Mr. Blum advanced $100,000
to us. The principal amount of $100,000 is repayable on demand (but no longer than a term of six months) and bears simple interest
at a rate of 12% per annum, which is payable upon repayment of the principal amount of $100,000. We are entitled to repay the
whole or any portion of the principal amount of $100,000, plus accrued interest on the portion of the principal amount of $100,000
being repaid, at any time. The loan agreement provides that we must, within five days of the release of funds to us from our private
placement of subscription receipts that closed in March 2018, repay the principal amount of $100,000 plus accrued interest in
full. The loan agreement also provides that if we obtain any indebtedness on terms that are superior to the terms set forth in
the loan agreement, then the terms under the loan agreement will be deemed to be amended, as of March 13, 2018, to match such
superior terms in a manner and on terms as nearly equivalent as practicable to such superior terms. The loan was repaid on June
1, 2018 with interest of $2,630.14.
On
March 27, 2018, we entered into a loan agreement with Greg Burnett, a member of our Advisory Board, whereby Mr. Burnett advanced
$100,000 to us. The principal amount of $100,000 is repayable on demand (but no longer than a term of six months) and bears simple
interest at a rate of 12% per annum, which is payable upon repayment of the principal amount of $100,000. We are entitled to repay
the whole or any portion of the principal amount of $100,000, plus accrued interest on the portion of the principal amount of
$100,000 being repaid, at any time. The loan agreement provides that we must, within five days of the release of funds to us from
our private placement of subscription receipts that closed in March 2018, repay the principal amount of $100,000 plus accrued
interest in full. The loan agreement also provides that if we obtain any indebtedness on terms that are superior to the terms
set forth in the loan agreement, then the terms under the loan agreement will be deemed to be amended, as of March 27, 2018, to
match such superior terms in a manner and on terms as nearly equivalent as practicable to such superior terms. The loan was repaid
on June 4, 2018 with interest of $2,268.50.
On
April 13, 2018, we entered into a loan agreement with a lender whereby the lender advanced $200,000 to us. The principal amount
of $200,000 is repayable on demand (but no longer than a term of six months) and bears simple interest at a rate of 12% per annum,
which is payable upon repayment of the principal amount of $200,000. We are entitled to repay the whole or any portion of the
principal amount of $200,000, plus accrued interest on the portion of the principal amount of $200,000 being repaid, at any time.
The loan was repaid on June 12, 2018 with interest of $3,090.
5.
COMMITMENTS
Starting
May 1, 2018, the Company entered into a contract to lease its premises. The contract is effective until February 28, 2020 and
is for $16,500 per month.
The
following commitments are outstanding as at June 30, 2018:
|
|
Total
|
|
2018
|
|
$
|
99,000
|
|
2019
|
|
|
198,000
|
|
2020
|
|
|
33,000
|
|
Total
|
|
$
|
330,000
|
|
6.
RELATED PARTY TRANSACTIONS
In
support of the Company’s efforts and cash requirements, it may rely on advances from stockholders until such time as the
Company can support its operations through revenue generation or attain adequate financing through sales of its equity or traditional
debt financing. There is no formal written commitment for continued support by stockholders. Amounts represent advances or amounts
paid in satisfaction of liabilities.
The
Company’s office premises were provided to it at no cost by one of its directors until April 30, 2018. This director did
not take any fees for serving as director during the period ended June 30, 2018.
6.
RELATED PARTY TRANSACTIONS (CONT’D)
In
October 2017, the Company signed an agreement with a company in which the Company’s Chairman is a director, officer, and
30.5% shareholder, to provide strategic management services. The agreement is for a two-year term that will automatically be renewed
unless: (i) mutually agreed to by Business Instincts Group, Inc. (“BIG”) and us, or (ii) written notice of non-renewal
is provided by the non-renewing party to the other at least 90 days prior to the end of the term. This agreement committed the
Company to pay $35,000 a month and a signing bonus of $100,000 payable as follows: (i) $50,000 upon closing of up to $750,000
of equity financing and (ii) $50,000 payable on signing of the first client agreement. On June 26, 2018, the agreement was amended
to pay $105,000 a month as of June 1, 2018 and pay a bonus of $280,000. $140,000 of the bonus has been paid with the remaining
portion to be paid upon signing of two additional clients. As of June 30, 2018, the Company had trade and other payables owing
to this related party of $43,358.
Future
minimum payments per the agreement are:
2018
|
|
$
|
630,000
|
|
2019
|
|
|
1,050,000
|
|
Total
|
|
$
|
1,680,000
|
|
On
December 29, 2017, the Company signed a master service agreement with WENN Digital Inc. (“WENN”), a company in which
there is a common director. The agreement was amended on March 15, 2018, pursuant to which the Company 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 business services agreement with WENN provides
that the 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) were deemed earned on the date of execution of the business services agreement.
The Company has waived WENN’s requirement to pay the $250,000 fixed fee in connection with the business development and
technical services as a concession. The Company has recognized the business development and technical service fee of $500,000
during the year end December 31, 2017, paid in January by WENN upon the completion of its first round of pre-ICO fundraising.
The
fees for the post-business launch support services (the
“Monthly Services”
) are $35,000 per month and they
will be due at the beginning of each month in which the Monthly Services are performed. With respect to the Monthly Services,
the Company has 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.
In
addition, the business services agreement with WENN provides that the work fee in the amount of $4,175,000 is deemed earned on
March 15, 2018 and the work fee is subject to a Renegotiation Obligation (as defined below). The business services agreement with
WENN also provides that 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 is also deemed earned on the date of execution of the business services agreement
and the additional fee is subject to a Renegotiation Obligation. However, for financial reporting purposes, the work fee and additional
fee are deemed earned on the date of the launch of the Platform. If WENN does not raise more than $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, the Company will be required to return the work fees and additional fee 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”
).
6.
RELATED PARTY TRANSACTIONS (CONT’D)
The
Company has 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, the Company has 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.
Either
the Company or WENN may terminate the business services agreement upon the provision of 30 days’ written notice to the other
party. If the Company provides such notice, WENN may immediately terminate the business services agreement and the Company will
be entitled to no further compensation except for any fees earned prior to the date of the termination. If WENN provides such
notice, the Company 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 $105,000.
For
the purpose of determining our fees earned to the date of the termination in the event that either party terminates the business
services agreement, all fees for services in connection with the development and launch of the Platform (the business development
and technical services and business launch services) and the additional fee of rights to receive an aggregate of 20,000,000 Tokens
are deemed earned on the date of execution of the business services agreement and the work fee is deemed earned as of March 15,
2018. However, the work fees and additional fee are subject to the Renegotiation Obligation. As such, our work fee and additional
fee are not determinable or deemed collectible for the financial reporting purposes until the WENN Offering is completed or, if
applicable, those fees are renegotiated pursuant to the Renegotiation Obligation.
The
Company’s chairman and one of its directors, 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 the Company owns 7.5% of the common stock of WENN.
Mr. Chell is also a director, chairman, and officer of WENN. Mr. Elliott is a former officer of WENN.
7.
SHARE CAPITAL
On
March 12 and 19, 2018, we completed private placements of an aggregate of 9,113,659 subscription receipts at a price of $0.60
per subscription receipt for aggregate gross proceeds of $5,468,195. The escrow release condition (as defined below) was met,
and each subscription receipt converted into one share of our common stock, for no additional consideration. The escrow release
condition was the receipt by our company of conditional approval for the listing of the shares of our common stock on a Canadian
stock exchange. In connection with the closing of the private placements, we paid cash finder’s fees in the aggregate amount
of $29,400 and we issued 160,865 shares of our common stock at a deemed price of $0.60 per share as the finder’s fee.
In
connection with this private placement, the Company agreed with each subscriber who purchased shares to prepare and file a registration
statement with respect to 50% of the shares issued with the United States Securities and Exchange Commission within 90 days following
the closing of the private placement and agreed to use commercially reasonable efforts to have the registration statement declared
effective by the United States Securities and Exchange Commission as soon as possible after filing.
7.
SHARE CAPITAL (CONT’D)
None
of the securities issued in the private placement have been registered under the United States Securities Act of 1933, as amended
(the “1933 Act”), and none of them may be offered or sold in the United States absent registration or an applicable
exemption from the registration requirements of the 1933 Act.
8.
STOCK-BASED COMPENSATION
The
Company has adopted the 2017 Equity Incentive Plan (“the Plan”) under which non-transferable options to purchase common
shares of the Company may be granted to directors, officers, employees, or consultants of the Company. The terms of the Plan provide
that our board of directors may grant options to acquire common shares of the Company at not less than 100% of the greater of:
(i) the fair market value of the shares underlying the options on the grant date and (ii) the fair market value of the shares
underlying the options on the date preceding the grant date at terms of up to ten years. No amounts are paid or payable by the
recipient on receipt of the options. As of December 31, 2017, the maximum number of options available for grant was 3,000,000
shares. On January 22, 2018, the maximum number of options available for grant was increased to 3,900,000 shares. As of June 30,
2018, there are 3,350,000 stock options issued (December 31, 2017 – 2,900,000) and 550,000 stock options unissued (December
31, 2017 – 100,000).
On
February 9, 2018, the Company granted a total of 100,000 stock options to a director. The stock options are exercisable at the
exercise price of $0.60 per share for a period of ten years from the date of grant. The stock options are exercisable as follows:
|
(i)
|
1/3
upon the date of grant;
|
|
|
|
|
(ii)
|
1/3
on the first anniversary date; and
|
|
|
|
|
(iii)
|
1/3
on the second anniversary date.
|
On
February 16, 2018, the Company granted a total of 75,000 stock options to two consultants. The stock options are exercisable at
the exercise price of $0.60 per share for a period of ten years from the date of grant. The stock options are exercisable as follows:
|
(i)
|
1/3
on the first anniversary date;
|
|
|
|
|
(ii)
|
1/3
on the second anniversary date; and
|
|
|
|
|
(iii)
|
1/3
on the third anniversary date.
|
On
May 17, 2018, the Company granted a total of 100,000 stock options to a director. The stock options are exercisable at the exercise
price of $0.60 per share for a period of ten years from the date of grant. The stock options are exercisable as follows:
|
(i)
|
2,778
upon the date of grant;
|
|
|
|
|
(ii)
|
2,778
on the 17
th
of each of the following 34 months; and
|
|
|
|
|
(iii)
|
2,770
on April 17, 2021.
|
8.
STOCK-BASED COMPENSATION (CONT’D)
On
June 7, 2018, the Company granted a total of 100,000 stock options to a director. The stock options are exercisable at the exercise
price of $0.60 per share for a period of ten years from the date of grant. The stock options are exercisable as follows:
|
(i)
|
1/3
upon the date of grant;
|
|
|
|
|
(ii)
|
1/3
on the first anniversary date; and
|
|
|
|
|
(iii)
|
1/3
on the second anniversary date.
|
On
June 8, 2018, the Company granted 75,000 stock options to one consultant. The stock options are exercisable at the exercise price
of $0.60 per share for a period of ten years from the date of grant. The stock options become exercisable as follows:
|
(i)
|
1/3
upon the date of grant;
|
|
|
|
|
(ii)
|
1/3
on the first anniversary date; and
|
|
|
|
|
(iii)
|
1/3
on the second anniversary date.
|
Stock
options granted are valued at the fair value calculation based off the Black-Scholes valuation model. The weighted average assumptions
used in the calculation are as follows:
|
|
Six
Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Share
price
|
|
$
|
0.60
|
|
|
|
N/A
|
|
Exercise
price
|
|
$
|
0.60
|
|
|
|
N/A
|
|
Time
to maturity (years)
|
|
|
10
|
|
|
|
N/A
|
|
Risk-free
interest rate
|
|
|
2.83%-3.11
|
%
|
|
|
N/A
|
|
Expected
volatility
|
|
|
186.62%-187.29
|
%
|
|
|
N/A
|
|
Dividend
per share
|
|
$
|
0.00
|
|
|
|
N/A
|
|
Forfeiture
rate
|
|
|
Nil
|
|
|
|
N/A
|
|
|
|
Number
of Options
|
|
|
Weighted
Average Grant-Date
Fair Value ($)
|
|
|
Weighted
Average Exercise
Price ($)
|
|
|
Weighted
Average Remaining
Life (Yrs)
|
|
Options
outstanding, December 31, 2017
|
|
|
2,900,000
|
|
|
|
0.10
|
|
|
|
0.10
|
|
|
|
9.3
|
|
Granted
|
|
|
450,000
|
|
|
|
0.60
|
|
|
|
0.60
|
|
|
|
9.9
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options
outstanding, June 30, 2018
|
|
|
3,350,000
|
|
|
|
0.17
|
|
|
|
0.17
|
|
|
|
9.4
|
|
Options
exercisable, June 30, 2018
|
|
|
830,553
|
|
|
|
0.16
|
|
|
|
0.16
|
|
|
|
9.4
|
|
9.
SUBSEQUENT EVENTS
On
July 9, 2018, we entered into a loan agreement with WENN whereby we provided to WENN a loan in the principal amount of $750,000.
The principal amount of the loan bears interest at the rate of 2% per annum, provided, however, any amounts not paid when due
will immediately commence accruing interest at the default rate of 10% per annum. The principal amount of the loan, any accrued
and unpaid interest thereon, and any other amounts owing under the loan maters on the earlier of (i) March 9, 2019 and (ii) the
closing by WENN of a minimum of $3,000,000 in financings, in the aggregate, whether through the sale of KodakCoins, equity or
otherwise. WENN can prepay all outstanding amounts on 10 days’ notice to our company.
As
a condition for entering into the loan agreement, Ryde GmbH (“Ryde”) provided a corporate guarantee dated July 9,
2018 to our company, pursuant to which Ryde unconditionally guaranteed and promised to pay our company on demand all amounts that
become due from WENN under the loan agreement with WENN and any other amounts that we may in the future loan or advance to WENN.
Also,
as a condition for entering into the loan agreement, WENN entered into the amendment no. 2, dated as of July 9, 2018, to the business
service agreement dated December 29, 2017 as amended as of March 15, 2018, with our company. Pursuant to the amendment no. 2,
our company and WENN agreed that each party will be responsible for its respective expenses and agreed not to charge any out of
pocket expenses to the other party unless expressly approved by the other party in advance in writing.