5.
NOTES PAYABLE (CONT’D)
The
balances of the convertible notes outstanding as at December 31, 2018 were as follows:
|
|
Start Date
|
|
Maturity Date
|
|
Rate
|
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
Note 1
(1)
|
|
09-14-2015
|
|
09-14-2020
|
|
|
8
|
%
|
|
$
|
73,825
|
|
|
$
|
43,170
|
|
|
$
|
116,995
|
|
Note 2
(1)
|
|
12-30-2016
|
|
12-30-2021
|
|
|
8
|
%
|
|
|
50,000
|
|
|
|
17,600
|
|
|
|
67,600
|
|
Note 3
(1)
|
|
12-30-2016
|
|
12-30-2021
|
|
|
8
|
%
|
|
|
21,500
|
|
|
|
7,568
|
|
|
|
29,068
|
|
Note 4
(1)
|
|
03-02-2017
|
|
03-02-2022
|
|
|
8
|
%
|
|
|
20,000
|
|
|
|
6,428
|
|
|
|
26,428
|
|
Note 5
(1)
|
|
06-08-2017
|
|
06-08-2022
|
|
|
8
|
%
|
|
|
10,000
|
|
|
|
2,731
|
|
|
|
12,731
|
|
Note 6
(2)
|
|
10-30-2017
|
|
10-30-2020
|
|
|
10
|
%
|
|
|
250,000
|
|
|
|
29,247
|
|
|
|
279,247
|
|
Note 7
(2)
|
|
10-30-2017
|
|
10-30-2020
|
|
|
10
|
%
|
|
|
75,000
|
|
|
|
8,774
|
|
|
|
83,774
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
500,325
|
|
|
$
|
115,518
|
|
|
$
|
615,843
|
|
(1)
|
The principal of the note, and the interest calculated
up to November 30, 2018, 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.
|
Based
upon the balances as of March 31, 2019, the convertible notes and the related interest will come due in the following years:
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
2019
|
|
$
|
-
|
|
|
$
|
8,938
|
|
|
$
|
8,938
|
|
2020
|
|
|
648,825
|
|
|
|
84,784
|
|
|
|
733,609
|
|
2021
|
|
|
71,500
|
|
|
|
26,579
|
|
|
|
98,079
|
|
2022
|
|
|
30,000
|
|
|
|
9,751
|
|
|
|
39,751
|
|
2023
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
750,325
|
|
|
$
|
130,052
|
|
|
$
|
880,377
|
|
6.
NOTES RECEIVABLE – RELATED PARTY
On
July 9, 2018, the Company entered into a loan agreement with Ryde Holding Inc. (“Ryde”) whereby the Company provided
to Ryde 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, 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 matures on the
earlier of (i) March 9, 2019 and (ii) the closing by Ryde of a minimum of $3,000,000 in financings, in the aggregate, whether
through the sale of KodakCoins, equity or otherwise. Ryde can prepay all outstanding amounts on 10 days’ notice to our company.
As
a condition for entering into the loan agreement, Ryde GmbH, a subsidiary of Ryde, provided a corporate guarantee dated July 9,
2018 to the Company, pursuant to which Ryde GmbH unconditionally guaranteed and promised to pay the Company on demand all amounts
that become due from Ryde under the loan agreement with Ryde and any other amounts that we may in the future loan or advance to
Ryde.
Also,
as a condition for entering into the loan agreement, Ryde 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 the Company. Pursuant to the amendment no. 2,
the Company and Ryde 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. As of March 31, 2019, interest
of $10,890 has been accrued and earned (December 31, 2018 - $7,192).
6.
NOTES RECEIVABLE – RELATED PARTY (CONT’D)
On
July 27, 2018, the Company entered into a loan agreement with Ryde whereby the Company provided to Ryde a loan in the principal
amount of $500,000. This loan is unsecured, will mature on the earlier of eight (8) months from the date of issuance or the closing
by Ryde of a minimum of $4,250,000 in financings, in the aggregate, whether through the sale of KodakCoins, equity, or otherwise
and will bear interest at the rate of 12% interest per annum. However, any amounts not paid when due shall immediately commence
accruing interest at the default rate of 18% per annum. As of March 31, 2019, interest of $38,269 has been accrued and earned
(December 31, 2018 - $23,474).
As
at March 31, 2019, the balances of the outstanding notes receivable are as follows:
|
|
Effective Date
|
|
Maturity Date
|
|
Rate
|
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
Note 1
|
|
07-09-2018
|
|
03-09-2019
|
|
|
2
|
%
|
|
$
|
750,000
|
|
|
$
|
10,890
|
|
|
$
|
760,890
|
|
Note 2
(1)
|
|
07-27-2018
|
|
03-27-2019
|
|
|
12
|
%
|
|
|
500,000
|
|
|
|
38,269
|
|
|
|
538,269
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,250,000
|
|
|
$
|
49,159
|
|
|
$
|
1,299,159
|
|
(1)
The $500,000 was issued in four tranches and the interest is calculated based on the dates that those tranches were issued.
The
Company is in discussions with Ryde to amend the agreements as they have already matured.
The
balances of the notes receivable outstanding as at December 31, 2018 were as follows:
|
|
Effective Date
|
|
Maturity Date
|
|
Rate
|
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
Note 1
|
|
07-09-2018
|
|
03-09-2019
|
|
|
2
|
%
|
|
$
|
750,000
|
|
|
$
|
7,192
|
|
|
$
|
757,192
|
|
Note 2
(1)
|
|
07-27-2018
|
|
03-27-2019
|
|
|
12
|
%
|
|
|
500,000
|
|
|
|
23,474
|
|
|
|
523,474
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,250,000
|
|
|
$
|
30,666
|
|
|
$
|
1,280,666
|
|
(1)
The $500,000 was issued in four tranches and the interest is calculated based on the dates that those tranches were issued.
7.
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. ASU 2016-02 was adopted in the period ended March 31, 2019.
The
following are the future minimum lease payments as at March 31, 2019:
|
|
Total
|
|
2019
|
|
$
|
148,500
|
|
2020
|
|
|
33,000
|
|
Total
|
|
$
|
181,500
|
|
Less interest factor
|
|
|
(5,589
|
)
|
Total to Lease Liability
|
|
$
|
175,911
|
|
8.
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 March 31, 2019.
8.
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. The agreement can be terminated
by either party, without cause, at any time upon the provision of 90 days written notice to the other party. 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 which were paid in 2017 and 2018. 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 March 31, 2019, the Company
had trade and other payables owing to this related party of $145,480 (December 31, 2018 - $20,458).
Future
minimum payments per the agreement are:
2019
|
|
$
|
735,000
|
|
Total
|
|
$
|
735,000
|
|
On
December 29, 2017, the Company signed a master service agreement with Ryde, 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 Ryde with the
services in connection with Ryde’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 Ryde 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 Ryde’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 Ryde upon the completion of its first round of pre-ICO fundraising. Also, as a condition
for entering into the loan agreement (Note 6), Ryde 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,
the Company and Ryde 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.
On
October 29, 2018, Ryde entered into amendment no. 3. Under the amendment no. 3, the Company agreed to provide to Ryde the services
from October 1, 2018 to December 31, 2019 (the “2018-19 Services”) consisting of corporate development and governance,
business development and technical services, business awareness services, financial and administrative services, and media management
services. In addition, the Company agreed to provide to Ryde the monthly services from January 1, 2020 to December 31, 2020 (the
“2020 Monthly Services”) consisting of board and corporate strategy management and board and corporate governance
management.
In
consideration for the 2018-19 Services, Ryde agreed to pay a fixed fee of $1,100,000, which is deemed earned as of October 1,
2018, under the agreement, but not for financial reporting purposes and is not due and payable until Ryde closes on the sale of
Simple Agreements for Future Tokens (“SAFTs”), equity, or token financings, joint venture financings, or any of its
affiliates, in a minimum aggregate amount of $12,000,000, including closings occurring prior to October 1, 2018. In consideration
for the 2020 Monthly Services fees, Ryde agreed to pay a monthly fee of $35,000 at the beginning of each month commencing January
1, 2020. All fees and other amounts paid to the Company with respect to the Company’s services provided prior to the amendment
no. 3 have been earned in connection with the prior services and will not be credited against any of the above fees or other amounts
due under the amendment no. 3.
8.
RELATED PARTY TRANSACTIONS (CONT’D)
In
addition, the amendment no. 3 provides for additional fees for the 2018-19 Services relating to success of Ryde’s business,
including the engagement of an investment banker and certain financing milestones and additional fees and milestone fees relating
to the achievements of certain net revenues and creation of a business relationship that increases the value of Ryde. The Company
will not provide any services related to any financings to be conducted by Ryde. The Company will also receive 20 million tokens
based upon 100 million tokens issued, which number will be increased on a pro rata basis, if at any time, Ryde issues more than
100 million tokens (the “Token Fee”). The Token Fee has been previously earned and will be issued in connection with
the first release of any tokens to any party.
However,
if the business services agreement is terminated before December 31, 2019, (a) the fee for the 2018-19 Services will be immediately
due in full (but only if the foregoing $12,000,000 financing is closed either before or after the termination date), (b) any additional
fees and milestone fees earned will be immediately paid in full (if the condition precedent/milestones are achieved), (c) the
Token Fee will be immediately transferred to the Company, and (d) any future adjustment in the number of tokens issued by Ryde,
to over 100,000,000, will result in the immediately issuance to our company of 20% of such additional tokens.
The
amendment no. 3 provides that the business services agreement will continue until December 31, 2020 unless earlier terminated
by either party, provided, however, the term of the 2020 Monthly Services will automatically renew for successive one-year periods
after December 31, 2020, which renewal term can be terminated by either party with 30 days advanced written notice. The amendment
no. 3 also provides that the Company may terminate the business services agreement upon the provision of 30 days written notice
to Ryde. Ryde may terminate the business services agreement after December 31, 2019, upon the provision of 30 days written notice
to the Company. If the Company or Ryde provides such notice, the Company or Ryde, as applicable, 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 and other fees discussed above, which are due regardless of such early termination.
The
Company has agreed that Ryde will not be responsible for any out-of-pocket expenses incurred by the Company in connection with
the 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 Ryde and its affiliates), (i) all legal costs and expenses incurred by Ryde,
the Company and any of their affiliates in connection with the Ryde Offering; (ii) all business and travel expenses incurred by
Ryde, the Company and any of their affiliates in connection the Ryde Offering; and (iii) all fees and expenses incurred by Ryde
in connection with its conversion of cryptocurrencies into US dollars in connection with the Ryde Offering, including bank, exchange
and other similar fees and expenses. Ryde will have the right to deduct any such amounts from the fees otherwise payable by it
to the Company and apply such deducted amounts to the payments to the Company.
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 Ryde and he is also a director, officer, and indirect shareholder of
Blockchain Merchant Group, Inc. which owns 2.5% of the common stock of Ryde and the Company owns 7.5% of the common stock of Ryde.
Mr. Chell is also a director, chairman, and officer of Ryde. Mr. Elliott is a former officer of Ryde. The Company’s Chief
Financial Officer, Swapan Kakumanu, is also the Chief Financial Officer of Ryde.
On
December 4, 2018, the Company appointed Swapan Kakumanu as Chief Financial Officer. Previously, on October 9, 2017, the Company
had signed an agreement with a company owned by Swapan Kakumanu to complete the accounting functions of the Company. As of March
31, 2019, the Company had trade and other payables owing to this related party of $63,000 (December 31, 2018 - $14,000).
9.
SHARE CAPITAL
The
Company’s common stock is issued at a $0.001 par value. 75,000,000 shares have been authorized. As at March 31, 2019, 22,329,474
shares were issued and outstanding (December 31, 2018 – 21,579,474).
The
increase in common stock outstanding in the current period is due to the conversion of a convertible debenture. On January 8,
2019, the $75,000 principal of Note 7 was converted into common shares at a conversion price of $0.10 per share for a share issuance
of 750,000 shares.
10.
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 the Board of Directors have the right to grant options to acquire common shares of the Company at not less than the closing
market price of the shares on the day preceding the grant 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, 2018, the maximum number of options available for grant was 3,900,000 shares. As
of March 31, 2019, there are 3,500,000 stock options issued (December 31, 2018 – 3,400,000) and 400,000 stock options unissued
(December 31, 2018 – 500,000).
On
February 13, 2018, the Company granted a total of 100,000 stock options to a 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 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.
|
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:
|
|
Three Months Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Share price
|
|
$
|
0.25
|
|
|
$
|
0.60
|
|
Exercise price
|
|
$
|
0.60
|
|
|
$
|
0.60
|
|
Time to maturity (years)
|
|
|
10
|
|
|
|
10
|
|
Risk-free interest rate
|
|
|
2.71
|
%
|
|
|
2.83%-2.87
|
%
|
Expected volatility
|
|
|
172.65
|
%
|
|
|
187.27%-187.29
|
%
|
Dividend per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Forfeiture rate
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Number
of Options
|
|
|
Weighted Average Grant-Date
Fair Value ($)
|
|
|
Weighted Average Exercise
Price ($)
|
|
|
Weighted Average Remaining
Life (Yrs)
|
|
Options outstanding, December 31, 2018
|
|
|
3,400,000
|
|
|
|
0.13
|
|
|
|
0.15
|
|
|
|
8.6
|
|
Granted
|
|
|
100,000
|
|
|
|
0.25
|
|
|
|
0.60
|
|
|
|
9.9
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options outstanding, March 31, 2019
|
|
|
3,500,000
|
|
|
|
0.17
|
|
|
|
0.19
|
|
|
|
8.6
|
|
Options exercisable, March 31, 2019
|
|
|
1,930,548
|
|
|
|
0.15
|
|
|
|
0.17
|
|
|
|
8.4
|
|
10.
STOCK-BASED COMPENSATION (CONT’D)
Cathio,
Inc. (“Cathio”), a subsidiary of the Company, has issued nonvested shares to the management team of Cathio.
On
March 5, 2019, Cathio granted a total of 16,000,000 nonvested shares to two officers of Cathio. These nonvested shares vest based
upon various milestones, have no exercise price, exercise immediately upon vesting, and do not expire except upon resignation
of the employee or by a resolution by the Board of Directors.
Nonvested
shares are valued at the date of the grant at the fair value of the common stock and are expensed over the vesting period. As
vesting conditions are not wholly dependent on the employee and there is no timeline for them, for accounting purposes, the fair
value will be calculated and the expense will be recognized upon the achievement of the milestones.
sBetOne,
Inc. (“sBetOne”), a subsidiary of the Company, has issued nonvested shares to a member of the Board of Directors of
sBetOne.
On
March 22, 2019, sBetOne granted a total of 150,000 nonvested shares to a member of the Board of Directors of sBetOne. These nonvested
shares vest 1/36 starting April 1, 2019 and at the beginning of the month for the following 35 months, have no exercise price,
exercise immediately upon vesting, and do not expire except upon resignation of the employee or by a resolution by the Board of
Directors.
Nonvested
shares are valued at the at the date of the grant at the fair value of the common stock and are expensed over the vesting period.
As at the grant date of the nonvested shares, the fair value of the common stock was based upon the issuance of the founder shares
at $0.0001 per share.
11.
SUBSEQUENT EVENTS
On May 9, 2019, sBetOne issued an additional
$250,000 Convertible Promissory Note (“Note”) related to its private placement offering (“Financing”).
The terms of the Note are as follows – 1) 15% simple interest per annum, 2) up to $1.5 million of Financing 3) Closing –
in one or more closings 4) Principle and interest payable in 18 months 5) Conversion – If sBetOne issues equity securities
in a transaction or series of transactions resulting in aggregate gross proceeds of $2,500,000 including the conversion
of the Notes and any other indebtedness (a “Qualified Financing”), then the Notes and any accrued but unpaid interest
thereon, will automatically convert into the equity securities issued in such financings, at a conversion price equal to the
lesser of (i) 70% of the lowest per share price paid by the purchasers of such equity securities in such financings for the
first $600,000 Notes issued and to 75% of the lowest per share price for Notes issued over the first $600,000 up to
$1,500,000 and (ii) the price per share equal to the quotient of $27,000,000 divided by the aggregate number of outstanding shares
of sBetOne’s common stock immediately prior to the closing of the offering that results in a Qualified Financing, but excluding
any outstanding common shares resulting from the prior conversion of any other convertible promissory notes issued prior to the
date of this Note.
On May 9, 2019, the Company transferred 2,000,000
founder shares of the common stock it holds in its subsidiary sBetOne to an arm’s length third party.