epoxy, inc. - OTC Markets

Transcription

EPOXY, INC.
FORM
10-Q
(Quarterly Report)
Filed 08/19/15 for the Period Ending 06/30/15
Address
Telephone
CIK
Symbol
SIC Code
Industry
Sector
Fiscal Year
2518 ANTHEM VILLAGE DRIVE, SUITE 100,
SUITE 100,
HENDERSON, NV 89052
702-350-2449
0001428816
EPXY
7200 - Services-Personal Services
Holding Companies
Financials
12/31
http://www.edgar-online.com
© Copyright 2017, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
000-53669
Commission File Number
EPOXY, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
N/A
(I.R.S. Employer Identification No.)
2518 Anthem Village Drive, Suite 100, Henderson NV
(Address of principal executive offices)
89052
(Zip Code)
702-350-2449
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
[ ]
Accelerated filer
[ ]
Non-accelerated filer
(Do not check if a smaller reporting company)
[ ]
Smaller reporting company
[X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
206,997,899 shares of common stock outstanding as of August 17, 2015
(Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.)
2
EPOXY, INC.
TABLE OF CONTENTS
Page
PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
4
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
5
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
8
Item 4.
Controls and Procedures
8
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
9
Item 1A.
Risk Factors
9
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
9
Item 3.
Defaults Upon Senior Securities
10
Item 4.
Mine Safety Disclosures
10
Item 5.
Other Information
10
Item 6.
Exhibits
11
SIGNATURES
12
3
EPOXY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as of June 30, 2015 and December 31,2014
Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014
Unaudited Consolidated Statement of Cash Flows for the six months ended June 30, 2015 and 2014
Notes to the Unaudited Consolidated Financial Statements
4
Page
F-1
F-2
F-3
F-4 to F-17
EPOXY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30,
2015
December 31,
2014
ASSETS
Current
Cash
Accounts receivable
Prepaid expenses
Deferred financing costs
Total Current Assets
$
Vehicle
Trademark and Patent
43,532
880
8,000
16,357
68,769
$
15,097
7,695
Total Assets
LIABILITIES
Current
Accounts payable and accrued liabilities
Loans payable
Derivative liabilities
Convertible notes, net of unamortized discounts
Total Current Liabilities
91,561
$
93,286
$
128,008
32,000
1,135,218
93,725
1,388,951
$
104,213
32,000
2,251,429
105,067
2,492,709
$
1,388,951
2,492,709
251
251
-
-
1,992
1,766
1,179,370
(168,477)
2,479,003
(2,232,963)
(1,297,390)
(2,399,423)
91,561 $
93,286
The accompanying notes are an integral part of these unaudited consolidated financial statements
F-1
20,758
7,695
$
Total Liabilities
STOCKHOLDERS’ DEFICIT
Preferred Stock, $0.00001 par value;
authorized: 35,000,000 Series A Preferred shares, 25,080,985 issued and outstanding as of June 30, 2015 and
December 31, 2014
authorized: 15,000,000 Series B Preferred shares, no shares issued and outstanding as of June 30, 2015 and
December 31, 2014
Common Stock, $0.00001 par value;
authorized: 480,000,000 shares, 199,136,035 and 176,594,122 shares issued and outstanding as of June 30,
2015 and December 31, 2014, respectively
Additional paid-in capital
Accumulated deficit
Total Stockholders’ Deficit
Total Liabilities and Stockholders’ Deficit
63,953
880
64,833
EPOXY , INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three month ended
June 30,
2015
2014
Revenue
$
Operating Expenses
Depreciation
General and administrative expenses
Total operating expenses
7,330
$
3,349
Six months ended
June 30,
2015
2014
$
15,645
$
7,734
2,830
165,670
168,500
51,693
51,693
5,661
257,806
263,467
83,687
83,687
Loss from operations
(161,170)
(48,344)
(247,822)
(75,953)
Other Income (Expenses):
Gain (loss) on change in fair value of derivative liabilities
Interest expenses
Total other income (expenses)
887,305
(166,079)
721,226
(19,701)
(12,675)
(32,376)
320,971
(319,189)
1,782
(16,727)
(24,107)
(40,834)
Net income (loss)
$
560,056
$
(80,720) $
Net income (loss) per share – basic
Net income (loss) per share – diluted
$
0.00
0.00
$
(0.00) $
(0.00)
Weighted average shares outstanding – basic
Weighted average shares outstanding – diluted
190,657,897
284,567,214
169,450,348
169,450,348
(246,040)
$
(116,787)
(0.00) $
(0.00)
(0.00)
(0.00)
183,892,494
183,892,494
F-2
169,139,256
169,139,256
EPOXY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
2015
2014
Cash flows from Operating Activities
Net loss
Adjustments to reconcile net loss to net cash used in operations:
Depreciation
Share issuance for services
(Gain) loss on change in fair value of derivative liabilities
Amortization of discounts on convertible notes
Amortization of deferred financing costs
Imputed interest
Foreign exchange in loan payable
Changes in operating assets and liabilities:
Accounts receivables
Prepaid expenses
Accrued expenses
Accounts payable
Net cash used in operating activities
$
(246,040)
$
(116,787)
5,661
40,917
(320,971)
286,658
13,643
350
-
16,727
14,672
2,986
(488)
(8,000)
18,538
18,823
(190,421)
1,250
16,583
7,134
(57,923)
Cash flows from Financing Activities
Proceeds from sale of common stock
Proceeds from convertible notes
Deferred financing costs
Net cash provided by financing activities
200,000
(30,000)
170,000
28,000
28,000
Net decrease in cash during the period
Cash, beginning of period
Cash, end of period
$
(20,421)
63,953
43,532 $
Supplemental disclosure of cash flow information:
Cash paid for:
Interest
Income taxes
$
$
-
$
$
2,986
-
$
298,000
13,565
995,240
200,000
$
11,191
-
Supplemental non-cash investing activities:
Shares and warrants reclassified as derivative liability
Debt principal converted to shares
Accrued interest converted to shares
Derivative liability reclassified as additional paid-in capital
Derivative liability – debt discount
F-3
(29,923)
30,467
544
EPOXY, INC.
(Unaudited)
Note 1 – Description of business and basis of presentation
Organization and nature of business
Epoxy, Inc. (the “Company”) was incorporated in the State of Nevada on November 13, 2007 as Rioridge Resources Corp. On July 22, 2008, the
Company changed its name to Neohydro Technologies Corp.
On August 1, 2014, the Company’s name changed from NeoHydro Technologies Corp. to Epoxy, Inc. in furtherance of actions taken on May
23, 2014, when the Board of Directors of the Company (the “ Board ”) approved, and recommended to the Majority Stockholders that they
approve the Name Change. On May 27, 2014, the Majority Stockholders approved the Name Change by written consent in lieu of a meeting, in
accordance with Nevada law. On August 4, 2014, the Company submitted the Name Change to FINRA for their review and approval, as well as
the approval of a symbol change from NHYT to EPXY. The Company filed an amendment to our Articles of Incorporation with the Secretary
of State of Nevada changing our name to Epoxy, Inc. effective on August 1, 2014.
The Company, through its wholly owned subsidiary, Couponz, Inc., is the developer of Epoxy app, an application or "app" for iPhone iOS and
Android operating systems. Epoxy is an innovative smart phone application designed and created to conveniently connect business owners and
consumers in order to ease marketing frustrations. The mobile app gives loyal customers the ease of keeping track of rewards and punch cards all
in one place while also giving opportunities to review and share businesses with friends. In turn, Epoxy provides businesses the ability to reward
customers, share offers, and deliver information about special events with their customers.
Financial Statements Presented
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring
nature. Operating results for the six month period ended June 30, 2015, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2015. For further information refer to the financial statements and footnotes thereto included in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2014 as filed with the Securities and Exchange Commission on April 15,
2015.
Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.
Note 2 – Going Concern
For the six months ended June 30, 2015, the Company reported net losses of $246,040. In addition, the Company had a working capital deficit as
of June 30, 2015. The Company believes that its existing capital resources may not be adequate to enable it to execute its business plan. These
conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company estimates that it will require
additional cash resources during 2015 based on its current operating plan and condition. The Company expects cash flows from operating
activities to improve, primarily as a result of an increase in revenue and a decrease in certain operating expenses, although there can be no
assurance thereof. The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be
unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to
modify, delay, or abandon some or all of our business and expansion plans.
F-4
EPOXY, INC.
(Unaudited)
Note 3- Fair Value Measurements
FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of
inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or
can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined
using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair
value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the
lowest level of input that is significant to the fair value measurement of the instrument.
The following table provides a summary of the fair value of our derivative liabilities as of June 30, 2015 and December 31, 2014:
Fair value measurements on a recurring basis
Level 1
Level 2
Level 3
As of June 30, 2015:
Liabilities
$
-
$
-
$
1,135,218
As of December 31, 2014:
Liabilities
$
-
$
-
$
2,251,429
Note 4- Loans Payable
During the month of July 2014, the Company entered into two 5% one-year promissory notes for a total of $20,000. At June 30, 2015, the
Company is indebted to these unrelated third parties in the amount of $20,000 (December 31, 2014 - $20,000).
At June 30, 2015, the Company is indebted to two unrelated third parties for a total of $12,000 (December 31, 2014 - $12,000). The loans are
non-interest bearing and due on demand after maturity. During the six months ended June 30, 2015, the Company recorded imputed interest of
$350 in respect of these loans.
F-5
EPOXY, INC.
(Unaudited)
Note 5- Convertible Notes
(1) Convertible notes due on November 27, 2015:
On November 27, 2012, the Company entered into certain convertible loan agreements with four (4) investors. The Company received a total of
$125,000 which bears interest at 10% per annum and is due on November 27, 2015. Interest shall accrue from the advancement date and shall be
payable quarterly. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock
of the Company at a conversion price of $0.0005 per share. The Company recognized the intrinsic value of the embedded beneficial conversion
feature of $125,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be
accreted over the term of the convertible debentures up to its face value of total of $125,000.
On August 1, 2014 the Company successfully amended the terms of certain convertible loan agreements with four (4) investors for a total of
$125,000 due and payable on November 27, 2015. Under the amended terms, a total of $125,000 originally available for conversion into a total
of 250,000,000 shares of common stock at $0.0005 per share has been amended to reflect a price of $0.005 per share for a total of 25,000,000
shares of common stock, if converted. The Company determined that the amended qualified as a substantial modification under ASC 470-60.
The Company analyzed the conversion feature of above Convertible Notes for derivative accounting consideration under FASB ASC 470 and
determined that the conversion feature did not create embedded derivatives.
The Company analyzed the above amendment under ASC 470-60 and concluded that the amendment to the conversion terms qualified as a
substantial modification and as such the unamortized discount of $88,184 was recorded as loss on extinguishment of debt. The Company
recalculated the intrinsic value of the embedded beneficial conversion feature of $125,000 this has been recorded at the discount on the
convertible note. The carrying value will be accreted over the term of the convertible debentures up to its face value of total of $125,000.
The carrying value of certain convertible notes is as follows:
August 1,
December 31,
June 30,
2014
Recalculation
2014
2015
$
125,000 $
125,000 $
125,000
(125,000)
(116,702)
(84,322)
$
8,298 $
40,678
Face value of certain convertible notes
Less: unamortized discount
Carrying value
As at June 30, 2015, the carrying values of the convertible debenture and accrued convertible interest thereon were $40,678 and $6,198,
respectively. Amortization of the discounts associated with these notes was $32,380 during the six months ended June 30, 2015.
(2) Convertible note due on August 22, 2015 (CN#1)
On August 22, 2014, the Company entered into a convertible loan agreements with an investor (the “CN#1”), where under the Company has
issued two 8% convertible redeemable notes in the aggregate principal amount of $250,000 with the first note being $125,000 and the second
note being $125,000, convertible into shares of the Company’s common stock upon the terms. Any portion of the loan and unpaid interest are
convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price equal to 52% of the lowest
trading price of the Common Stock as reported on the OTCQB exchange for the twelve (12) prior trading days including the day upon which a
Notice of Conversion is received by the Company.
F-6
EPOXY, INC.
(Unaudited)
(2) Convertible note due on August 22, 2015 (CN#1) (cont’d)
On August 22, 2014, the Company received net proceeds totaling $106,250 in respect to the first of the two notes in the totaling gross amount of
$125,000. Financing fees of $12,500 and legal fees of $6,250 were paid in respect of the back end note which is due and payable on August 22,
2015.
On January 15, 2015 and February 26, 2015 respectively the Company received net proceeds from an investor totaling $63,750 and $42,500 in
respect to the second of the two notes in the total gross amount of $125,000. Financing fees of $12,500 and legal fees of $6,250 were paid in
respect of the back end note which is due and payable on August 22, 2015.
The following table reflects the issuance of 12,121,820 shares in respect of Conversion Notices received for a total of $198,000 in principal and
$7,983 in accrued interest from CN#1 during the six month period ended June 30, 2015:
Conversion Date
February 27, 2015
April 17, 2015
April 29, 2015
May 7, 2015
May 21, 2015
June 2, 2015
June 8, 2015
June 29, 2015
Total
Original
Principal
Amount
($)
40,000
15,000
20,000
25,000
25,000
25,983
29,017
18,000
198,000
Accrued
interest
payable
($)
1,613
766
1,074
1,386
1,463
547
649
485
7,983
Conversion
Price
($)
0.0364520
0.0239200
0.0208000
0.0130000
0.0130000
0.0141445
0.0141440
0.0145600
Number of
shares issued
1,141,587
659,114
1,013,171
2,029,715
2,035,616
1,875,620
2,097,405
1,269,592
12 ,121,820
As of June 30, 2015, the balance payable on CN #1 includes $52,000 in principal from convertible notes and $2,132 in accrued interest payable.
(3) Convertible note due on April 16, 2015 (CN#2)
On September 17, 2014, the Company entered into a convertible loan agreements with an investor (the “CN#2). The Company received net
proceeds totaling $88,000 from a note in the gross amount of $100,000 which bears interest at 10% per annum and is due on April 16, 2015.
Financing fees of $10,500 and legal fees of $2,000 were paid in respect of the note which is due and payable on April 16, 2015. Interest shall
accrue from the advancement date and shall be payable on maturity. Any portion of the loan and unpaid interest are convertible at any time at the
option of the lender into shares of common stock of the Company at a conversion price of the lower of (1) a 50% discount to the average of the
three lowest daily trading prices for the previous twenty (20) trading days to the date of conversion; or (2) a 50% discount to the average of the
three lowest daily trading prices for the previous twenty (20) trading days before the date that this note was executed.
The following table reflects the details of the issuance of 9,180,180 shares in respect of Conversion Notices received for a total of $100,000 in
principal and $5,582 in accrued interest from CN#2 during the six month period ended June 30, 2015:
F-7
EPOXY, INC.
(Unaudited)
(3) Convertible note due on April 16, 2015 (CN#2)
Conversion Date
March 26, 2015
April 1, 2015
April 22, 2015
Total
Original
Principal
Amount
($)
6,775
50,000
43,225
100,000
Accrued
interest
payable
($)
5,582
5,582
Conversion
Price
($)
0.0115167
0.0115000
0.0115000
Number of
shares issued
588,235
4,347,826
4,244,119
9,180,180
As of June 30, 2015, theprincipal amount and all accrued interest payable with respect to CN#2 was paid in full with issuance of common stock.
(4) Convertible note due on January 13, 2016 (CN#3)
On January 13, 2015 the Company entered into a Securities Purchase Agreement (“SPA”) with Adar Bays, LLC (“Adar”) a Florida Limited
Liability company where under the Company has issued two 8% convertible redeemable notes in the aggregate principal amount of $150,000
with the first note being $75,000 and the second note being $75,000, convertible into shares of the Company’s common stock with a maturity
date one year after issuance or January 13, 2016. The first of the two notes (the “First Note”) shall be paid for by Adar upon execution of the
SPA, and the second note (the “Second Note”) shall initially be paid for by the issuance of an offsetting $75,000 secured note issued to the
Company by Adar (“Buyer Note”), provided that prior to conversion of the Second Note, Adar must have paid off the Buyer Note in cash. Under
the terms of the First Note, at any time after 180 days, the holder may elect to convert all or part of the face value of the note into shares of the
Company’s common stock without restrictive legend at a price (“Conversion Price”) for each share of Common Stock equal to 52% of the
lowest trading price of the Company’s common stock for the twelve prior trading days including the day upon which a Notice of Conversion is
received by the Company. If the shares are not delivered in 3 business days, to the holder, the Notice of Conversion may be rescinded. Under
the terms of the Second Note, the holder is entitles at its option, after the expiration of the requisite Rule 144 holding period and after full cash
payment for the promissory note issued by the holder to the Company simultaneously with the issuance by the Company of this note (the
“Holder Issued Note”) to convert all or part of the Note then outstanding into shares of the Company’s common stock equal to 52% of the lowest
trading price of the Company’s common stock for the twelve prior trading days including the day upon which a Notice of Conversion is received
by the Company. If the shares are not delivered in 3 business days, to the holder, the Notice of Conversion may be rescinded. With respect to
the First and Second Notes, in the event that the Company experiences a DTC “Chill” on its shares the conversion price shall be decreased to
42% instead of 52% while the “Chill” is in effect, and in no event shall the holder be allowed to effect a conversion, if such conversion, along
with other shares of the Company common stock beneficially owned by the holder and its affiliates would exceed 9.9% of the outstanding shares
of the common stock of the Company. Further, with respect to the Second note, in the event the Company is not “Current” in its SEC filings at
the time the note is cash funded, the discount shall be decreased to 40% instead of 52%. In respect of the First and Second notes interest on any
unpaid principal balance of the Notes shall be paid by the Company in common stock (the “Interest Shares”). The Holder may at any time send
a Notice of Conversion for Interest Shares based on the aforementioned formula for all or part of interest payable.
F-8
EPOXY, INC.
(Unaudited)
(4) Convertible note due on January 13, 2016 (CN#3) (cont’d)
During the first 180 days the Company may redeem the First Note by paying to the holder an amount as follows: (i) if the redemption is in the
first 90 days the note is in effect an amount equal to 125% of the unpaid principal amount of the note along with accrued interest; (ii) if the
redemption is after the 91st day the note is in effect then the
Company may redeem the note in an amount equal to 135% of unpaid principal and interest. The note is not redeemable after 180 days.
The Second Note may not be prepaid, except that if the First Note is redeemed by the Company within 6 months of the issuance date of such
note, the obligations of the Company under the Second Note will be automatically deemed satisfied and the Second Note and the Holder Note
will be deemed canceled and of no further force or effect.
Upon funding of each Note the Company shall pay $3,750 in legal fees and fees to Carter, Terry & Company of $7,500.
On January 15, 2015 the Company received net proceeds from Adar totaling $63,750 with respect to the First Note in the total gross amount of
$75,000. Financing fees of $7,500 and legal fees of $3,750 were paid.
In our evaluation of the financing arrangement, we concluded that the conversion features were not afforded the exemption as a conventional
convertible instrument and it did not otherwise meet the conditions set forth in current accounting standards for equity classification.
Accordingly, they do not meet the conditions necessary to obtain equity classification and are required to be carried as derivative liabilities. (See
footnote 11 for derivative disclosure)
Additionally, the Company evaluated the convertible notes in note 6 (1) above and concluded that these are tainted due to the variable
conversion rate of the above the convertible notes and as such they do not meet the conditions necessary to obtain equity classification and are
required to be carried as derivative liabilities. (See footnote 9 for derivative disclosure)
The carrying value of certain convertible notes (CN#1, CN#2 and CN#3) are as follows
CN#1
Carrying value, December 31, 2013
Add: Face value of certain convertible notes
Carrying value, December 31, 2014
$
- $
125,000
(79,860)
45,140
Add: Face value of certain convertible notes
125,000
Total Face value of certain convertible notes
Less: converted face value to shares
Carrying value, June 30, 2015
250,000
(198,000)
(33,744)
18,256
$
CN#2
CN#3
- $
100,000
(48,371)
51,629
100,000
(100,000)
- $
Total
-
$
225,000
(128,231)
96,769
75,000
200,000
75,000
(40,209)
34,791
425,000
(298,000)
(73,953)
53,047
Amortization of the discount over the six months ended June 30, 2015 totaled $254,278, which amount has been recorded as amortization of
discounts on convertible notes and is reflected on the Company’s balance sheet as Convertible Note Liabilities, Net. The unamortized discount
of $73,953 associated with CN#1, CN#2 and CN#3 will be expensed in future periods.
F-9
EPOXY, INC.
(Unaudited)
Note 6 – Common Stock and Stock-Based Compensation
Common stock
Shares issued in current period ended June 30, 2015:
Issuances Date
February 27, 2015
March 26, 2015
April 1, 2015
April 17, 2015
April 22, 2015
April 29, 2015
May 7, 2015
May 21, 2015
June 2, 2015
June 8, 2015
June 18, 2015
June 29, 2015
Conversion
Price/FMV
($)
0.0364520
0.0115167
0.0115000
0.0239200
0.0115000
0.0208000
0.0130000
0.0130000
0.0141445
0.0141440
0.0330000
0.0145600
Conversion of debt
Conversion of debt
Conversion of debt
Conversion of debt
Conversion of debt
Conversion of debt
Conversion of debt
Conversion of debt
Conversion of debt
Conversion of debt
Services rendered
Conversion of debt
Total
Number of
shares
issued
1,141,587
588,235
4,347,826
659,114
4,244,119
1,013,171
2,029,715
2,035,616
1,875,620
2,097,405
1,239,913
1,269,592
22,541,913
Amount
($)
41,613
6,775
50,000
15,766
48,807
21,074
26,386
26,463
26,530
29,666
40,917
18,485
352,482
Shares issued in the fiscal year ended December 31, 2014
On April 30, 2014, the Company received the final $28,000 installment in respect of a funding agreement entered into on June 17, 2013 (ref:
Note 10) for a total of $100,000. The Company accepted a subscription for 933,333 shares of common stock at $0.03 per share for cash
proceeds of $28,000 and the Company also agreed to issue a 2-year warrant entitling the holder to acquire an additional 93,333 and shares of
common stock at an exercise price of $0.30 per share.
On August 8, 2014 the Company agreed to issue 500,000 fully paid for and earned restricted shares of the Company’s common stock under an
agent agreement with Carter, Terry & Company (“C&T”). The Company recorded $15,000 as financing costs, which was the fair market value
of the shares on the agreement date.
On August 22, 2014, the Company settled certain unrelated third party debt in the amount of $50,572 by way of the issuance of 2,528,600 shares
of the Company’s common stock at $0.02 per share with a fair value of $83,192.The Company recognized loss on the debt settlement in the
amount of $32,620.
During the period ended September 30, 2014 the Company agreed to issue a total of 307,482 restricted shares of the Company’s common stock
under an agent agreement with C&T, which equal to the 4% of $225,000 capital raised divided by the closing price of the stock on the date of
close.
On October 17, 2014, the Company issued 3,500,000 shares of the Company’s common stock at $0.0213 per share with a fair value of $74,550
as stock awards to officers and directors of the Company.
As of June 30, 2015 and December 31, 2014, there were a total of 199,136,035 and 176,594,122 shares issued and outstanding, respectively.
F-10
EPOXY, INC.
(Unaudited)
Note 6 – Common Stock and Stock-Based Compensation (continued)
Stock award and stock option
On October 17, 2014 the Company’s Board of Directors approved a 2014 Stock Option and Award Plan. Under the Stock Option and Award
Plan, the Company awarded Mr. Woywod, director of the Company, 500,000 common shares and Mr. Harney, director of the Company,
3,000,000 common shares, all of which were fully vested on the date of issue. The Company also granted Mr. Woywod 500,000 incentive stock
options at an exercise price of $0.03 per share for a term of 2 years form the date of grant, which options also vested immediately.
Stock Award
As a result of the stock awards granted, the Company recorded stock based compensation expenses totaling $74,550 as consulting fees during
the year ended December 31, 2014.
Stock Option
The following tables summarize the information concerning stock options outstanding as of June 30, 2015 and December 31, 2014:
June 30, 2015
Weighted
Average
Exercise
Price
$
Shares
500,000
0.03
500,000
0.03
Outstanding at beginning of the year
Granted
Exercised
Expired or cancelled
Outstanding at the period
Exercise Price
$
0.03
Weighted Average
Remaining Contractual Life
1.30
Number Outstanding
500,000
December 31, 2014
Weighted
Average
Exercise
Price
$
Shares
500,000
0.03
500,000
0.03
Number Subject to Exercise
500,000
The Company recognized stock-based compensation of $9,832 as consulting fees during the year ended December 31, 2014 in respect of the
aforementioned stock option.
F-11
EPOXY, INC.
(Unaudited)
Note 6 – Common Stock and Stock-Based Compensation (continued)
Stock award and stock option (cont’d)
Valuation Assumptions
The following table presents the range of the weighted average fair value of options granted and the related assumptions used in the BlackScholes model for stock option grants made during the year ended December 31, 2014:
Options
Granted
October 17,
2014
Fair value of options granted
$
0.021
Assumptions used:
Expected life (years) (a)
2
Risk free interest rate (b)
0.39%
Volatility (c)
261%
Dividend yield (d)
0.00%
a) Expected life : The expected term of options granted is determined using the “shortcut” method allowed by SAB No.107. Under this
approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.
b) Risk-free interest rate : The rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the
expected life of the options.
c) Volatility: The expected volatility of the Company’s common stock is calculated by using the historical daily volatility of the
Company’s stock price calculated over a period of time representative of the expected life of the options.
d) Dividend yield : The dividend yield rate is not considered in the model, as the Company has not established a dividend policy for the
stock.
Share Purchase Warrants
During the year ended December 31, 2014 the Company issued a 2-year warrant entitling the holders to acquire an additional 93,333 shares of
common stock at an exercise price of $0.30 per share.
As June 30, 2015 and December 31, 2014, the following share purchase warrants were outstanding:
Warrants
856,667
93,333
950,000
950,000
950,000
Outstanding - December 31, 2013
Granted
Forfeited/Canceled
Exercised
Outstanding – December 31, 2014
Outstanding – June 30, 2015
Exercisable – June 30, 2015 and December 31, 2014
Weighted
Average
Exercise Price
0.12
0.30
0.14
0.14
0.14
The intrinsic value of these warrants was $5,667 and 19,833 at June 30, 2015 and December 31, 2014. There was no change in the outstanding
warrants during the six months ended June 30, 2015.
F-12
EPOXY, INC.
(Unaudited)
Note 7 - Derivative Liabilities
(1) Derivative liabilities from convertible notes
On August 22, 2014, the Company entered into a convertible loan agreement with an investor (the “CN#1”) see below which the Company
concluded that these are tainted due to the variable conversion rate of the below convertible notes and as such they do not meet the conditions
necessary to obtain equity classification and are required to be carried as derivative liabilities.
On August 22, 2014, the Company entered into a convertible loan agreements with an investor (the “CN#1”). The Company received a total of
$125,000 which bears interest at 8% per annum and is due on August 22, 2015. During the period ended June 30, 2015 the Company further
received a total of $125,000 in respect to the backend note from CN#1. Interest shall accrue from the advancement date and shall be payable on
August 22, 2015. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock
of the Company at a conversion price equal to 52% of the lowest trading price of the Common Stock as reported on the OTCQB exchange for
the twelve (12) prior trading days including the day upon which a Notice of Conversion is received by the Company.
On September 17, 2014, the Company entered into a convertible loan agreements with an investor (the “CN#2). The Company received a total of
$100,000 which bears interest at 10% per annum and is due on April 16, 2015. Interest shall accrue from the advancement date and shall be
payable on April 16, 2015. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of
common stock of the Company at a conversion price of the lower of (1) a 50% discount to the average of the three lowest daily trading prices for
the previous twenty (20) trading days to the date of conversion; or (2) a 50% discount to the average of the three lowest daily trading prices for
the previous twenty (20) trading days before the date that this note was executed.
On January 13, 2015, the Company entered into a convertible loan agreements with an investor (the “CN#3”). The Company received a total of
$75,000 which bears interest at 8% per annum and is due on January 13, 2016. Interest shall accrue from the advancement date and shall be
payable on August 22, 2015. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of
common stock of the Company at a conversion price equal to 52% of the lowest trading price of the Common Stock as reported on the OTCQB
exchange for the twelve (12) prior trading days including the day upon which a Notice of Conversion is received by the Company.
Since equity classification is not available for the conversion feature, we were required to bifurcate the embedded conversion feature and carry it
as a derivative liability, at fair value. Derivative financial instruments are carried initially and subsequently at their fair values.
We estimated the fair value of the derivative on the inception dates, and subsequently, using the Black-Scholes Merton valuation technique,
adjusted for the effect of dilution, because that technique embodies all of the assumptions (including, volatility, expected terms, and risk free
rates) that are necessary to fair value complex derivate instruments.
(2) Derivative liabilities from share purchase warrants
On August 22, 2014, the Company entered into a convertible loan agreement with an investor (the “CN#1”) see above (2) which the Company
concluded that these are tainted due to the variable conversion rate of the share purchase warrants (ref Note 10) and as such they do not meet the
conditions necessary to obtain equity classification and are required to be carried as derivative liabilities.
F-13
EPOXY, INC.
(Unaudited)
Note 7 - Derivative Liabilities (continued)
As a result of the application of ASC No. 815 in period ended June 30, 2015 the fair value of the conversion feature is summarized as follows:
Balance at December 31, 2013
Derivative addition associated with convertible notes
Recognition of derivative associated with tainted instruments
December 31, 2014 loss on change in fair value
Balance at December 31, 2014
Derivative addition associated with convertible notes
Derivative liability reclassified as additional paid in capital associated with conversion of shares
Loss on change in fair value during the period
$
23,790
225,000
669,741
1,332,898
2,251,429
200,000
(995,240)
(320,971)
Balance at June 30, 2015
$
1,135,218
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management
assumptions as of June 30, 2015 and commitment date:
Expected dividends
Expected volatility
Expect term
Risk free interest rate
Commitment
December 31,
Date
2014
0
0
196.14 ~
219.26%
192.59%
0.29~0.64
0.59 ~ 1 years
years
0.10~0.19 %
0.12%
June 30,
2015
0
219.13%
0.55~0.66
0.11%
Note 8 - Commitments
(1) Agency Agreement with Cater, Terry & Company
On August 8, 2014 the Company entered into an Agency Agreement (the “Agreement”) with Carter, Terry & Company (“C&T”) where under
C&T will act as the Company’s exclusive Financial Advisor, Investment Bank and Placement Agent, on a "best efforts" basis for an initial
period of 30 days, and then reverting to a non-exclusive financial advisor for the next twelve consecutive (12) months. Under the terms of the
Agreement, C&T will receive 500,000, fully paid for and earned restricted shares of the Company’s common stock. In addition, in respect of any
introductions those results in financing for the Company C&T shall receive fees as follows:
a. 10% of the amount for any equity or hybrid equity capital raised up to $2,000,000
b. 8% of the amount for any equity or hybrid equity capital raised up to $5,000,000
c. 6% of the amount for any equity or hybrid equity capital raised over $5,000,000
And;
an amount of restricted shares equal to 4% of capital raised divided by the closing price of the stock on the date of close.
F-14
EPOXY, INC.
(Unaudited)
Note 8 – Commitments (continued)
(1) Agency Agreement with Cater, Terry & Company (cont’d)
On August 8, 2014, the Company issued 500,000 shares of the Company’s common stock in consideration of $15,000 as financing costs
pursuant the Agreement.
On August 22, 2014 and September 17, 2014 the Company raised $125,000 and $100,000, respectively, under two convertible notes (CN#1 and
CN#2) and paid to C&T cash consideration of $22,500 as financing costs and issued 307,482 shares of the Company’s common stock in
consideration of $9,000 as financing costs.
During the six month ended June 30, 2015 the Company raised $125,000 and $75,000, respectively, under two convertible notes (CN#1 and
CN#3) and paid to C&T cash consideration of $26,250 as deferred financing costs.
(2) Independent Contractor Agreement with Sherf Corporation
On January 15, 2015, the Company entered into an Independent Contractor Agreement (the “Agreement”) with Scherf Corporation (“Scherf”) of
Las Vegas, Nevada for the provision of public relations services to the Company for an initial term of one year, expiring on December 31, 2015,
with an option to renew for successive one (1) year terms upon mutual agreement of both parties.
Under the terms of the Agreement Scherf will provide communications with shareholders, drafting and placing press announcements and articles
pertaining to the Company’s business and introduction to venture capital firms, hedge funds and other potential investors. In consideration for
services provided, exclusive of venture capital introduction) Scherf shall receive compensation equal to 0.5% of the increase in the market cap of
the Company from one fiscal quarter to the next. The compensation shall be paid in the form of common shares of the Company determined by
the average closing price of the Company’s common stock over the last ten trading days of the fiscal quarter to be compensated for. Such
compensation shall be paid within fifteen (15) days of the close of each fiscal quarter. Further the Company shall compensate Scherf for all
venture capital introduction ate a rate of 3% of any and all funds received as investments by any venture capital, hedge fund or other investor
introduced by Scherf. The compensation shall be paid in the form of common shares of the Company determined by the average closing price of
the Company’s common stock over the last ten trading days of the fiscal quarter to be compensated for. Such compensation shall be paid within
fifteen (15) days of the close of each fiscal quarter.
Further by resolution of the Board it was determined that Scherf shall receive additional compensation in the form of 1,000,000 restricted shares
of the Company’s common stock as consideration for the translation of the Company’s website, and mobile application into German. On June
18, 2015, 1,039,913 restricted shares were issued in respect of the translation services provided and the quarterly compensation for the period
ended March 31, 2015 as required under the terms of the agreement. During the period ended June 30, 2015 the contract with Scherf was
terminated by mutual agreement of the parties thereto.
(3) Service Agreement with Wheat Creative LLC
On February 1, 2015 the Company entered into a Services Agreement (the “Agreement”) with Wheat Creative LLC (the “Consultant”), a
Nevada Limited Liability Company. Under the terms of the Agreement, the Consultant shall be engaged to redesign the Company’s mobile app
for both iOS and Android. As consideration for services rendered, the Consultant shall receive a total of 200,000 shares of the Company’s
restricted common shares, deliverable upon completion and delivery of the redesign of the Company’s mobile app for both iOS and Android. On
June 18, 2015, 200,000 shares were issued upon completion of services rendered as compensation.
F-15
EPOXY, INC.
(Unaudited)
Note 8 – Commitments (continued)
(4) Office Lease
On March 16, 2015 the Company entered into a six month lease commencing April 1, 2015 with certain other third parties in respect of a shared
office and residential premises located in San Diego, California. The Company’s obligation under the terms of the lease is a total of $875 per
month plus utilities. The Company paid a security deposit of $875 and the first month’s rent totaling $1,750 upon signing of the contract.
Note 9 – Related Party Transactions
On August 28, 2014, the Company entered into an employment agreement with David Gasparine, president of the Company, for management
services. The employment agreement became effective as of September 1, 2014. Under the employment agreement, the base salary is of $36,000
per annum, paid monthly. The amount of base salary shall be determined by the Board of Directors and may be increased, but not decreased,
from time to time by the Board of Directors of the Company. In addition to the base salary, Mr. Gasparine shall be eligible for periodic bonuses
in amounts to be determined by the Board of Directors. In January 2015 the board agreed to increase Mr. Gasparine’s salary to $57,600 per year.
During the six month period ended June 30, 2015, the Company paid $28,800 to Mr. Gasparine (June 30, 2014 - $45,378).
Note 10 – Subsequent events
On July 7, 2015 and July 20, 2015 respectively the Company received conversion notices from an investor requesting the conversion of a total of
$52,000 in principal and $1,587 in accrued interest by way of issuance of a total of 5,725,112 shares of common stock.
On July 14, 2015, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds totaling
$90,000 from total loan proceeds of $102,000, which bears interest at 8% per annum and is due on January 6, 2016. Financing fees of $10,000
and legal fees of $2,000 were paid in respect of the note. Interest shall accrue from the advancement date and shall be payable on maturity. Any
portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a
conversion price of 45% of the lowest trading prices for the previous twenty (20) trading days to the date of conversion.
On July 20, 2015 and July 23, 2015 respectively the Company received conversion notices from an investor requesting the conversion of a total
of $20,000 in principal by way of issuance of a total of 2,136,752 shares of common stock.
On July 29, 2015 the Company entered into a convertible loan agreement with an investor. The Company received new proceeds totaling
$75,000 from total loan proceeds of $84,000 which bears interest at 8% per annum and is due on July 29, 2016. An original issue discount of
$6,000 and legal fees of $3,000 were paid in respect of the note. Interest shall accrue from the advancement date and shall be payable on
maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the
Company at 58% multiplied by the lowest intra-day trade price in the twenty (20) Trading Days immediately preceding the applicable
Conversion, provided that if at any time the lowest intra-day trade price in the twenty (20) Trading Days immediately preceding any date of
measurement is below $0.01, then in such event the then-current Conversion Factor shall be reduced by 5% for all future Conversions.
F-16
EPOXY, INC.
(Unaudited)
Note 10 – Subsequent events (cont’d)
On August 3, 2015, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds totaling
$50,000 from total loan proceeds of $56,000, which bears interest at 8% per annum and is due on August 3, 2016. Financing fees of $3,500 and
legal fees of $2,500 were paid in respect of the note. Interest shall accrue from the advancement date and shall be payable on maturity. Any
On August 10, 2015, the Board of Directors approved that Class B Preferred stock shall be designated as 15,000,000 shares with par value of
$0.00001 with voting rights of 1,000 to 1 compared to common, but no conversion rights.
F-17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
This current report contains forward-looking statements relating to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes",
"estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are
only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results,
levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by
these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were
made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future.
Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forwardlooking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated
events.
In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to
the common shares of our capital stock.
The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements
for the fiscal year ended December 31, 2014, as filed with the Securities and Exchange Commission on April 15, 2015, along with the
accompanying notes. As used in this quarterly report, the terms "we", "us", "our", and the "Company" means Epoxy, Inc. (formerly Neohydro
Technologies Corp.) and its wholly owned subsidiary Couponz, Inc.
Current Business
On July 19, 2013, the Company entered into an agreement to purchase Couponz, Inc. (“Couponz”), a company incorporated in the State of
Nevada. Under the agreement, the Company had the right to acquire 100% of the ownership of Couponz, Inc. in exchange for the issuance
of 24,514,319 shares of preferred stock of the Company and $100,000. The agreement provided for the preferred shares issued to be designated
as 1 share of preferred to carry 15 shares of common voting rights and to be convertible into common shares on the basis of 2.5 shares of
common for each 1 share of preferred. Mr. David Gasparine, the sole director of Epoxy Inc. (formerly NeoHydro Technologies Corp.), is also
the controlling shareholder of Couponz, Inc., and, as such, the transaction is considered to be non-arm’s length. Mr. Gasparine became the
controlling shareholder of the Company concurrent with the completion of the transaction.
On November 1, 2013, the Company completed the aforementioned transaction and Couponz, Inc. became a wholly owned subsidiary of the
Company.
Couponz Inc. is the developer of Epoxy app, an application or "app" for iPhone iOS and Android operating systems. Epoxy is an innovative
smart phone application designed and created to conveniently connect business owners and consumers in order to ease marketing frustrations.
The mobile app gives loyal customers the ease of keeping track of rewards and punch cards all in one place while also giving opportunities to
review and share businesses with friends. In turn, Epoxy provides businesses the ability to reward customers, share offers, and deliver
information about special events with their customers. Epoxy designers are dedicated to providing a superior and easy-to-use product for
business owners to reward loyal customers.
Our goal is to provide a simple and easy to use platform for consumers to find business information, including but not limited to product and
service descriptions, promotions, loyalty programs, and customer reviews, as well as to provide business owners a simple and easy to use
platform to promote their businesses to mobile app users. Through the use of research and development we will be able to continue evolving our
platform and features provided for our users.
Epoxy, Couponz’s mobile app, is a “two-part” system that has a server that both a website and a mobile application access. The mobile app
allows users to find local businesses that have an Epoxy membership. An app user can navigate to an individual business several ways. App
users can find a specific business by searching for the specific name of the business, the category of the business or by the App users location
and listed results on a Map View. App users can then filter the results of the businesses in the Map View by category. Once a business is chosen
the app user is presented with a Business Landing Page or “BLP”. The BLP displays information about that specific business that the business
owner has input including operating hours, locations, menus, phone numbers as well as marketing such as digital loyalty cards and coupons.
Within the BLP app users can also create reviews or “Sticky Notes” about that individual business and review other Sticky Notes that have been
previously created. When an app user opens a loyalty card or offer the app has a built in scanner that allows the staff to “punch” or “redeem”
either offer. A loyalty card is scanned multiple times and once completely filled is valid for a specified offer from the business owner. The app
user can collect or “save” filled loyalty cards to redeem at a later time. A coupon is a one-time use offer that once redeemed will disappear from
the device and become de-active. A business needs no equipment as the scanner is built into the Epoxy application that is required to scan each
unique QR code. Epoxy provides each business with their own unique code that is used to track each loyalty card and offer. Each time an app
user redeems an offer or digitally receives a punch the system tracks that information and displays it on a website administration panel for the
business owner to track.
5
The website serves as a merchant login where merchants can access an administration panel that allows them to create their BLP and add digital
punch cards, offers, events a and send out direct messages to individuals or groups in real-time. The admin panel also will provide the merchants
with analytics such as the number of recipients for these direct messages, the number of punch cards and offers that have been used as well as the
individual customers who are recommending that particular business (the referral system is a pending patent). This will allow the merchant to
distinguish between different levels of consumers and compensate accordingly. This also adds a level of security and accuracy to the loyalty and
coupon program that is not practical with a paper system.
Our pricing for merchants is a simple flat membership fee of $99 a month, without any contracts. The mobile app is free for consumers to
download, and is available on both Android and Apple platform.
We plan to expand geographically in stages. By the close of December 2015, we expect to grow beyond the Las Vegas market into the rest of the
Southwestern United States. We have already begun this process with expansion into Southern California. Within two to three years (December
2016), we plan to expand into the Midwest, and within five years (December 2019) we plan to expand nationally. As we experience each stage
of growth, we plan to increase our staff primarily through commission-based sales people, as opposed to salaried or hourly wage employees, thus
minimizing the financial burden of each stage of expansion. We believe that this plan for expansion will also minimize the need for additional
outside financing, as we plan to fund our growth primarily through the growth of our paying customer base.
Our primary philosophy is to provide excellent customer service to both app users and merchants, while utilizing feedback through our events,
website and mobile app. The mobile application platform gives us an opportunity to seamlessly receive feedback while providing a service. Once
feedback has been provided we can then study and then apply this to the system. We believe if you keep the marketing simple, to the point and
clean people will be willing to listen and convert. Once a customer is willing to listen, they can be turned into more valuable, loyal customers.
Couponz’s product is marketed to Mobile App Users as well as Business owners.
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 2015 Compared to the Three and Six Months Ended June 30, 2014.
Our net loss for the three and six month periods ended June 30, 2015 and 2014 is as follows:
Three month ended
June 30,
2015
2014
Revenue
$
7,330
Operating Expenses
Depreciation
Professional fees
Software development expenses
Consulting fee
General and administrative expenses
Total operating expenses
Loss from operations
2,830
10,150
31,757
19,614
104,149
168,500
(161,170)
Other Income (Expenses):
Loss on change in fair value of derivative liabilities
Interest expenses
Total other income (expenses)
887,305
(166,079)
721,226
Net income (loss)
$
560,056
$
3,349
Six months ended
June 30,
2015
2014
$
19,128
6,461
14,973
11,131
51,693
(48,344)
(19,701)
(12,675)
(32,376)
(80,720) $
15,645
$
5,661
17,681
47,145
39,485
153,495
263,467
(247,822)
27,964
14,176
22,955
18,592
83,687
(75,953)
320,971
(319,189)
1,782
(246,040)
7,734
(16,727)
(24,107)
(40,834)
$
(116,787)
During the comparative three and six month periods ended June 30, 2015 and 2014 the Company experienced a substantive increase to
consulting fees, software development costs and general and administrative expenses as we expanded our sales force, updated and improved our
application software and website, and increased customer identification and cultivation plans, including increased marketing and advertising
efforts, all of which activities required more time from our key management and consultants.
6
Liquidity and Financial Condition
Working Capital
At
December
At
June 30,
31,
2014
2015
$
68,769 $
64,833
$ 1,388,951 $ 2,492,709
$ (1,320,182) $ (2,427,876)
Current Assets
Current Liabilities
Working Capital (Deficit)
Cash Flows
Six Month Periods Ended
June 30,
2015
2014
$
(190,421) $
(57,923)
$
170,000 $
28,000
$
(20,421) $
(29,923)
Net cash used in operating activities
Net cash provided by financing activities
Net increase (decrease) in cash during period
Operating Activities
Net cash used in operating activities was $190,421 for the six month period ended June 30, 2015 compared with cash used in operating activities
of $57,923 in the same period in 2014. The increase in cash used in operating activities is predominantly attributable to various non-cash
reconciliation adjustments including accretion of debt discount on convertible notes and the change in the fair value of our derivative liabilities,
as well as increases to accounts payable and accrued expenses period over period as we were not able to retire our obligations as they became
due.
Investing Activities
There were no investing activities during the six month period ended June 30, 2015 and 2014.
Financing Activities
Net cash provided by financing activities was $170,000 for the six month period ended June 30, 2015 compared to $28,000 of cash provided in
the same period in 2014.
Going Concern
We believe that presently we have sufficient funds to operate for the coming 12 months. While our cash on hand presently falls short of our
currently anticipated operating expenses, we believe any shortfall can be addressed by the anticipated increase to our revenues, the exercise of
outstanding warrants or new loans and equity financing opportunities. We have no assurance that future financing will be available to us in the
future on satisfactory terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our activities.
Equity financing could result in additional dilution to existing shareholders.
Our Company has generated revenues of $15,645 and $7,734 in the six month periods ended June 30, 2015 and 2014, respectively, which
amounts are not presently sufficient to cover our ongoing quarterly operating expenses. We have never paid dividends and it is unlikely we will
generate sufficient earnings in the immediate or foreseeable future to meet our operational overhead. The continuation of our Company as a
going concern is dependent upon the continued financial support from our shareholders, the ability of our Company to obtain necessary equity
financing to continue operations, and the attainment of profitable operations. As at June 30, 2015, we had a working capital deficit of $1,320,182
and have an accumulated deficit of $2,479,003. These factors raise substantial doubt regarding our company’s ability to continue as a going
concern. The financial statements included herein do not include any adjustments to the recoverability and classification of recorded asset
amounts and classification of liabilities that might be necessary should our Company be unable to continue as a going concern.
7
During the next twelve months we expect to expend approximately $50,000 for operations of the Company in regard to the filing of reports with
the requisite regulatory authorities and $125,000, including costs for advertising and marketing, as required with respect the operations of
wholly-owned subsidiary, Couponz, Inc., including salaries, advertising and marketing, and any ongoing software development expenses.
We may require additional working capital to fund our business objectives. There can be no assurance that any additional financing will be
available or accessible on reasonable terms, either by way of an equity financing or debt. If we cannot raise any additional funding we may either
have to suspend operations until we do raise the cash, or cease operations entirely.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements that will have a current or future effect on our financial condition and changes in financial
condition.
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the 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. On an on-going basis, management evaluates its estimates and judgments which are based on historical
experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis
for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different
assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our Financial Statements.
Recent Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. The new standard will require debt
issuance costs to be presented on the balance sheet as a direct reduction of the carrying value of the associated debt liability, consistent with the
presentation of debt discounts. Currently, debt issuance costs are presented as a deferred asset. The recognition and measurement requirements
will not change as a result of this guidance. The standard is effective for the annual reporting periods beginning after December 15, 2015 and
will be applied on a retrospective basis. This amendment will not have a material impact on our financial statements.
The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption
of any such pronouncements will have a material impact on its financial condition or the results of its operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under
the Securities Exchange Act of 1934 , as amended, is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management,
including our president (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions
regarding required disclosure.
As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president
(our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer, principal financial officer and
principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this
quarterly report.
Changes in Internal Control over Financial Reporting
During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
8
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings and is not aware of any pending legal proceedings as of the date of this Form 10-Q.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company and is not required to provide this information.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On April 1 and April 22, 2015 respectively the Company received conversion notices from an investor with respect to the conversion of a total
of $93,225 in principal and $5,582 in accrued interest by way of issuance of a total of 8,591,945 shares of common stock.
On April 17, April 29, 2015 and May 7, 2015 respectively the Company received conversion notices from an investor with respect to the
conversion of a total of $60,000 in principal and $3,226 in accrued interest by way of issuance of a total of 3,702,000 shares of common stock.
On June 2, June 8, and June 29, 2015 respectively the Company received conversion notices from an investor with respect to the conversion of a
total of $73,000 in principal and $1,681 in accrued interest by way of issuance of a total of 5,242,617 shares of common stock.
On June 18, 2015 the Company issued a total of 200,000 shares of common stock to a third party consulting firm for services rendered.
On June 18, 2015 the Company issued a total of 1,039,913 shares to a third party consulting firm for services rendered.
On July 7, 2015 and July 20, 2015 respectively the Company received conversion notices from an investor requesting the conversion of a total of
$52,000 in principal and $1,587 in accrued interest by way of issuance of a total of 5,725,112 shares of common stock.
On July 14, 2015, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds totaling
$90,000 from total loan proceeds of $102,000, which bears interest at 8% per annum and is due on January 6, 2016. Financing fees of $10,000
and legal fees of $2,000 were paid in respect of the note. Interest shall accrue from the advancement date and shall be payable on maturity. Any
On July 20, 2015 and July 23, 2015 respectively the Company received conversion notices from an investor requesting the conversion of a total
of $20,000 in principal by way of issuance of a total of 2,136,752 shares of common stock.
On July 29, 2015 the Company entered into a convertible loan agreement with an investor. The Company received new proceeds totaling
$75,000 from total loan proceeds of $84,000 which bears interest at a 8% per annum and is due on July 29, 2016. An original issue discount of
$6,000 and legal fees of $3,000 were paid in respect of the note. Interest shall accrue from the advancement date and shall be payable on
maturity. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the
Company at 58% multiplied by the lowest intra-day trade price in the twenty (20) Trading Days immediately preceding the applicable
Conversion, provided that if at any time the lowest intra-day trade price in the twenty (20) Trading Days immediately preceding any date of
measurement is below $0.01, then in such event the then-current Conversion Factor shall be reduced by 5% for all future Conversions.
On August 3, 2015, the Company entered into a convertible loan agreement with an investor. The Company received net proceeds totaling
$50,000 from total loan proceeds of $56,000, which bears interest at 8% per annum and is due on August 3, 2016. Financing fees of $3,500 and
legal fees of $2,500 were paid in respect of the note. Interest shall accrue from the advancement date and shall be payable on maturity. Any
9
In respect of the aforementioned Company will claim an exemption from the registration requirements of the Securities Act of 1933, as
amended, for the issuance of the aforementioned shares pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated
thereunder since, among other things, the transaction does not involve a public offering, the purchasers are “accredited investors” and/or
qualified institutional buyers, the purchasers have access to information about the Company and its purchase, the purchasers will take the
securities for investment and not resale.
Other than as disclosed above, there were no unregistered securities to report which were sold or issued by the Company without the registration
of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements, within the period covered by
this report, which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company does not have any senior securities as of the date of this Form 10-Q.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
ITEM 5. OTHER INFORMATION
On August 10, 2015, the Board of Directors approved that Class B Preferred stock shall be designated as 15,000,000 shares with par value of
$0.00001 with voting rights of 1,000 to 1 compared to common, but no conversion rights.
10
ITEM 6. EXHIBITS
Exhibit Description
Filed herewith
Articles of Incorporation
By-laws as currently in effect
Agency Agreement with Carter, Terry & Company executed August 8, 2014
Form of Addendum between the Company and certain investors with
convertible loans expiring November 27, 2015
August 22, 2014 letter agreement between the Company and Quarry Bay
Equity Inc.
Form of employment agreement between the Company and David Gasparine
2014 Stock Option and Award Plan
Form of Stock Option Agreement
Form of Stock Award Agreement
Form of Note - LG Capital Funding LLC
Form of Note - JSJ Investments Inc.
Form of SPA and 8% Convertible Redeemable Notes entered into between
the Company and Adar Bays LLC.
Form of Independent Contractor Agreement between the Company and
Scherf Corporation
Form of Services Agreement between the Company and Wheat Creative
LLC
Form of SPA and 8% Convertible Note - JSJ Investments Inc.
X
Form of SPA and 8% Convertible Note – St. George Investments LLC
X
Form of SPA and 8% Convertible Note – GW Holdings Group LLC
X
Certification of Principal Executive Officer pursuant to Section 302 of the
X
Sarbanes-Oxley Act
Certification of Principal Financial Officer pursuant to Section 302 of the
X
Sarbanes-Oxley Act
Certification of Principal Executive and Financial Officer, pursuant to
X
Section 906 of the Sarbanes-Oxley Act
Interactive Data files
X
11
Form
S-1
S-1
10-Q
10-Q
Exhibit
3.1
3.2
10.1
10.2
Incorporated by reference
Filing Date
03/18/08
03/18/08
08/14/2014
11/19/2014
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10.3
10.4
10.5
10.6
10.7
10.8
10.9
11/19/2014
11/19/2014
11/19/2014
11/19/2014
11/19/2014
11/19/2014
11/19/2014
8-K
10.1
02/17/2015
8-K
10.2
02/17/2015
8-K
10.3
10.10
10.11
10.12
02/17/2015
31.1
31.2
32.1
101
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there
unto duly authorized.
EPOXY, INC.
Date: August 19, 2015
By:
/s/ David Gasparine
Name: David Gasparine
Title: Chief Executive Officer (Principal Executive Officer),
Treasurer, (Principal Financial Officer) Secretary, and
Director
12
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of July 29, 2015, is entered into by and between EPOXY, INC. , a
Nevada corporation (“ Company ”), and ST. GEORGE INVESTMENTS LLC , a Utah limited liability company, its successors and/or assigns (“
Investor ”).
A.
Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the Securities
Act of 1933, as amended (the “ 1933 Act ”).
B.
Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement
(i) a Convertible Promissory Note, in the form attached hereto as Exhibit A , in the original principal amount of $84,000.00 (the “ Note ”),
convertible into shares of common stock, $0.00001 par value per share, of Company (the “ Common Stock ”), upon the terms and subject to the
limitations and conditions set forth in such Note, and (ii) a Warrant to Purchase Shares of Common Stock, substantially in the form attached
hereto as Exhibit B (the “ Warrant ”).
C.
This Agreement, the Note, the Warrant, and all other certificates, documents, agreements, resolutions and instruments
delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to
herein as the “ Transaction Documents ”.
D.
For purposes of this Agreement: “ Conversion Shares ” means all shares of Common Stock issuable upon conversion of all or
any portion of the Note; “ Warrant Shares ” means all shares of Common Stock issuable upon the exercise of or pursuant to the Warrant; and “
Securities ” means the Note, the Conversion Shares, the Warrant and the Warrant Shares.
NOW, THEREFORE , in consideration of the above recitals and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Company and Investor hereby agree as follows:
1.
Purchase and Sale of Securities .
1.1.
Purchase of Securities . Company shall issue and sell to Investor and Investor agrees to purchase from Company the
Note and the Warrant. In consideration thereof, Investor shall pay the Purchase Price (as defined below) to Company.
1.2.
Form of Payment . On the Closing Date, Investor shall pay the Purchase Price to Company via wire transfer of
immediately available funds against delivery of the Note and the Warrant.
1.3.
Closing Date . Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6
below, the date and time of the issuance and sale of the Securities pursuant to this Agreement (the “ Closing Date ”) shall be 5:00 p.m., Eastern
Time on or about July 29, 2015, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “
Closing ”) shall occur on the Closing Date by means of the exchange by express courier and email of .pdf documents, but shall be deemed to
have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.
1.4.
Collateral for the Note . The Note shall not be secured.
1.5.
Original Issue Discount; Transaction Expenses . The Note carries an original issue discount of $6,000.00 (the “ OID
”). In addition, Company agrees to pay $3,000.00 to Investor to cover Investor’s legal fees, accounting costs, due diligence, monitoring and other
transaction costs incurred in connection with the purchase and sale of the Securities (the “ Transaction Expense Amount ”), all of which
amount is included in the initial principal balance of the Note. The “ Purchase Price ”, therefore, shall be $75,000.00, computed as follows:
$84,000.00 original principal balance, less the OID, less the Transaction Expense Amount.
2.
Investor’s Representations and Warranties . Investor represents and warrants to Company that: (i) this Agreement has been duly
and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with its terms; and
(iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the 1933 Act.
1
3.
Company’s Representations and Warranties . Company represents and warrants to Investor that: (i) Company is a corporation
duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate power to own its
properties and to carry on its business as now being conducted; (ii) Company is duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary; (iii)
Company has registered its Common Stock under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”), and is
obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (iv) each of the Transaction Documents and the transactions
contemplated hereby and thereby, have been duly and validly authorized by Company; (v) this Agreement, the Note, the Warrant, and the other
Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations of Company
enforceable in accordance with their terms, subject as to enforceability only to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors’ rights generally; (vi) the execution and delivery of the Transaction
Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation by Company of the other
transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by Company of any of the terms
or provisions of, or constitute a default under (a) Company’s formation documents or bylaws, each as currently in effect, (b) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which Company is a party or by which it or any of its properties or assets
are bound, including any listing agreement for the Common Stock, or (c) any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body
having jurisdiction over Company or any of Company’s properties or assets; (vii) no further authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lender of Company
is required to be obtained by Company for the issuance of the Securities to Investor; (viii) none of Company’s filings with the SEC contained, at
the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they were made, not misleading; (ix) Company has filed all reports,
schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act on a timely basis or has
received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document prior to the
expiration of any such extension; (x) Company has not consummated any financing transaction that has not been disclosed in a periodic filing
with the SEC under the 1934 Act; (xi) Company is not, nor has been in the past twelve (12) months, a “Shell Company,” as such type of “issuer”
is described in Rule 144(i)(1) under the 1933 Act or is in compliance with Rule 144(i)(2) under the 1933 Act; (xii) with respect to any
commissions, placement agent or finder’s fees or similar payments that will or would become due and owing by Company to any person or
entity as a result of this Agreement or the transactions contemplated hereby (“ Broker Fees ”), any such Broker Fees will be made in full
compliance with all applicable laws and regulations and only to a person or entity that is a registered investment adviser or registered brokerdealer; (xiii) Investor shall have no obligation with respect to any Broker Fees or with respect to any claims made by or on behalf of other
persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company
shall indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, members, managers, agents, and
partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’ fees)
and expenses suffered in respect of any such claimed or existing Broker Fees; (xiv) when issued, the Conversion Shares and the Warrant Shares
will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; (xv)
neither Investor nor any of its officers, directors, stockholders, members, managers, employees, agents or representatives has made any
representations or warranties to Company or any of its officers, directors, employees, agents or representatives except as expressly set forth in
the Transaction Documents and, in making its decision to enter into the transactions contemplated by the Transaction Documents, Company is
not relying on any representation, warranty, covenant or promise of Investor or its officers, directors, members, managers, employees, agents or
representatives other than as set forth in the Transaction Documents; and (xvi) Company has performed due diligence and background research
on Investor and its affiliates including, without limitation, John M. Fife, and, to its satisfaction, has made inquiries with respect to all matters
Company may consider relevant to the undertakings and relationships contemplated by the Transaction Documents including, among other
things, the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC ;SEC Civil Case
No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill.); and FINRA Case #2011029203701. Company, being aware of the
matters described in subsection (xvi) above, acknowledges and agrees that such matters, or any similar matters, have no bearing on the
transactions contemplated by the Transaction Documents and covenants and agrees it will not use any such information as a defense to
performance of its obligations under the Transaction Documents or in any attempt to avoid, modify or reduce such obligations.
4.
Company Covenants . Until all of Company’s obligations under all of the Transaction Documents are paid and performed in full,
or within the timeframes otherwise specifically set forth below, Company shall comply with the following covenants: (i) so long as Investor
beneficially owns any of the Securities and for at least twenty (20) Trading Days (as defined in the Note) thereafter, Company shall timely file
on the applicable deadline all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and shall take all
reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with
Rule 144 of the 1933 Act, is publicly available, and shall not terminate its status as an issuer required to file reports under the 1934 Act even if
the 1934 Act or the rules and regulations thereunder would permit such termination; (ii) the Common Stock shall be listed or quoted for trading
on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, or (d) OTCQB; (iii) when issued, the Conversion Shares and the Warrant Shares will be duly
authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances; (iv) trading in
Company’s Common Stock shall not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease on the Company’s principal trading
market; and (v) Company shall not have at any given time more than six (6) Variable Security Holders (as defined below), excluding Investor,
without Investor’s prior written consent. For purposes hereof, the term “ Variable Security Holder ” means any holder of any Company
securities that are convertible into Common Stock (including without limitation convertible debt, warrants or convertible preferred stock) with a
conversion price that varies with the market price of the Common Stock.
2
5.
Conditions to Company’s Obligation to Sell . The obligation of Company hereunder to issue and sell the Securities to Investor at
the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions:
5.1.
Investor shall have executed this Agreement and delivered the same to Company.
5.2.
Investor shall have delivered the Purchase Price to Company in accordance with Section 1.2 above.
6.
Conditions to Investor’s Obligation to Purchase . The obligation of Investor hereunder to purchase the Securities at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for Investor’s
sole benefit and may be waived by Investor at any time in its sole discretion:
6.1.
Company shall have executed this Agreement and delivered the same to Investor.
6.2.
Company shall have delivered to Investor the duly executed Note and Warrant in accordance with Section 1.2 above.
6.3.
Company shall have delivered to Investor a fully executed Irrevocable Letter of Instructions to Transfer Agent
substantially in the form attached hereto as Exhibit C acknowledged and agreed to in writing by Company’s transfer agent (the “ Transfer
Agent ”).
6.4.
Company shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached
hereto as Exhibit D evidencing Company’s approval of the Transaction Documents.
Company shall have delivered to Investor a fully executed Share Issuance Resolution substantially in the form attached
6.5.
hereto as Exhibit E to be delivered to the Transfer Agent.
6.6.
Company shall have delivered to Investor fully executed copies of all other Transaction Documents required to be
executed by Company herein or therein.
7.
Reservation of Shares . At all times during which the Note is convertible or the Warrant is exercisable, Company will reserve
from its authorized and unissued Common Stock to provide for the issuance of Common Stock upon the full conversion of the Note and full
exercise of the Warrant at least (i) three (3) times the quotient obtained by dividing the Outstanding Balance (as defined in the Note) by the
Conversion Price (as defined in the Note), plus (ii) three (3) times the number of Warrant Shares (as determined pursuant to the Warrant)
deliverable upon full exercise of the Warrant (the “ Share Reserve ”), but in any event not less than 18,000,000 shares of Common Stock shall
be reserved at all times for such purpose (the “ Transfer Agent Reserve ”). Company further agrees that it will cause the Transfer Agent to
immediately add shares of Common Stock to the Transfer Agent Reserve in increments of 3,000,000 shares as and when requested by Investor in
writing from time to time, provided that such incremental increases do not cause the Transfer Agent Reserve to exceed the Share Reserve. In
furtherance thereof, from and after the date hereof and until such time that the Note has been paid in full and the Warrant exercised in full,
Company shall require the Transfer Agent to reserve for the purpose of issuance of Conversion Shares under the Note and Warrant Shares under
the Warrant, a number of shares of Common Stock equal to the Transfer Agent Reserve. Company shall further require the Transfer Agent to
hold such shares of Common Stock exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor’s delivery
of a conversion notice under the Note or a notice of exercise under the Warrant. Finally, Company shall require the Transfer Agent to issue
shares of Common Stock pursuant to the Note and the Warrant to Investor out of its authorized and unissued shares, and not the Transfer Agent
Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Transfer Agent Reserve. The
Transfer Agent shall only issue shares out of the Transfer Agent Reserve to the extent there are no other authorized shares available for issuance
and then only with Investor’s written consent.
3
8.
Miscellaneous . The provisions set forth in this Section 8 shall apply to this Agreement, as well as all other Transaction
Documents as if these terms were fully set forth therein.
8.1.
Original Signature Pages . Each party agrees to deliver its original signature pages to the Transaction Documents to the
other party within five (5) Trading Days of the date hereof. Notwithstanding the foregoing, the Transaction Documents shall be fully effective
upon exchange of electronic signature pages by the parties and payment of the Purchase Price by Investor. For the avoidance of doubt, the failure
by either party to deliver its original signature pages to the other party shall not affect in any way the validity or effectiveness of any of the
Transaction Documents, provided that such failure to deliver original signatures shall be a breach of the party’s obligations hereunder.
8.2.
Arbitration of Claims . The parties shall submit all Claims (as defined in Exhibit F ) arising under this Agreement or
any other Transaction Document or any other agreement between the parties and their affiliates to binding arbitration pursuant to the arbitration
provisions set forth in Exhibit F attached hereto (the “ Arbitration Provisions ”). The parties hereby acknowledge and agree that the Arbitration
Provisions are unconditionally binding on the parties hereto and are severable from all other provisions of this Agreement. By executing this
Agreement, Company represents, warrants and covenants that Company has reviewed the Arbitration Provisions carefully, consulted with legal
counsel about such provisions (or waived its right to do so), understands that the Arbitration Provisions are intended to allow for the expeditious
and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company
will not take a position contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing
representations and covenants of Company regarding the Arbitration Provisions.
8.3.
Governing Law; Venue . This Agreement shall be governed by and interpreted in accordance with the laws of the State
of Utah for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each
party consents to and expressly agrees that exclusive venue for arbitration of any dispute arising out of or relating to any Transaction Document
or the relationship of the parties or their affiliates shall be in Salt Lake County or Utah County, Utah. Without modifying the parties obligations
to resolve disputes hereunder pursuant to the Arbitration Provisions, for any litigation arising in connection with any of the Transaction
Documents, each party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court
sitting in Salt Lake County, Utah, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, and (iii) waives any
claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim or objection to the bringing of
any such proceeding in such jurisdictions or to any claim that such venue of the suit, action or proceeding is improper.
8.4.
Calculation Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination or
arithmetic calculation under the Transaction Documents, including without limitation, calculating the Outstanding Balance, Warrant Shares,
Exercise Shares (as defined in the Warrant), Delivery Shares (as defined in the Warrant), Conversion Price, Conversion Shares, or VWAP (as
defined in the Note) (each, a “ Calculation ”), Company or Investor (as the case may be) shall submit any disputed Calculation via email or
facsimile with confirmation of receipt (i) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to
Company or Investor (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after Investor learned of the circumstances
giving rise to such dispute. If Investor and Company are unable to agree upon such Calculation within two (2) Trading Days of such disputed
Calculation being submitted to Company or Investor (as the case may be), then Investor shall, within two (2) Trading Days, submit via email or
facsimile the disputed Calculation to Unkar Systems Inc. (“ Unkar Systems ”). Company shall cause Unkar Systems to perform the Calculation
and notify Company and Investor of the results no later than ten (10) Trading Days from the time it receives such disputed Calculation. Unkar
Systems’ determination of the disputed Calculation shall be binding upon all parties absent demonstrable error. Unkar Systems’ fee for
performing such Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation is furthest from
the correct Calculation as determined by Unkar Systems. In the event Company is the losing party, no extension of the Delivery Date (as defined
in the Note) shall be granted and Company shall incur all effects for failing to deliver the applicable shares in a timely manner as set forth in the
Transaction Documents. Notwithstanding the foregoing, Investor may, in its sole discretion, designate an independent, reputable investment
bank or accounting firm other than Unkar Systems to resolve any such dispute and in such event, all references to “Unkar Systems” herein will
be replaced with references to such independent, reputable investment bank or accounting firm so designated by Investor.
8.5.
Counterparts . Each Transaction Document may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another
party’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed to be an executed original
thereof.
4
8.6.
Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect
the interpretation of, this Agreement.
8.7.
Severability . In the event that any provision of this Agreement 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 to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
8.8.
Entire Agreement . This Agreement, together with the other Transaction Documents, contains 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 Company nor
Investor makes any representation, warranty, covenant or undertaking with respect to such matters.
8.9.
No Reliance . Company acknowledges and agrees that neither Investor nor any of its officers, directors, members,
managers, representatives or agents has made any representations or warranties to Company or any of its officers, directors, representatives,
agents or employees except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions
contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its
officers, directors, members, managers, agents or representatives other than as set forth in the Transaction Documents.
8.10.
Amendments . No provision of this Agreement may be waived or amended other than by an instrument in writing
signed by the parties hereto.
8.11.
Notices . Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and
shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written receipt therefor or
by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii) the earlier of the date delivered or the third
Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail, or (iii) the earlier of the date delivered or the
third Trading Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties
thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written
notice similarly given to each of the other parties hereto):
If to Company:
Epoxy, Inc.
Attn: Dave Gasparine
2518 Anthem Village Drive, Suite 100
Henderson, Nevada 89052
If to Investor:
St. George Investments LLC
Attn: John Fife
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
5
With a copy to (which copy shall not constitute notice):
Hansen Black Anderson Ashcraft PLLC
Attn: Jonathan Hansen
3051 West Maple Loop Drive, Suite 325
Lehi, Utah 84043
8.12.
Successors and Assigns . This Agreement or any of the severable rights and obligations inuring to the benefit of or to
be performed by Investor hereunder may be assigned by Investor to a third party, including its financing sources, in whole or in part, without the
need to obtain Company’s consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties
hereunder without the prior written consent of Investor.
8.13.
Survival . The representations and warranties of 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 Investor. Company
agrees to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a
result of or related to any breach or alleged breach by 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.
8.14.
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.
8.15.
Investor’s Rights and Remedies Cumulative; Liquidated Damages . All rights, remedies, and powers conferred in this
Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every
other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or
existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such
order as Investor may deem expedient. The parties acknowledge and agree that upon Company’s failure to comply with the provisions of the
Transaction Documents, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’
inability to predict future interest rates and future share prices, Investor’s increased risk, and the uncertainty of the availability of a suitable
substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note, the
Warrant, and the other Transaction Documents are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and
Investor’s expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under
Rule 144 under the 1933 Act). The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages and not a
penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties
acknowledge and agree that under the circumstances existing at the time this Agreement is entered into, such liquidated damages are fair and
reasonable and are not penalties. All fees, charges, and default interest provided for in the Transaction Documents are agreed to by the parties to
be based upon the obligations and the risks assumed by the parties as of the Closing Date and are consistent with investments of this type. The
liquidated damages provisions of the Transaction Documents shall not limit or preclude a party from pursuing any other remedy available at law
or in equity; provided, however , that the liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual
damages.
8.16.
Ownership Limitation . Notwithstanding anything to the contrary contained in this Agreement or the other
Transaction Documents, if at any time Investor shall or would be issued shares of Common Stock under any of the Transaction Documents, but
such issuance would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage (as
defined in the Note), then Company must not issue to Investor the shares that would cause Investor to exceed the Maximum Percentage. The
shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein as the “
Ownership Limitation Shares ”. Company will reserve the Ownership Limitation Shares for the exclusive benefit of Investor. From time to
time, Investor may notify Company in writing of the number of the Ownership Limitation Shares that may be issued to Investor without causing
Investor to exceed the Maximum Percentage. Upon receipt of such notice, Company shall be unconditionally obligated to immediately issue
such designated shares to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares. For purposes of this
Section, beneficial ownership of Common Stock will be determined under Section 13(d) of the 1934 Act.
6
8.17.
Attorneys’ Fees and Cost of Collection . In the event of any arbitration or action at law or in equity to enforce or
interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most money
shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’
fees, deposition costs, and expenses paid by such prevailing party in connection with arbitration or litigation without reduction or apportionment
based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s or a
court’s power to award fees and expenses for frivolous or bad faith pleading. If (i) the Note or Warrant is placed in the hands of an attorney for
collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal
proceeding, or Investor otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note or the Warrant; or
(ii) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and
involving a claim under the Note or the Warrant; then Company shall pay the costs incurred by Investor for such collection, enforcement or
action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees,
expenses, deposition costs, and disbursements.
8.18.
Waiver . No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed
by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision
or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit
a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
8.19.
Waiver of Jury Trial . EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL
RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS
WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY
APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH
PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY .
8.20.
Time is of the Essence . Time is expressly made of the essence with respect to each and every provision of this
Agreement and the other Transaction Documents.
8.21.
Voluntary Agreement . Company has carefully read this Agreement and each of the other Transaction Documents and
has asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the other
Transaction Documents and fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s choosing
and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue influence by Investor
or anyone else.
[ Remainder of page intentionally left blank; signature page follows ]
7
IN WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first
above written.
SUBSCRIPTION AMOUNT :
Principal Amount of Note:
$84,000.00
Purchase Price:
$75,000.00
INVESTOR:
ST. GEORGE INVESTMENTS LLC
By: Fife Trading, Inc., Manager
By:
John M. Fife, President
COMPANY:
EPOXY, INC.
By:
Printed Name:
Title:
ATTACHED EXHIBITS:
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Note
Warrant
Irrevocable Transfer Agent Instructions
Secretary’s Certificate
Share Issuance Resolution
Arbitration Provisions
[ Signature Page to Securities Purchase Agreement ]
8
Exhibit A - Note
CONVERTIBLE PROMISSORY NOTE
Effective Date: July 29, 2015 U.S. $84,000.00
FOR VALUE RECEIVED, EPOXY, INC. , a Nevada corporation (“ Borrower ”), promises to pay to ST. GEORGE INVESTMENTS LLC , a
Utah limited liability company, or its successors or assigns (“ Lender ”), $84,000.00 and any interest, fees, charges, and late fees on the date that
is twelve (12) months after the Purchase Price Date (the “ Maturity Date ”) in accordance with the terms set forth herein and to pay interest on
the Outstanding Balance at the rate of eight percent (8%) per annum from the Purchase Price Date until the same is paid in full. This Convertible
Promissory Note (this “ Note ”) is issued and made effective as of July 29, 2015 (the “ Effective Date ”). This Note is issued pursuant to that
certain Securities Purchase Agreement dated July 29, 2015, as the same may be amended from time to time, by and between Borrower and
Lender (the “ Purchase Agreement ”). All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve
(12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. Certain capitalized terms used
herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.
This Note carries an OID of $6,000.00. In addition, Borrower agrees to pay $3,000.00 to Lender to cover Lender’s legal fees,
accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note (the “
Transaction Expense Amount ”), all of which amount is included in the initial principal balance of this Note. The purchase price for this Note
and the Warrant (as defined in the Purchase Agreement) shall be $75,000.00 (the “ Purchase Price ”), computed as follows: $84,000.00 original
principal balance, less the OID, less the Transaction Expense Amount. The Purchase Price shall be payable by Lender by wire transfer of
immediately available funds.
1.
Payment; Prepayment . All payments owing hereunder shall be in lawful money of the United States of America or Conversion
Shares (as defined below), as provided for herein, and delivered to Lender at the address furnished to Borrower for that purpose. All payments
shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter,
to (d) principal. Notwithstanding the foregoing, so long as Borrower has not received a Conversion Notice (as defined below) from Lender
where the applicable Conversion Shares have not yet been delivered and so long as no Event of Default has occurred since the Effective Date
(whether declared by Lender or undeclared), then Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written
notice to Lender to prepay the Outstanding Balance of this Note, in full, in accordance with this Section 1. Any notice of prepayment hereunder
(an “ Optional Prepayment Notice ”) shall be delivered to Lender at its registered address and shall state: (i) that Borrower is exercising its
right to prepay this Note, and (ii) the date of prepayment, which shall be not less than five (5) Trading Days from the date of the Optional
Prepayment Notice. On the date fixed for prepayment (the “ Optional Prepayment Date ”), Borrower shall make payment of the Optional
Prepayment Amount (as defined below) to or upon the order of Lender as may be specified by Lender in writing to Borrower. If Borrower
exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash equal to 135% multiplied by the then
Outstanding Balance of this Note (the “ Optional Prepayment Amount ”). In the event Borrower delivers the Optional Prepayment Amount to
Lender prior to the Optional Prepayment Date or without delivering an Optional Prepayment Notice to Lender as set forth herein without
Lender’s prior written consent, the Optional Prepayment Amount shall not be deemed to have been paid to Lender until the Optional Prepayment
Date. Moreover, in such event the Optional Prepayment Liquidated Damages Amount will automatically be added to the Outstanding Balance of
this Note on the day Borrower delivers the Optional Prepayment Amount to Lender. In the event Borrower delivers the Optional Prepayment
Amount without an Optional Prepayment Notice, then the Optional Prepayment Date will be deemed to be the date that is five (5) Trading Days
from the date that the Optional Prepayment Amount was delivered to Lender. In addition, if Borrower delivers an Optional Prepayment Notice
and fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading Days following the Optional Prepayment Date,
Borrower shall forever forfeit its right to prepay this Note.
2.
Security . This Note is unsecured.
3.
Conversion .
3.1.
Conversion Price . Subject to the adjustments set forth herein, the conversion price (the “ Conversion Price ”) for each
Conversion (as defined below) shall be equal to the product of 58% (the “ Conversion Factor ”) multiplied by the lowest intra-day trade price in
the twenty (20) Trading Days immediately preceding the applicable Conversion, provided that if at any time the lowest intra-day trade price in
the twenty (20) Trading Days immediately preceding any date of measurement is below $0.01, then in such event the then-current Conversion
Factor shall be reduced by 5% for all future Conversions (subject to other reductions set forth in this section). Additionally, if at any time after
the Effective Date, Borrower is not DWAC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for all future
Conversions. If at any time after the Effective Date, the Conversion Shares are not DTC Eligible, then the then-current Conversion Factor will
automatically be reduced by an additional 5% for all future Conversions. Finally, in addition to the Default Effect, if any Major Default occurs
after the Effective Date, the Conversion Factor shall automatically be reduced for all future Conversions by an additional 5% for each of the first
three (3) Major Defaults that occur after the Effective Date (for the avoidance of doubt, each occurrence of any Major Default shall be deemed to
be a separate occurrence for purposes of the foregoing reductions in Conversion Factor, even if the same Major Default occurs three (3) separate
times). For example, the first time Borrower is not DWAC Eligible, the Conversion Factor for future Conversions thereafter will be reduced
from 58% to 53% for purposes of this example. Following such event, the first time the Conversion Shares are no longer DTC Eligible, the
Conversion Factor for future Conversions thereafter will be reduced from 53% to 48% for purposes of this example. If, thereafter, there are three
(3) separate occurrences of a Major Default pursuant to Section 4.1 (a), then for purposes of this example the Conversion Factor would be
reduced by 5% for the first such occurrence, and so on for each of the second and third occurrences of such Major Default. Notwithstanding the
foregoing, in no event shall the Conversion Price be less than $0.0001.
9
3.2.
Conversions . Lender has the right at any time after the Purchase Price Date until the Outstanding Balance has been
paid in full, including without limitation until any Optional Prepayment Date (even if Lender has received an Optional Prepayment Notice), at its
election, to convert (each instance of conversion is referred to herein as a “ Conversion ”) all or any part of the Outstanding Balance into shares
(“ Conversion Shares ”) of fully paid and non-assessable common stock, $0.00001 par value per share (“ Common Stock ”), of Borrower as
per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “ Conversion Amount ”)
divided by the Conversion Price. Conversion notices in the form attached hereto as Exhibit A (each, a “ Conversion Notice ”) may be
effectively delivered to Borrower by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or
personal delivery), and all Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Conversion
Shares from any Conversion to Lender in accordance with Section 8 below.
4.
Defaults and Remedies .
4.1.
Defaults . The following are events of default under this Note (each, an “ Event of Default ”): (a) Borrower shall fail
to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; or (b) Borrower shall fail to deliver any
Conversion Shares in accordance with the terms hereof; or (c) a receiver, trustee or other similar official shall be appointed over Borrower or a
material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within
sixty (60) days; or (d) Borrower shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become
due, subject to applicable grace periods, if any; or (e) Borrower shall make a general assignment for the benefit of creditors; or (f) Borrower shall
file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (g) an involuntary proceeding shall be
commenced or filed against Borrower; or (h) Borrower shall default or otherwise fail to observe or perform any covenant, obligation, condition
or agreement of Borrower contained herein or in any other Transaction Document (as defined in the Purchase Agreement), other than those
specifically set forth in this Section 4.1 and Section 4 of the Purchase Agreement; or (i) any representation, warranty or other statement made or
furnished by or on behalf of Borrower to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note
shall be false, incorrect, incomplete or misleading in any material respect when made or furnished; or (j) the occurrence of a Fundamental
Transaction without Lender’s prior written consent; or (k) Borrower shall fail to maintain the Share Reserve as required under the Purchase
Agreement; or (l) Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Lender; or
(m) any money judgment, writ or similar process shall be entered or filed against Borrower or any subsidiary of Borrower or any of its property
or other assets for more than $100,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless
otherwise consented to by Lender; or (n) Borrower shall fail to deliver to Lender original signature pages to all Transaction Documents within
five (5) Trading Days of the Purchase Price Date; or (o) Borrower shall fail to be DWAC Eligible; or (p) Borrower shall fail to observe or
perform any covenant set forth in Section 4 of the Purchase Agreement.
4.2.
Remedies . Upon the occurrence of any Event of Default, Borrower shall within one (1) Trading Day deliver written
notice thereof via facsimile, email or reputable overnight courier (with next day delivery specified) (an “ Event of Default Notice ”) to Lender.
At any time and from time to time after the earlier of Lender’s receipt of an Event of Default Notice and Lender becoming aware of the
occurrence of any Event of Default, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming
immediately due and payable in cash at the Mandatory Default Amount. Notwithstanding the foregoing, at any time following the occurrence of
any Event of Default, Lender may, at its option, elect to increase the Outstanding Balance by applying the Default Effect (subject to the
limitation set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance
shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the Outstanding Balance
shall not be immediately due and payable unless so declared by Lender (for the avoidance of doubt, if Lender elects to apply the Default Effect
pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately due and payable at any time and no such
election by Lender shall be deemed to be a waiver of its right to declare the Outstanding Balance immediately due and payable as set forth herein
unless otherwise agreed to by Lender in writing). Notwithstanding the foregoing, upon the occurrence of any Event of Default described in
clauses (c), (d), (e), (f) or (g) of Section 4.1 , the Outstanding Balance as of the date of acceleration shall become immediately and automatically
due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender. At any time following the occurrence
of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the
date the applicable Event of Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under
applicable law (“ Default Interest ”). Additionally, following the occurrence of any Event of Default, Borrower may, at its option, pay any
Conversion in cash instead of Conversion Shares by paying to Lender on or before the applicable Delivery Date (as defined below) a cash
amount equal to the number of Conversion Shares set forth in the applicable Conversion Notice multiplied by the highest intra-day trading price
of the Common Stock that occurs during the period beginning on the date the applicable Event of Default occurred and ending on the date of the
applicable Conversion Notice. In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any
presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and
annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as
Lender receives full payment pursuant to this Section 4.2 . No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver
Conversion Shares upon Conversion of the Notes as required pursuant to the terms hereof.
10
4.3.
Cross Default . A breach or default by Borrower of any covenant or other term or condition contained in any Other
Agreements shall, at the option of Lender, be considered an Event of Default under this Note, in which event Lender shall be entitled (but in no
event required) to apply all rights and remedies of Lender under the terms of this Note.
5.
Unconditional Obligation; No Offset . Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable
obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or
may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance
with the terms of this Note.
6.
Waiver . No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party
granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to
any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to
provide a waiver or consent in the future except to the extent specifically set forth in writing.
7.
Rights Upon Issuance of Securities .
7.1.
Adjustment of Conversion Price upon Subdivision or Combination of Common Stock . Without limiting any provision
hereof, if Borrower at any time on or after the Effective 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 Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective 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 Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment
pursuant to this Section 7.1 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring
an adjustment under this Section 7.1 occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such
Conversion Price shall be adjusted appropriately to reflect such event.
7.2.
Other Events . In the event that Borrower (or any subsidiary) shall take any action to which the provisions hereof are
not strictly applicable, or, if applicable, would not operate to protect Lender from dilution or if any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then Borrower’s board of directors shall in good faith determine and implement
an appropriate adjustment in the Conversion Price so as to protect the rights of Lender, provided that no such adjustment pursuant to this Section
7.2 will increase the Conversion Price as otherwise determined pursuant to this Section 7 , provided further that if Lender does not accept such
adjustments as appropriately protecting its interests hereunder against such dilution, then Borrower’s board of directors and Lender shall agree,
in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose
determination shall be final and binding and whose fees and expenses shall be borne by Borrower.
8.
Method of Conversion Share Delivery . On or before the close of business on the fifth (5 th ) Trading Day following the date of
delivery of a Conversion Notice (the “ Delivery Date ”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer
agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender in the applicable Conversion
Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated in the Conversion Notice), via reputable
overnight courier, a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender
shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver
Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the
applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the terms set forth above.
11
9.
Conversion Delays . If Borrower fails to deliver Conversion Shares in accordance with the timeframe stated in Section 8, Lender,
at any time prior to selling all of those Conversion Shares, may rescind in whole or in part that particular Conversion attributable to the unsold
Conversion Shares, with a corresponding increase to the Outstanding Balance (any returned amount will tack back to the Purchase Price Date for
purposes of determining the holding period under Rule 144 under the Securities Act of 1933, as amended (“ Rule 144 ”)). In addition, for each
Conversion, in the event that Conversion Shares are not delivered by the fourth Trading Day (inclusive of the day of the Conversion), a late fee
equal to the greater of (a) $500.00 and (b) 2% of the applicable Conversion Share Value rounded to the nearest multiple of $100.00 (but in any
event the cumulative amount of such late fees for each Conversion shall not exceed 200% of the applicable Conversion Share Value) will be
assessed for each day after the fifth Trading Day (inclusive of the day of the Conversion) until Conversion Share delivery is made; and such late
fee will be added to the Outstanding Balance (such fees, the “ Conversion Delay Late Fees ”). For illustration purposes only, if Lender delivers
a Conversion Notice to Borrower pursuant to which Borrower is required to deliver 100,000 Conversion Shares to Lender and on the Delivery
Date such Conversion Shares have a Conversion Share Value of $20,000.00 (assuming a Closing Trade Price on the Delivery Date of $0.20 per
share of Common Stock), then in such event a Conversion Delay Late Fee in the amount of $500.00 per day (the greater of $500.00 per day and
$20,000.00 multiplied by 2%, which is $400.00) would be added to the Outstanding Balance of the Note until such Conversion Shares are
delivered to Lender. For purposes of this example, if the Conversion Shares are delivered to Lender twenty (20) days after the applicable
Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $10,000.00 (20 days multiplied
by $500.00 per day). If the Conversion Shares are delivered to Lender one hundred (100) days after the applicable Delivery Date, the total
Conversion Delay Late Fees that would be added to the Outstanding Balance would be $40,000.00 (100 days multiplied by $500.00 per day, but
capped at 200% of the Conversion Share Value).
10.
Ownership Limitation . Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, if
at any time Lender shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause
Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock
outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “ Maximum Percentage
”), then Borrower must not issue to Lender shares of Common Stock which would exceed the Maximum Percentage. For purposes of this
section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The shares of Common Stock
issuable to Lender that would cause the Maximum Percentage to be exceeded are referred to herein as the “ Ownership Limitation Shares ”.
Borrower will reserve the Ownership Limitation Shares for the exclusive benefit of Lender. From time to time, Lender may notify Borrower in
writing of the number of the Ownership Limitation Shares that may be issued to Lender without causing Lender to exceed the Maximum
Percentage. Upon receipt of such notice, Borrower shall be unconditionally obligated to immediately issue such designated shares to Lender,
with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%” above shall
be replaced with “9.99%” at such time as the Market Capitalization is less than $10,000,000.00. Notwithstanding any other provision contained
herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until
increased, decreased or waived by Lender as set forth below. By written notice to Borrower, Lender may increase, decrease or waive the
Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice
requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.
11.
Terms of Future Financings . So long as this Note is outstanding, upon any issuance by Borrower of any security with any term
more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to Lender in
this Note, then Borrower shall notify Lender of such additional or more favorable term and such term, at Lender’s option, shall become a part of
the Transaction Documents. Additionally, if Borrower fails to notify Lender of any such additional or more favorable term, but Lender becomes
aware that Borrower has granted such a term to any third party, Lender may notify Borrower of such additional or more favorable term and such
term shall become a part of the Transaction Documents retroactive to the date on which such term was granted to the applicable third party. 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 conversion discounts, conversion lookback periods, interest rates, OIDs, stock sale price, conversion price per share, and warrant
coverage.
12.
Payment of Collection Costs . If this Note is placed in the hands of an attorney for collection or enforcement prior to
commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes
action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for
such collection, enforcement or action including, without limitation, attorneys’ fees and disbursements. Borrower also agrees to pay for any
costs, fees or charges of its transfer agent that are charged to Lender pursuant to any Conversion or issuance of shares pursuant to this Note.
13.
Opinion of Counsel . In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to
have any such opinion provided by its counsel. Lender also has the right to have any such opinion provided by Borrower’s counsel.
12
14.
Governing Law . 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 Utah, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any
disputes are incorporated herein by this reference.
15.
Resolution of Disputes .
15.1.
Arbitration of Disputes . By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions
(as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.
15.2.
Calculation Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculation (as
defined in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement.
16.
Cancellation . After repayment or conversion of the entire Outstanding Balance, this Note shall be deemed paid in full, shall
automatically be deemed canceled, and shall not be reissued.
17.
Amendments . The prior written consent of both parties hereto shall be required for any change or amendment to this Note.
18.
Assignments . Borrower may not assign this Note without the prior written consent of Lender. This Note and any shares of
Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower.
19.
Time is of the Essence . Time is expressly made of the essence with respect to each and every provision of this Note and the
documents and instruments entered into in connection herewith.
20.
Notices . Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given
in accordance with the subsection of the Purchase Agreement titled “Notices.”
21.
Liquidated Damages . Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions
of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to
predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that
any fees, balance adjustments, Default Interest or other charges assessed under this Note are not penalties but instead are intended by the parties
to be, and shall be deemed, liquidated damages (under Lender’s and Borrower’s expectations that any such liquidated damages will tack back to
the Purchase Price Date for purposes of determining the holding period under Rule 144).
22.
Waiver of Jury Trial . EACH OF LENDER AND BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH
PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER
EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE
STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS
KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.
[ Remainder of page intentionally left blank; signature page follows ]
13
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
BORROWER:
EPOXY, INC.
By:
Name:
Title:
ACKNOWLEDGED, ACCEPTED AND AGREED:
LENDER:
By:
14
ATTACHMENT 1
DEFINITIONS
For purposes of this Note, the following terms shall have the following meanings:
A1.
“ Bloomberg ” means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding the Common
Stock, a comparable reporting service of national reputation selected by Lender and reasonably satisfactory to Borrower).
A2.
“ Closing Bid Price ” and “ Closing Trade Price ” means the last closing bid price and last closing trade price, respectively,
for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis
and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively,
of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities
exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the
principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin
board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common
Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by
OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common
Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common
Stock on such date shall be the fair market value as mutually determined by Lender and Borrower. If Lender and Borrower are unable to agree
upon the fair market value of the Common Stock, then such dispute shall be resolved in accordance with the procedures in Section 15.2. All such
determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such
period.
A3.
“ Default Effect ” means multiplying the Outstanding Balance as of the date the applicable Event of Default occurred by (a)
15% for each occurrence of any Major Default, or (b) 5% for each occurrence of any Minor Default, and then adding the resulting product to the
Outstanding Balance as of the date the applicable Event of Default occurred, with the sum of the foregoing then becoming the Outstanding
Balance under this Note as of the date the applicable Event of Default occurred; provided that the Default Effect may only be applied three (3)
times hereunder with respect to Major Defaults and three (3) times hereunder with respect to Minor Defaults; and provided further that the
Default Effect shall not apply to any Event of Default pursuant to Section 4.1(b) hereof.
A4.
“ DTC ” means the Depository Trust Company.
A5.
“ DTC Eligible ” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate
form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Lender’s brokerage
firm for the benefit of Lender.
A6.
“ DTC/FAST Program ” means the DTC’s Fast Automated Securities Transfer program.
A7.
“ DWAC ” means the DTC’s Deposit/Withdrawal at Custodian system.
A8.
“ DWAC Eligible ” means that (a) Borrower’s 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) Borrower has been approved (without
revocation) by the DTC’s underwriting department, (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program, (d) the
Conversion Shares are otherwise eligible for delivery via DWAC; (e) Borrower has previously delivered all Conversion Shares to Lender via
DWAC; and (f) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.
A9.
“ Fundamental Transaction ” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more
related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other
person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license,
assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or
(iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make
a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not
including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or
entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in
one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity
acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the
other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share
purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related
transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s
Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules
and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower.
15
A10.
“ Major Default ” means any Event of Default occurring under Sections 4.1(a) (payments), 4.1(k) (Share Reserve), or 4.1(p)
(breach of certain covenants) of this Note.
A11.
“ Mandatory Default Amount ” means the greater of (a) the Outstanding Balance divided by the Conversion Price on the
date the Mandatory Default Amount is demanded, multiplied by the VWAP on the date the Mandatory Default Amount is demanded, or (b) the
Outstanding Balance following the application of the Default Effect.
A12.
“ Market Capitalization ” means the product equal to (a) the average VWAP of the Common Stock for the immediately
preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding shares of Common Stock as reported on Borrower’s
most recently filed Form 10-Q or Form 10-K.
A13.
“ Minor Default ” means any Event of Default that is not a Major Default.
A14.
“ OID ” means an original issue discount.
A15.
“ Optional Prepayment Liquidated Damages Amount ” means an amount equal to the difference between (a) the product of
(i) the number of shares of Common Stock obtained by dividing (1) the applicable Optional Prepayment Amount by (2) the Conversion Price as
of the date Borrower delivered the applicable Optional Prepayment Amount to Lender, multiplied by (ii) the Closing Trade Price of the Common
Stock on the date Borrower delivered the applicable Optional Prepayment Amount to Lender, and (b) the applicable Optional Prepayment
Amount paid by Borrower to Lender. For illustration purposes only, if the applicable Optional Prepayment Amount were $50,000.00, the
Conversion Price as of the date the Optional Prepayment Amount was paid to Lender was equal to $0.75 per share of Common Stock, and the
Closing Trade Price of a share of Common Stock as of such date was equal to $1.00, then the Optional Prepayment Liquidated Damages
Amount would equal $16,666.67 computed as follows: (a) $66,666.67 (calculated as (i) (1) $50,000.00 divided by (2) $0.75 multiplied by (ii)
$1.00) minus (b) $50,000.00.
A16.
“ Other Agreements ” means, collectively, (a) all existing and future agreements and instruments between, among or by
Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (b) any financing agreement or a material
agreement that affects Borrower’s ongoing business operations.
A17.
“ Outstanding Balance ” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may
be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, plus the OID, the Transaction Expense Amount, accrued but
unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and
fees related to Conversions, and any other fees or charges (including without limitation Conversion Delay Late Fees) incurred under this Note.
A18.
“ Purchase Price Date ” means the date the Purchase Price is delivered by Lender to Borrower.
A19.
“ Trading Day ” means any day on which the Common Stock is traded or tradable for any period on the Common Stock’s
principal market, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
A20.
“ VWAP ” means the volume weighted average price of the Common stock on the principal market for a particular Trading
Day or set of Trading Days, as the case may be, as reported by Bloomberg.
16
EXHIBIT A
St. George Investments LLC
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
Epoxy, Inc.
Attn: Dave Gasparine, CEO
2518 Anthem Village Drive, Suite 100
Henderson, Nevada 89052
Date: __________________
CONVERSION NOTICE
The above-captioned Lender hereby gives notice to Epoxy, Inc., a Nevada corporation (the “ Borrower ”), pursuant to that certain
Convertible Promissory Note made by Borrower in favor of Lender on July 29, 2015 (the “ Note ”), that Lender elects to convert the portion of
the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified
below. Said conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the
Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Conversion
Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
A.
B.
C.
D.
E.
F.
Date of Conversion:
____________
Conversion #:
____________
Conversion Amount:
____________
Conversion Price: _______________
Conversion Shares: _______________ (C divided by D)
Remaining Outstanding Balance of Note: ____________*
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the
Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Conversion Notice and such
Transaction Documents.
Please transfer the Conversion Shares electronically (via DWAC) to the following account :
Broker:
Address:
DTC#:
Account #:
Account Name:
To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated
shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:
_____________________________________
_____________________________________
_____________________________________
[Remainder of page intentionally left blank]
17
Sincerely,
Lender:
By:
18
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of August 3, 2015, by and between Epoxy Inc. , an Nevada
corporation, with headquarters located at 2518 Anthem Village Drive, Suite 100, Henderson, NV 89052 (the “Company”), and GW Holdings
Group, LLC. , a New York Limited Liability Company, with its address at 137 Montague Street, Suite 291, Brooklyn, NY 11201 (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 the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under
the Securities Act of 1933, as amended (the “1933 Act”);
B.
Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an
8% convertible note of the Company, in the form attached hereto as Exhibit A in the aggregate principal amount of $56,000.00 (the “Note”),
convertible into shares of common stock, $0.001 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.
C.
The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set
forth immediately below its name on the signature pages hereto; and
NOW THEREFORE , the Company and the Buyer severally (and not jointly) 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 such principal amount of Note as is set forth immediately below the Buyer’s name on the
signature pages hereto.
b.
Form of Payment . On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the
Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the
Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the
Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly
executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.
c.
Closing Date . The date and time of the first issuance and sale of the Note pursuant to this Agreement (the
“Closing Date”) shall be on or about August 3, 2015, or such other mutually agreed upon time. 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. Subsequent Closings shall
occur when the Buyer Note is repaid.
2.
Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a.
Investment Purpose . As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock
issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the
“Conversion Shares” and, collectively with the Note, 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.
1
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 remain 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 remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing,
the Company has not disclosed to the Buyer any material nonpublic information 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. The Buyer understands that its investment in the Securities involves a significant
degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made
herein.
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 re-sale 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
Buyer, an opinion of counsel 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 (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 Buyer, 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 as collateral in
connection with a bona fide margin account or other lending arrangement.
g.
Legends . The Buyer understands that the Note and, until such time as the Conversion Shares have been
registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such Securities):
“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 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 OR RULE 144A 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.”
2
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security
upon which it is stamped, 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 or Regulation S without any restriction
as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion
of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, 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 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 or
Regulation S, within 2 business days, it will be considered an Event of Default under the Note.
h.
Authorization; Enforcement . This Agreement has been duly and validly authorized. This Agreement 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.
i.
Residency . The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the
signature pages hereto.
3.
Representations and Warranties of the Company . The Company represents and warrants to the Buyer that:
a.
Organization and Qualification . The Company and each of its subsidiaries, 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.
b.
Authorization; Enforcement . (i) 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 Note by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation
for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of
Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has
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 and the other documents executed in connection herewith 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 its terms.
c.
Issuance of Shares . The Conversion Shares are duly authorized and reserved for issuance and, upon conversion
of the Note in accordance with its respective 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.
d.
Acknowledgment of Dilution . The Company understands and acknowledges the potentially dilutive effect to
the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
e.
No Conflicts . The execution, delivery and performance of this Agreement, 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) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or Bylaws, 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, 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 selfregulatory organizations to which the Company or its securities are 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). 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 Over-the-Counter Quotations
Bureau (the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable future, nor
are the Company’s securities “chilled” by FINRA. The Company and its subsidiaries are unaware of any facts or circumstances, which might
give rise to any of the foregoing.
3
f.
Absence of Litigation . Except as disclosed in the Company’s public filings, 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. Schedule 3(f) contains 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.
g.
Acknowledgment Regarding Buyer’ Purchase of Securities . The Company acknowledges and agrees that the
Buyer is acting solely in the capacity of arm’s length purchasers 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’ 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.
h.
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.
i.
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(i) 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 by them under
valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.
j.
Bad Actor . No officer or director of the Company would be disqualified under Rule 506(d) of the Securities
Act as amended on the basis of being a "bad actor" as that term is established in the September 19, 2013 Small Entity Compliance Guide
published by the Securities and Exchange Commission.
k.
Breach of Representations and Warranties by the Company . 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 the Note.
4.
COVENANTS .
a.
Expenses . At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection
with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection
herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for
stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the
Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the
Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the
Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’s expenses shall be $2,500 in legal fees and $3,500 to
Carter, Terry & Company Inc., which shall be deducted from the Note when funded.
b.
Listing . The Company shall promptly secure the listing of the Conversion Shares upon each national securities
exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and,
so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of
all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of
the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement exchange, the Nasdaq
National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the American
Stock Exchange (“AMEX”) 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 OTCQB and any other exchanges or quotation systems on which the Common Stock is then
listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.
4
c.
Corporate Existence . So long as the Buyer beneficially owns any Note, the Company shall 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 on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
d.
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.
e.
Registration Rights . With respect to any Company issued note owned by the Buyer, in the event the Company
completes a registration statement for its securities prior to the date on which that particular note is eligible for conversion into legend free shares
under Rule 144, the shares issuable upon conversion of that particular note shall be “piggybacked” onto the registration statement.
f.
Breach of Covenants . If the Company breaches any of the covenants set forth in this Section 4, and in addition
to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5.
Governing Law; Miscellaneous .
a.
Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State
of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of
New York. 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 . The Company and Buyer waive
trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any
provision of this Agreement 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 Agreement or any other Transaction Document 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; Signatures by Facsimile . 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. This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
c.
Headings . 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 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 provision hereof which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
e.
Entire Agreement; Amendments . This Agreement 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 may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
5
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, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by
written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below
(if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
Epoxy Inc.
2518 Anthem Village Drive, Suite 100,
Henderson, NV 89052
Attn: David Gasparine, CEO
If to the Buyer:
GW Holdings Group, LLC
137 Montague Street, Suite 291
Brooklyn, NY 11201
Attn: Yosef Gorowitz - Manager
Each party shall provide notice to the other party of any change in address.
g.
Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their
successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities 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.
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.
k.
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.
l.
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 will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement, 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
and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other
security being required.
6
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above
written.
Epoxy, INC.
By:________________________________
David Gasparine
Chief Executive Officer
GW Holdings Group, LLC.
By:
Name: Yosef Gorowitz
Title: Manager
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Note: $56,000.00
less $2,500.00 in legal fees and $3,500.00 to Carter, Terry & Company Inc.
7
EXHIBIT A
144 NOTE - $56,000
8
EPOXY, INC.
8% CONVERTIBLE REDEEMABLE PROMISSORY NOTE
Effective Date August 3, 2015
US $56,000.00
Due August 3, 2016
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT
BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE
"1933 ACT”)
FOR VALUE RECEIVED, Epoxy, Inc. (the “Company”) promises to pay to the order of GW Holdings Group, LLC , and its authorized
successors and permitted assigns (" Holder "), the aggregate principal face amount of Fifty-six Thousand Dollars exactly (U.S. $56,000.00) on
August 3, 2016 (" Maturity Date "). The Company will pay interest on the principal amount outstanding at the rate of 8% per annum, which will
commence on August 3, 2015. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 137 Montague Street, Suite 291,
Brooklyn, NY 11201, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from
time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less
any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last
address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding
principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or
wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
2.
Under all applicable laws, the Company shall be entitled to withhold any amounts from all payments it is entitled to.
3.
This Note may only be transferred or exchanged in compliance with the Securities Act of 1933, as amended (" Act ")
and any applicable state securities laws. All attempts transfer to a non-qualifying party shall be treated by the Company as void. Prior to due
presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly
registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company
nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set
forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required
to give the Company written confirmation that this Note is being converted (" Notice of Conversion ") in the form annexed hereto as Exhibit A .
The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4.
(a)
The Holder of this Note has the option, upon the issuance date of the stock, to convert all or any amount of
the principal face amount of this Note then outstanding into shares of the Company's common stock (the " Common Stock ") at a price ("
Conversion Price ") for each share of Common Stock equal to 45% discount of the lowest trading price of the Common Stock as reported
on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the Common
Stock may be traded in the future (" Exchange "), for the twenty prior trading days, including the day upon which a Notice of Conversion is
received by the Company (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the
Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). The Notice of
Conversion may be rescinded if the shares have not been delivered within 3 business days. The Company shall deliver the shares of Common
Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. The Holder shall surrender this Note to
the Company upon receipt of the shares of Common Stock, executed by the Holder. This will make clear the Holder's intention to convert this
Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued but unpaid interest shall be subject to
conversion. The number of issuable shares will be rounded to the nearest whole share, and no fractional shares or scrip representing fractions
of shares will be issued on conversion . In the event the Company experiences a DTC “Chill” on its shares, the conversion price discount
shall be increased to 60% while that “Chill” is in effect. Notwithstanding anything to the contrary contained in the Note (except as set forth
below in this Section), the Note shall not be convertible by Investor, and Company shall not effect any conversion of the Note or otherwise
issue any shares of Common Stock to the extent (but only to the extent) that Investor together with any of its affiliates would beneficially own
in excess of 9.99% (the “ Maximum Percentage ”) of the Common Stock outstanding. To the extent the foregoing limitation applies, the
determination of whether a Note shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by Investor or
any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities
owned by Investor and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission
to Company for conversion, exercise or exchange (as the case may be). No prior inability to convert a Note, or to issue shares of Common
Stock, pursuant to this Section shall have any effect on the applicability of the provisions of this Section with respect to any subsequent
determination of convertibility. For purposes of this Section, beneficial ownership and all determinations and calculations (including, without
limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(e) of the 1934 Act (as
defined below) and the rules and regulations promulgated thereunder. The provisions of this Section shall be implemented in a manner
otherwise than in strict conformity with the terms of this Section to correct this Section (or any portion hereof) which may be defective or
inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this Section shall apply to
a successor holder of this Note and shall be unconditional, irrevocable and non-waivable. For any reason at any time, upon the written or oral
request of Investor, Company shall within one (1) business day confirm orally and in writing to Investor the number of shares of Common
Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock,
including, without limitation, pursuant to this Note. During the first six months, this Note is n effect, the Investor may not convert this Note
pursuant to this paragraph.
9
(b)
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest
shall be paid by the Company in Common Stock ("Interest Shares"). Holder may send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the
accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c)
During the first six months this Note is in effect, the Company may redeem this Note by paying to the
Holder an amount as follows: (i) if the redemption occurs within the first 90 days then an amount equal to 135% of the unpaid principal amount
of this Note along with any prepaid and earned interest, (ii) if the redemption occurs after the first 90 days but before the 150 th day following the
issuance of this Note, then an amount equal to 145% of the unpaid principal amount of this Note along with any prepaid and earned interest, and
(iii) if the redemption occurs after the 151 days but before the 180 th day following the issuance of this Note, then an amount equal to 150% of
the unpaid principal amount of this Note along with any prepaid and earned interest. This Note may not be redeemed after 180 days. The
redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be
invalid and the Company may not redeem this Note.
(d)
Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single
transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the
Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction
of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into
shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon
request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of
redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of
accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e)
In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in
connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this
Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other
securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a
holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as
defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the
consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the
Company or successor person or entity acting in good faith.
5.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6.
The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice
of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7.
The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be
incurred by the Holder in collecting any amount due under this Note.
8.
If one or more of the following described "Events of Default" shall occur:
(a)
the Holder by the Company; or
The Company shall default in the payment of principal or interest on this Note or any other note issued to
(b)
Any of the representations or warranties made by the Company herein or in any certificate or financial or
other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this
Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c)
The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition,
agreement or obligation of the Company under this Note or any other note issued to the Holder; or
(d)
The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they
mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for relief, consent to
the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
10
(e)
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property
or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
(f)
Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
(g)
One or more money judgments, writs or warrants of attachment, or similar process, in excess of Fifty-six
thousand dollars ($56,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain
unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(h)
The Company shall have defaulted on or breached any term of any other note of similar debt instrument into
which the Company has entered and failed to cure such default within the appropriate grace period; or
(i)
The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or,
if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j)
serving as members of the Board;
If a majority of the members of the Board of Directors of the Company on the date hereof are no longer
(k)
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without
restrictive legend within 3 business days of its receipt of a Notice of Conversion; or
(l)
The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of
the Holder. If the Company does not replenish the reserve set forth in Section 12, within 5 business days of the request of the Holder then the
conversion discount set forth in Section 4(a) shall be increased from a 45% conversion discount to a 60% conversion discount; or
(m)
The Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n)
The Company shall lose the “bid” price for its stock in a market (including the OTCQB marketplace or
other exchange).
Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the
Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further)
notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other
instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce
any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default,
interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate
of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the
4 th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10 th day. The
penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the
outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this
Note shall increase by 10%.
11
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney,
then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.
At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day
following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder
may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company
must make the Holder whole as follows:
Failure to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of conversion
shares)]
The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from
the time of the Holder’s written notice to the Company.
9.
In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10.
Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the Company and the Holder.
11.
The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has
been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a
“shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for salability of the conversion
shares or (ii) accept such opinion from Holder’s counsel.
12.
The Company shall issue irrevocable transfer agent instructions reserving 23,500,000 shares of its Common Stock
for conversions under this Note (the “Share Reserve”). The Investor can, in writing, from time to time, request 3,000,000 share increments, so
long as the increase does not cause the Transfer Agent Reserve to exceed the Authorized share count. Upon full conversion of this Note, any
shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs associated with issuing and delivering the shares.
13.
The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes,
stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14.
This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made
and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder
and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New
York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
12
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated:
EPOXY, INC.
By: __________________________________
Title: _________________________________
____
Initials
13
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common
Stock of Epoxy Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other
taxes and charges payable with respect thereto.
Date of Conversion:
Applicable Conversion Price:
Signature:
[Print Name of Holder and Title of Signer]
Address:
SSN or EIN:
Shares are to be registered in the following name:
Name:
Address:
Tel:
Fax:
SSN or EIN:
Shares are to be sent or delivered to the following account:
Account Name:
Address:
____
Initials
14
RULE 13A-14(A)/15D-14(A) CERTIFICATION
I, David Gasparine, certify that:
(1) I have reviewed this quarterly report on Form 10- Q of Epoxy, Inc. for the period ended June 30, 2015;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15
(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
By: /s/ David Gasparine
Name:David Gasparine
Title: Principal Executive Officer
RULE 13A-14(A)/15D-14(A) CERTIFICATION
I, David Gasparine, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of Epoxy, Inc. for the period ended June 30, 2015;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15
(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Title: Principal Financial Officer
EXHIBIT 32
Epoxy, Inc.
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Epoxy, Inc.(the “Company”) on Form 10-Q for the quarterly period ended June 30, 2015 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I, David Gasparine, Chief Executive Officer and Chief Financial
Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Title: Principal Executive Officer, Principal Financial and Accounting Officer
A signed original of this written statement required by Section 1350 of Title 18 of the United States Code has been provided to the Company and
will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 1350 of
Title 18 of the United States Code and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is
not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934
(whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing.)

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