Caro Holdings Inc 10-Q for FY2023 Q3
Caro Holdings Inc. (CAHO)
About this 10-Q
Caro Holdings Inc filed this 10-Q on February 21, 2023, covering the quarter ended December 31, 2022 (FY2023 Q3).
Headline figures
Quarter ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $176.57K
- compared with a net loss of $9133 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | None | None |
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. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ☐ YES ☐ NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
TABLE OF CONTENTS
| 2 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CARO HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
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ASSETS |
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Current Assets |
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Cash |
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Total Current Assets |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Accrued interest |
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Due to related parties |
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Promissory note |
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Convertible notes |
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Total Current Liabilities |
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TOTAL LIABILITIES |
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Stockholders’ Deficit |
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Preferred stock: |
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Common stock: |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total Stockholders’ Deficit |
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 3 |
| Table of Contents |
CARO HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
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Operating Expenses |
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General and administration |
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Professional fees |
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Research and development |
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Total operating expenses |
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Loss from operations |
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Other income (expense) |
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Interest expense |
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Foreign exchange gain |
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Total other income (expense) |
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Net loss before taxes |
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Provision for income taxes |
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Net loss |
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Other comprehensive loss |
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Comprehensive Loss |
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Net Loss Per Common Share – Basic and Diluted |
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Weighted Average Common Shares Outstanding |
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The accompanying notes are an integral part of these unaudited consolidated financial statements
| 4 |
| Table of Contents |
CARO HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED DECEMBER 31, 2022 AND DECEMBER 31, 2021
(Unaudited)
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Balance - March 31, 2022 |
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Net loss |
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Balance - June 30, 2022 |
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Net loss |
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Balance - September 30, 2022 |
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Other comprehensive loss |
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Net loss |
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Balance - December 31, 2022 |
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Balance - March 31, 2021 |
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Net loss |
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Balance - June 30, 2021 |
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Net loss |
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Balance - September 30, 2021 |
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Net loss |
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Balance - December 31, 2021 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
| Table of Contents |
CARO HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Cash Flows from Operating Activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Loss on convertible notes |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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Accounts payable and accrued liabilities |
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Accrued interest |
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Net Cash Used in Operating Activities |
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Cash Flows from Financing Activities: |
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Proceeds from issuance of promissory note |
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Proceeds from issuance of convertible notes |
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Advancement from related party |
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Net Cash Provided by Financing Activities |
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Effects on changes in foreign exchange rate |
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Net Changes in Cash |
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Cash, beginning of period |
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Cash, end of period |
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Supplemental Disclosure Information: |
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Cash paid for interest |
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Cash paid for taxes |
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Non-Cash Investing and Financing Activities: |
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Operating expenses paid by related parties |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
| Table of Contents |
CARO HOLDINGS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Caro Holdings Inc. (the “Company”) was incorporated in the State of Nevada on March 29, 2016 and engaged in the subscription box business with initial focus on offering sock subscriptions to its customers. The Company is now engaged in the development of its Direct To Consumer systems and methodologies where the Company analyzes the marketplace and work with mid-size brands that have a strong bricks and mortar presence, and have a desire to increase their digital presence.
Effective April 28, 2022, Rozh Caroro, the previous sole director, CEO and majority shareholder of the Company, entered into a stock purchase agreement for the sale of
On September 21 2022, the Company incorporated a subsidiary Caro Holdings International Ltd. in UK. To streamline operations, hire employees, consultants and contractors including the payment of payroll taxes and the collection of local VAT, Caro Holdings International Ltd, has been established. The subsidiary is currently enhancing the ecommerce software that will allow the Small and Medium sized Business (SMB) community to sell, market and distribute their products. The company intends to create subsidiaries in markets where it perceives a significant sales opportunity.
The Company is located at 7 Castle Street, Sheffield, UK.
NOTE 2 – GOING CONCERN UNCERTAINTY
As reflected in the accompanying financial statements, the Company has an accumulated deficit of $
Management believes that the current actions to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. There are no assurances that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles used in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year.
This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended March 31, 2022 included in the Company’s Annual Report on Form 10-K as filed with the SEC on October 17, 2022.
Basis of Consolidation
These unaudited interim consolidated financial statements include the accounts of the Company and the wholly-owned subsidiary Caro Holdings International, Ltd.. All material intercompany balances and transactions have been eliminated.
| 7 |
| Table of Contents |
Foreign Currency Translations
The Company’s functional and reporting currency is the U.S. dollar. Caro Holdings International, Ltd.’s functional currency is the Great British Pounds (GBP). All transactions initiated in GBP are translated into U.S. dollars in accordance with ASC 830-30, ”Translation of Financial Statements,” as follows:
| 1) | Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date. |
| 2) | Equity at historical rates. |
| 3) | Revenue and expense items at the average rate of exchange prevailing during the period. |
Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity as a component of comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income (loss). Gains and losses from foreign currency transactions are included in earnings in the period of settlement.
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Average GBP: USD exchange rate |
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Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current period presentation. The reclassification had no impact on net loss and financial position.
Related Parties
We follow ASC 850, “Related Party Disclosures”, for the identification of related parties and disclosure of related party transactions (see Note 6).
Fair Value of Financial Instruments
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including accounts payable and accrued liabilities. are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC 820 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. 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. 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 - | quoted prices for similar assets and liabilities in active markets or inputs that are observable |
Level 3 - | inputs that are unobservable (for example cash flow modeling inputs based on assumptions) |
| 8 |
| Table of Contents |
Convertible Note
The Company follows ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) in its evaluation of the accounting for a hybrid instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives. The Company records each convertible note as a liability at the fixed monetary amount by measuring and recording a premium, as applicable, on the note issuance date with a charge to interest expense in the accompanying consolidated statements of operations and comprehensive loss.
Web Development Cost
In accordance with FASB ASC 350-50 “Web Development Costs”, all costs incurred during the website planning stage are incurred. During the website application and infrastructure development stage, software tool costs and internet domain costs are capitalized, and website hosting costs are expensed. Cost incurred in the graphics development, content development and operating stage are generally expensed unless the costs are software related and should then be capitalized. During the nine ended December 31, 2022, the Company incurred $
Net Income (Loss) per Share
The Company computes basic and diluted net loss per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period. Diluted loss per share reflects the potential dilution that could occur if convertible notes to issue common stock were converted resulting in the issuance of common stock that could share in the loss of the Company.
For the nine months ended December 31, 2022 and 2021, convertible notes were dilutive instruments and were not included in the calculation of diluted loss per share as their effect would be antidilutive.
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Convertible notes payable |
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Recently Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
| 9 |
| Table of Contents |
NOTE 4 – PROMISSORY NOTE
On October 9, 2022, the Company issued a promissory note to an unaffiliated party at principal amount of $
As of December 31, 2022and March 31, 2022, the promissory note payable was $
NOTE 5 – CONVERTIBLE NOTES
As of December 31, 2022 and March 31, 2022, the convertible note payable was $
On October 13, 2022, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
On November 8, 2022, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
On November 19, 2022, the Company entered into an agreement to issue a convertible promissory note to an unaffiliate for an amount of $
Accrued interest on convertible notes
During the nine months ended December 31, 2022 and 2021, interest expense of $
NOTE 6 – RELATED PARTY TRANSACTIONS
During the nine months ended December 31, 2022, the director and Chief Executive Officer (“CEO”) of the Company paid $
During the nine months ended December 31, 2022, the director and Chief Operating Officer (“COO”) of the Company advanced $
As of December 31, 2022 and March 31, 2022, there was $
NOTE 7 – EQUITY
Authorized Stock
The Company’s authorized common stock consists of
Common Stock
As of December 31, 2022 and March 31, 2022, the issued and outstanding common stock was
NOTE 8 – RISKS AND UNCERTAINTIES
In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at December 31, 2022. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company in the future. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this financial statements. These estimates may change, as new events occur and additional information is obtained.
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NOTE 9 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to the December 31, 2022 to the date these financial statements were issued and has determined that it has the following material subsequent events:
On December 29, 2022, the Company entered into a software license agreement with Noise Comms Ltd. for the acquisition of Unified Communications Platform which enables multi-party communications between brands and consumers in consideration of
On December 31, 2022, the Company entered into a board resolution with the director and CEO of the Company for the cancellation of
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Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “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 that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements 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, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Caro Holdings Inc., unless otherwise indicated.
General Overview
Our company was incorporated on March 29, 2016 in the State of Nevada. We had been engaged in the subscription box business with our initial focus on offering sock subscriptions to our customers. Our subscription box was a package of a pair of socks that will be sent directly to a customer on a recurring basis. For example, a potential subscriber would subscribe to receive a pair of socks once a month for either a period of 6 months or 12 months. Our subscription sock boxes were a marketing strategy and a method of product distribution, allowing us to target a wide range of customers and cater to their variety of specific needs and interests.
We are a small early-stage development company. Prior to September 2022, our company's activities have been limited to the sourcing of our advertising channels, initial branding efforts, and in our formation and the raising of equity capital.
Since September 2022, the company has identified all of the components that it needs to provide service. It has been actively either acquiring or building these core components, and additional features as requested by certain clients. It has engaged a number of marketing activities, and has three or four example clients in multiple industries. As an example, it has a potential client in the legal and notarization space, where it is working to build a marketplace for notaries, to connect directly to its consumers, it has also been in conversations with a company that provides pet care, products, and industry that has seen substantial growth as a result of COVID-19. It is looking to provide its marketplace platform for the sale of products and services to the pet care, industry, and has identified three primary suppliers, who are willing to test this platform on a nationally in the United States. The Company is also engaging in social media campaigns, making the business is aware of our services. We contemplate that this year, we will also be attending trade shows and fairs as well as doing a number of online conferences to promote direct 2 consumer commerce, and we have identified experts in affiliate marketing, pay per click, organic, search, engine, optimization, and social media marketing. We have no revenues and have limited cash on hand. We have sustained losses since inception and have relied upon loans from directors and officers and the sale of our securities for funding. We have never declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.
Our Current Business
Since our original idea, online commerce and the direct-to-consumer market has had sustained growth. As a result of Covid, this method of sales and distribution has grown exponentially. There are thousands of manufacturers and retailers that have traditionally sold their goods and services offline. Our plan has evolved from the original idea from being both the merchant and the distribution marketplace to strictly a marketplace and a direct-to-consumer enabler.
We are now engaged in the development of our Direct To Consumer systems and methodologies where we analyze the marketplace and work with mid-size brands that have a strong bricks and mortar presence, and have a desire to increase their digital presence.
Our Direct to Consumer System (D2C) will be a fully integrated, end-to-end system that allows full control of data that provides insight from multiple channels so together with our clients successful marketing decisions can be based on the entire business’ performance. Based on these analytics, the system can immediately deploy personalization and optimization independently and readily understand how customer interactions vary across different regions. Furthermore, we believe we have the necessary infrastructure to take advantage of growth opportunities with minimal additional costs.
We have not developed any new or unique products or services that have not already been announced, but have plans to create or acquire complementary systems in the next year.
Marketing, Advertising, and Promotion
We believe that our systems will become one of our most important assets. Our ability to successfully create brand awareness is dependent upon our ability to address the changing needs and priorities of each brand’s target customers. To that end, we plan to focus much of our marketing efforts to recruit partners and then to apply our methodologies to better understand their customers and their needs and ensure we align our brand messages in our marketing, and the channels through which we deliver these messages, to our target customers.
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Results of Operations
Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| December 31, |
|
| Change |
|
| Change |
| |||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| Percentage |
| ||||
Revenue |
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
| - |
|
Cost of Goods Sold |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Gross Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Operating expenses |
| $ | 102,956 |
|
| $ | 9,133 |
|
| $ | 93,823 |
|
| 1027 | % | |
Loss from operations |
|
| (102,956 | ) |
|
| (9,133 | ) |
|
| (93,823 | ) |
| 1027 | % | |
Other expenses |
|
| (73,611 | ) |
|
| - |
|
|
| (73,611 | ) |
|
| - |
|
Net Loss |
| $ | (176,567 | ) |
| $ | (9,133 | ) |
| $ | (167,434 | ) |
| 1833 | % | |
Net loss increased from $9,133 for the three months ended December 31, 2021 to $176,567 for the three months ended December 31, 2022 due to the increase in operating expenses and other expenses.
During the three months ended December 31, 2022 and 2021, we did not generate revenues.
Operating expenses for the three months ended December 31, 2022 consisted of audit and accounting fees, software development expense, legal fees transfer agent fees, consulting fees and website development expense. The increase in operating expenses was primarily a result of an increase in development activities, audit fees, legal fees and consulting fees.
During the three months ended December 31, 2022, the Company incurred other expenses of $73,611 mainly consist of loss on convertible notes of $73,333.
Nine Months Ended December 31, 2022 Compared to Nine Months Ended December 31, 2021
|
| Nine Months Ended |
|
|
|
|
|
|
| |||||||
|
| December 31, |
|
| Change |
|
| Change |
| |||||||
|
| 2022 |
|
| 2021 |
|
| Amount |
|
| Percentage |
| ||||
Revenue |
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
| - |
|
Cost of Goods Sold |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Gross Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Operating expenses |
| $ | 139,403 |
|
| $ | 43,412 |
|
|
| 95,991 |
|
|
| 221 | % |
Loss from operations |
|
| (139,403 | ) |
|
| (43,412 | ) |
|
| (95,991 | ) |
|
| 221 | % |
Other expenses |
|
| (73,611 | ) |
|
| - |
|
|
| (73,611 | ) |
|
| - |
|
Net Loss |
| $ | (213,014 | ) |
| $ | (43,412 | ) |
| $ | (169,602 | ) |
|
| 391 | % |
Net loss increased from $43,412 for the nine months ended December 31, 2021 to $213,014 for the nine months ended December 31, 2022 due to the increase in operating expenses and other expenses.
During the nine months ended December 31, 2022 and 2021, we did not generate revenues.
Operating expenses for the nine months ended December 31, 2022 consisted of audit and accounting fees, software development expense, legal fees, consulting fees and website development expense. The increase in operating expenses was primarily a result of an increase in development activities, audit fees, legal fees and consulting fees.
During the nine months ended December 31, 2022, the Company incurred other expenses of $73,611 mainly consist of loss on convertible notes of $73,333.
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Liquidity and Financial Condition
Working Capital (Deficiency) |
|
|
|
| ||||
|
|
|
|
| ||||
|
| December 31, 2022 |
|
| March 31, 2022 |
| ||
Current Assets |
| $ | 46,369 |
|
| $ | - |
|
Current Liabilities |
|
| 283,093 |
|
|
| 22,003 |
|
Working Capital (Deficiency) |
| $ | (236,724 | ) |
| $ | (22,003 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash used in Operating Activities |
| $ | (88,900 | ) |
| $ | (491 | ) |
Cash used in Investing Activities |
|
| - |
|
|
| - |
|
Cash provided by Financing Activities |
|
| 136,976 |
|
|
| 500 |
|
Effects on changes in foreign exchange rate |
|
| (1,707 | ) |
|
| - |
|
Net changes in cash during period |
| $ | 46,369 |
|
| $ | 9 |
|
Our total current assets as of December 31, 2022 were as $46,369 compared to total current assets of $0 as of March 31, 2022. The increase was primarily due to an increase in cash as the Company opened a bank account in September 2022.
Our total current liabilities as of December 31, 2022 were $283,093 as compared to total current liabilities of $22,003 as of March 31, 2022. The increase was attributed by the increase in convertible notes, promissory notes and due to related parties.
Working capital deficiency increased from $22,003 as of March 31, 2022 to $236,724 as of December 31, 2022 mainly due to the increase in convertible notes, promissory notes and due to related parties.
The report of our auditors on our audited financial statements for the fiscal year ended March 31, 2022, contains a going concern qualification as we have suffered losses since our inception. We have minimal assets and have achieved limited operating revenues since our inception. We have been dependent on sales of equity securities to conduct operations. Unless and until we commence material operations and achieve material revenues, we will remain dependent on financings to continue our operations.
Operating Activities
For the nine months ended December 31, 2022, net cash used in operating activities was $88,900, related to our net loss of $213,014, decreased by an increase of loss on convertible notes of $73,333, an increase in accounts payable and accrued liabilities of $48,896 and an increase in accrued interest of $1,885.
For the nine months ended December 31, 2021, net cash used in operating activities was $491, related to our net loss of $43,412 increased in by an increase in accounts payable and accrued liabilities of $40,421and an increase in prepaid expenses of $2,500.
Investing Activities
We did not use any funds for investing activities for the nine months ended December 31, 2022 and December 31, 2021.
Financing Activities
For the nine months ending December 31, 2022, net cash used by financing activities was $136,976 due to an issuance of a promissory note of $25,000,issuance of convertible notes of $110,000 and advancement from related party of $1,976. For the nine months ended December 31, 2021, net cash used by financing activities was $500 from advancement from related party.
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Cash Requirements
We will require additional cash as we expand our business. Initially, to carry out our business plan, we will need to raise additional capital. There can be no assurance that we will be able to raise additional capital or, if we are able to raise additional capital, the terms we be acceptable to us. Currently we do not have any inventory.
These conditions indicate a material uncertainty that casts significant doubt about our ability to continue as a going concern. We require additional debt or equity financing to have the necessary funding to continue operations and meet our obligations. We have continued to adopt the going concern basis of accounting in preparing our financial statements.
We will require additional financing in order to enable us to proceed with our plan of operations. There is no assurance that any party will advance additional funds to us in order to continue our future plans for operations.
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
Basis of Presentation
The financial statements are prepared in accordance with generally accepted accounting principles used in the United States of America (“US GAAP”).
Use of Estimates
In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those estimates.
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Fair Value of Financial Instruments
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including accounts payable and accrued liabilities. are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC 820 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. 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. 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 - | quoted prices for similar assets and liabilities in active markets or inputs that are observable |
Level 3 - | inputs that are unobservable (for example cash flow modeling inputs based on assumptions) |
Recently Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We are required to maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on her evaluation as of the end of the period covered by this report, Meriesha Rennalls, our President, Chief Operating Officer, Secretary and Director, has concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in our internal control over financial reporting.
As disclosed in our Quarterly Report on Form 10-Q for the three months ended December 31, 2022, based on management’s assessment of the effectiveness of our internal controls over financial reporting, management concluded that our internal controls over financial reporting were not effective as of December 31, 2022, due to inadequate segregation of duties and ineffective risk management, and insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. Management believes the above weakness constitute material weaknesses in our internal control over financial reporting. Until such time, if ever, that we remediate the material weakness in our internal control over financial reporting we expect that the material weaknesses in our disclosure controls and procedures will continue.
Changes in Internal Control over Financial Reporting
During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we area party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.
Item 1A. Risk Factors
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit Number |
| Description of Exhibits |
| 19 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CARO HOLDINGS INC. | |||
| (Registrant) |
| |
| Dated: February 21, 2023 | /s/ Meriesha Rennalls | ||
|
| Meriesha Rennalls | |
President, Chief Operating Officer, Secretary (Principal Executive Officer) | |||
| 20 |
EXHIBIT 4.1
PROMISSORY NOTE
| Amount: $25,000.00 USD |
| DUE: April 9th 2023 |
| Issue Date: October 9th, 2022 |
|
|
Caro Holdings Inc, a Nevada corporation (herein called the “Maker”), for value received, hereby promises to pay to rOOmZZ Communications, a United Kingdom corporation with an address at 4 Belle Vue Road, Paignton, TQ4 6ER UK (“Payee”), on the Maturity Date (hereinafter defined), or earlier as hereinafter provided the principal sum of TWENTY-FIVE Thousand Dollars ($25,000.00) (the “Principal”), and to pay interest on such Principal, as set forth below.
IT IS THEREFORE AGREED:
| 1) | Definitions. |
|
| a) | The term “Maturity Date” shall mean April 9th 2023. |
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|
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| b) | The term “Event of Default” shall mean any event specified in Section 8(a) of this Note. |
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| c) | The term “Note” shall mean this Promissory Note. |
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| d) | The term “Termination Date” shall have the meaning ascribed to it in Section 8(b) hereof. |
| 2) | Payment Terms. The Maker shall irrevocably and unconditionally pay to Payee, without set- off or deduction the Principal and all accrued and unpaid interest on the earlier of the Maturity Date or the Termination Date. Interest on the Principal amount of this Note shall accrue at the rate of 8% per annum and following an Event of Default shall accrue at the rate equal to the lesser of one and one-half percent (2-1/2%) per month, or the maximum rate allowed by law, compounded monthly, until paid. In no event shall Payee be entitled to receive interest in excess of the legally permissible rate of interest. In the event that Payee receives payments under this Note that are deemed excessive interest under applicable law, such excess will be applied first to the costs referred to in Section 12 hereof and then to the Principal of this Note. If, in such instance, such costs and the Principal are paid in full, any remaining excess shall be refunded to by the Maker. |
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| 3) | Acceleration. Notwithstanding any provision of this Note to the contrary, upon the occurrence of an Event of Default (hereinafter defined) under this Note, the Principal and all then accrued interest thereon shall become immediately due and payable, without demand, notice or other action by Payee. All payments received by Payee after an Event of Default under this Note will be applied first to the costs referred to in Sections 12 and 13 hereof, then to all accrued interest hereunder and next to the Principal of this Note. |
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| 4) | Place and Manner of Payment. All payments of Principal and interest under this Note (and all other amounts payable hereunder) shall be made to Payee on the Maturity Date, or earlier as and to the extent provided in this Note, at the address of Payee hereinbefore set forth or, at Payee’s request, to Payee at such other place as Payee may, from time to time, designate in writing (or by wire transfer pursuant to written instructions provided to Maker by Payee). If any payment hereunder becomes due on a Saturday, Sunday or legal holiday, such payment shall become due on the next business day. All payments of Principal and interest under this Note shall be deemed made only upon receipt by Payee. |
| 1 |
| 5) | Prepayment. The Maker shall have the right to prepay the unpaid Principal of this Note, and/or any accrued interest thereon, in whole or in part, at any time prior to the Maturity Date without a penalty or premium. Additionally, any payments that result from the receipt of proceeds from the collateral as set forth in Section 6 shall be a “prepayment” and subject to this section. |
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| 6) | Exchange for Regulation A Subscription. Upon the Company having a qualified Regulation A Offering Circular (the “Qualified Reg A Offering”), the Payee may exchange this Note in the amount of the then outstanding principal and accrued but unpaid interest, for a subscription for securities being sold pursuant to the Qualified Reg A Offering at the price set forth therein. |
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| 7) | Fees. Each party shall be responsible for its own costs and professional fees, except in the event of a default where the costs of collection will be borne by the maker. |
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| 8) | Default. |
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| a) | If one or more of the following events shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), each such event shall, for purposes of this Note, be deemed an “Event of Default”: |
|
| i) | default by the Maker in payment of the Principal of this Note or any accrued interest hereunder, as and when the same shall become due and payable, whether at Maturity or on a date fixed for payment, prepayment, or by acceleration or otherwise; or |
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| ii) | default by the Maker in the performance or observance by it of any other covenant, agreement, term or condition contained in this Note; or |
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| iii) | the Maker’s making of an assignment for the benefit of its creditors or admitting in writing its inability to pay its debts generally as they become due; or |
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| iv) | the entry of a final order, judgment or decree adjudicating the Maker bankrupt or insolvent; or |
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| v) | the Maker’s petitioning or applying to any court of competent jurisdiction or other tribunal for the appointment of a trustee or receiver, or of any substantial part of its assets or properties, or the commencement by the Maker of any proceedings under any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution, or similar law of any jurisdiction whether now or hereafter in effect; or the filing of any such petition or application, or the commencement of any such proceedings, against the Maker, if the Maker by any act indicates its approval thereof, consents or acquiesces therein, or the entry of any order, judgment or decree appointing any such trustee or receiver, or approves the petition in any such proceedings, if such order, judgment or decree remains unstayed or unbonded and in effect for more than thirty (30) days. |
| 2 |
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| b) | Upon the occurrence of an Event of Default, the holder of this Note may, by notice in writing to the Maker, declare the Principal of this Note then outstanding, and all interest accrued thereon, to be immediately due and payable without presentment, demand or other notice of any kind, all of which are hereby waived, and upon any such notice the same shall become and shall be immediately due and payable, notwithstanding anything contained in this Note to the contrary (the “Termination Date”). |
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| c) | In the event of a default, the Payee does not have an obligation to notify the Maker, and notification will be assumed automatically by the Maker. For further clarification, if the note goes into default on October 9th 2023, the Payee does not have to inform the Maker, and the Maker accepts that the responsibility and onus is on the Maker to not only notify the Payee that he is in default and to take the affirmative actions to cure such a default. |
| 9) | Loan Reinstatement. If, at any time after payment in full of this Note, any payments previously made under this Note must be disgorged by the Payee for any reason whatsoever, this Note shall be reinstated as to all disgorged payments as if such payments had not been made, until payment in full of all obligations of the Maker under this Note are made. |
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| 10) | Waiver of Presentment, Demand and Notice. The Maker hereby waives presentment for payment, demand, notice of demand, notice of non-payment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default, or enforcement of the terms of this Note (except as specifically provided elsewhere in this Note) and the Maker hereby agrees that its liability under this Note shall be without regard to the liability of any other party, including any guarantor of this Note, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted or consented to by Payee. The Maker hereby agrees that additional makers, endorsers, guarantors or sureties may become parties to this Note without notice to the Maker and without affecting the Maker’s liability hereunder. |
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| 11) | Right to Cure. Regardless of anything stated otherwise, Payee shall have ten (10) business days to cure any breach of this Note by remitting payment of all amounts due and owing hereunder to the Maker from the date of written notice of default. |
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| 12) | Costs of Collection. In the event that Payee shall take any action to enforce its rights under this Note after an Event of Default, including the commencement of any legal action or proceeding to enforce the terms of this Note (or takes any action to enforce its security interest in the Pledged Shares following an Event of Default under this Note), the Payee shall be entitled to recover from the Maker, upon demand, all costs and expenses incurred by it in connection therewith (including, without limitation, all of Payee’s attorneys’ fees and disbursements), together with interest on any judgment obtained against Maker, at the then prevailing legal rate of interest. |
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| 13) | Remedies Cumulative. The rights and remedies of Payee provided in this Note shall be cumulative and concurrent and exclusive of all rights and remedies provided by law or in equity and Payee may, at its election, pursue its rights and remedies against the Maker hereunder or thereunder, singly, successively, or together, at the sole discretion of Payee, and all of such rights and remedies may be exercised separately as often as occasion therefor shall occur. The failure of Payee to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. |
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| 14) | Severability. If any provision of this Note is held to be invalid or unenforceable by a court of competent jurisdiction, the other provisions of this Note shall remain in full force and effect and shall be unaffected thereby. |
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| 15) | No Waiver by Payee. Payee shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by Payee, and then only to the extent specifically set forth in any such writing. A waiver of one event shall not be construed as continuing or constitute a bar to or waiver of any right or remedy with respect to a subsequent event. |
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| 16) | Modification; Governing Law. The provisions of this Note may not be modified or amended except by an instrument in writing signed by the party to be bound thereby. This Note and the respective rights and obligations of the Maker and Payee hereunder shall be governed by and construed in accordance with the laws of the state of Florida without regard for the conflicts of law principles thereof. Any dispute arising will be settled in the city of Montreal, Quebec. |
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| 17) | Notice. Any notice or demand which by any provision of this Agreement is required or provided to be given shall be deemed to have been sufficiently given or served for all purposes by (i) being delivered in person to the party to whom the notice or demand is directed or (ii) by being sent as first class mail, postage prepaid, or (iii) being sent via nationally recognized overnight carrier, in any event to the following address: |
If to Maker at:
7 Castle Street
S3 8LT, Sheffield, United Kingdom;
or if any other address shall at any time be designated by Maker in writing to the holders of record of the Note at the time of such designation to such other address;
and if to Payee,
4 Belle Vue Road
Paignton, TQ4 6ER United Kingdom,
or if any other address shall at any time be designated in writing to Maker, to such other address. Notwithstanding the foregoing, no notice shall be effective as to Payee until actually received by Payee. Any written notice that is not sent in conformity with the provisions here-of shall nevertheless be effective on the date that such notice is actually received by the noticed party.
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| 18) | Binding Effect. This Note shall be binding upon the Maker and its successors and permitted assigns and shall inure to the benefit of Payee and its successors and assigns. The Maker shall not have the right to assign this Note, or any of its obligations hereunder, without the written consent of Payee, which consent shall be within Payee’s sole and absolute discretion. This Note shall extend to and enure to the benefit of the Maker, its successors and assigns, and every reference herein to the Payee as a reference to and shall be construed as including the Payee, its successors and assigns, to and upon whom this promissory note shall extend and be binding. The Payee in its sole and absolute discretion may assign this note to any third party without the consent of the Maker. |
IN WITNESS WHEREOF, the Maker, intending to be legally bound hereby, has caused this Note to be signed in its name by its duly authorized officer and to be dated the day and year above written.
| MAKER | |||
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| CARO HOLDINGS INC |
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| By: | /s/ Meriesha Rennalls | ||
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| Name: | Meriesha Rennalls | |
| Title: | CEO | ||
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| Acknowledged by: rOOmZZ Communications LTD |
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| By: | /s/ Pavle Andjelkovic | ||
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| Name: | Pavle Andjelkovic |
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| Title: | Director |
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| Transaction statement | ||
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| Generated on the Oct 24, 2022 | ||
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| Gratia-Irma-Elena |
| Currency | USD |
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| Ionescu |
| Type | Local |
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| ROOMZZ |
| Account number | 253372308686 |
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| COMMUNICATIONS |
| Routing number | 026014928 |
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| LTD |
| Type | International |
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| 4 Belle Vue Road |
| IBAN | GB57REVO00996967956264 |
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| Paignton |
| BIC | REVOGB21 |
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| TQ4 6ER |
| Intermediary BIC | CHASGB2L |
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| United Kingdom |
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Transaction of Oct 9, 2022
| Date |
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| Description |
| Money out |
| Money in |
| 9 Oct 2022 |
| MOS |
| To CARO HOLDINGS INTERNATIONAL LIMITED |
| $25 000.00 |
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| Report lost or stolen card +44 20 3322 8352 Get help directly In app Scan the QR code | Revolut Ltd (Company No. 08804411) is authorised by the Financial Conduct Authority under the Electronic Money regulations 2011 (Firm Reference 900562). Registered address: 7 Westferry Circus, Canary Wharf, London, England, E14 4HD. Revolut Ltd is an Appointed Representative of Lending Works Ltd (for the activity of “operating an electronic system for lending” only) and Revolut Travel Ltd (for the purposes of designated investment business only). Transaction information is available through the Revolut app while your account is open. If you need to keep a copy of the information after your account is closed, you will need to download it first. You can download information from the app at any time. |
| © 2022 Revolut Ltd |
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EXHIBIT 4.2
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
| October 13th 2022 | $20,000 US |
CARO HOLDINGS INC
(OTC: CAHO)
10% Convertible Debenture
Due April 13, 2023
FOR VALUE RECEIVED, CARO HOLDINGS INC, a Nevada corporation (hereinafter called the “Borrower” or the “Company”), hereby promises to pay to Dan Ionescu (the “Holder”) without demand, the sum of TWENTY Thousand Dollars ($20,000), with simple interest accruing at the rate described below, on April 13 2023 (the “Maturity Date”).
NOW THEREFORE, the following terms shall apply to this Note:
ARTICLE I
GENERAL PROVISIONS
1.1 Payments. The entire unpaid principal amount due under this Note (the “Principal”) shall be due and payable on the Maturity Date. Interest on this Note (the “Interest”) will be payable on the Maturity Date. Interest shall be payable in cash or, at the Holder’s option, in shares of the Company’s common stock, $.0001 par value per share (the “Common Stock”).
Upon any conversion in part by the Holder in accordance with Article II, the Holder and the Borrower shall in good faith recalculate the outstanding principal balance. Upon any full conversion by the Holder in accordance with Article II of all of the Interest and the Principal due hereunder, all of the Borrower’s payment obligations shall terminate. All payments in respect of the indebtedness evidenced hereby shall be applied in the following order: to accrued Interest, Principal, and charges and expenses owing under or in connection with this Note.
If any payment of interest is paid in Common Stock, the number of shares issuable will be determined utilizing the conversion ratio as set forth in Article II. Notwithstanding the foregoing, the Company’s right to pay this Note, including any Interest due thereunder, in shares of Common Stock upon the Maturity Date is subject to the condition that: (i) the Common Stock is trading on the OTC Markets (Pink Sheets), OTC Bulletin Board, American Stock Exchange or Nasdaq; and (ii) there is an effective Registration Statement on the Maturity Date or the shares are otherwise eligible for resale pursuant to Rule 144 and payment thereof in full will not exceed the Maximum Conversion as defined below.
1.2 Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to ten percent (10%) from the date Principal was advanced in connection with this Note and shall be payable annually unless otherwise converted earlier at the election of the Holder as further described below. Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder will be paid to the Holder or its assignee in whose name this Note is registered on the records of the Borrower regarding registration and transfers of Notes (the “Note Register”). However, should the Company fail to maintain current public information as defined in Rule 144 of the Securities Act of 1933, the interest rate shall increase to 18% per annum for that period when the Company’s filings are not up-to-date.
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1.3 Payment Grace Period. From and after the 10th day after an Event of Default under Section 3.1, the Interest Rate applicable to any unpaid amounts owed hereunder shall be increased to eighteen percent (18%) per annum.
1.4 Conversion Privileges. The conversion privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. This Note shall be payable in full on the Maturity Date, unless previously converted into Common Stock in accordance with Article II hereof; provided, that if an Event of Default has occurred, the Holder may elect to extend the Maturity Date by the amount of days of the pendency of the Event of Default.
1.5 Corporate Existence. So long as this Note remains outstanding, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split, consolidation, change of control, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, a “Fundamental Change”) where the Company is not the surviving entity unless, prior to the consummation a Fundamental Change, the Company shall have given the Holder not less than fourteen (14) days prior written notice to the Holder. In any such case, the Company grant the Holder the right to put this Note to the Company up to the time of the effectiveness of the Fundamental Change at 150% of the then outstanding Principal plus any unpaid and accrued Interest.
This Note is subject to the following additional provisions:
ARTICLE II
CONVERSION RIGHTS AND REDEMPTION RIGHTS
The Holder shall have the right to convert the principal and accrued and unpaid interest due under this Note into Shares of the Borrower’s Common Stock as set forth below.
2.1 Conversion into the Borrower’s Common Stock.
(a) The Company shall convert the principal amount of this note into shares of the Company’s stock. Additionally, the Holder shall have the right from and after the date of the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and accrued Interest, at the election of the Holder (the date of giving of such notice of conversion being a “Conversion Date”) into fully paid and non-assessable shares of Common Stock as such stock exists on the date of issuance of this Note (such shares, the “Conversion Shares”), or any shares of capital stock of Borrower into which such Common Stock shall hereafter be changed or reclassified (the “Other Securities”), at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”), determined as provided herein. Upon delivery to the Borrower of a completed Notice of Conversion, a form of which is attached hereto as Exhibit A, Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date (such third day being the “Delivery Date”) that number of Conversion Shares for the portion of the Note converted in accordance with the foregoing. At the election of the Holder, the Borrower will deliver accrued but unpaid interest on the principal amount of the Note being converted in the manner provided in Section 1.1 through the Conversion Date directly to the Holder on or before the Delivery Date. The number of Conversion Shares to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of this Note and accrued interest to be converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be 60% of the average VWAP for the Company’s stock during the previous 15 trading days.
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(c) The Conversion Price and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(a), shall be subject to adjustment from time to time upon the happening of the following certain events while this conversion right remains outstanding:
A. Reorganization, Consolidation, Merger, etc.; Reclassification. In case at any time or from time to time, the Company shall, subject to Section 1.5 hereof, effect a Fundamental Change, then, in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holder of this Note, on the conversion hereof as provided in Article II, at any time after the consummation of such Fundamental Change, shall receive, in lieu of the Conversion Shares (or Other Securities) issuable on such conversion prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation of a Fundamental Change if such Holder had so converted this Note, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 2.1(c)(E).
If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes that may be issued or outstanding, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.
B. Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of this Note after the effective date of such dissolution pursuant to this Article II to a bank or trust company (a “Trustee”) having its principal office in Fort Lauderdale, Florida as trustee for the Holder of the Notes.
C. Continuation of Terms. Upon any Fundamental Change or transfer (and any dissolution following any transfer) referred to in this Article II, this Note shall continue in full force and effect and the terms hereof shall be applicable to the Other Securities and property receivable on the conversion of this Note after the consummation of such Fundamental Change or transfer or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Note as provided in Section 2.1(c)(E). In the event this Note does not continue in full force and effect after the consummation of the transaction described in this Article II, then only in such event will the Company’s securities and property (including cash, where applicable) receivable by the Holder of this Note be delivered to the Trustee as contemplated by Section 2.1(c)(B).
D. Forced Conversion. Subject to the terms and conditions of this Section 2.1 (c), the Company shall have the absolute right, if not redeemed, exercisable at any time to require Conversion of this Note (a “Forced Conversion”). In order to effect a Forced Conversion, (i) the daily VWAP must, on each of twenty (20) Trading Days occurring during any period of thirty (30) consecutive Trading Days (such period of thirty Trading Days, a “Forced Conversion Period”), be equal to or greater than the Forced Conversion Price and (ii) each of the Equity Conditions must be satisfied on each Trading Day occurring during the Forced Conversion Period and through and including the Forced Conversion Date. Notwithstanding the foregoing, in no event shall the Company be permitted to effect a Forced Conversion to the extent that, upon receipt of the shares of Common Stock deliverable thereby, the Holder would beneficially own more than 4.99% of the number of shares of Common Stock then outstanding. In the event of a forced conversion, the conversion rate will be at a discount to market at 150% of the note value, including interest, penalties and cost.
E. Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) subject to Section 1.5 hereof, combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Conversion Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Conversion Price then in effect. The Conversion Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 2.1(c)(E). The number of Conversion Shares that the Holder of this Note shall thereafter, on the conversion hereof as provided in Article II, be entitled to receive shall be adjusted to a number determined by multiplying the number of Conversion Shares that would otherwise (but for the provisions of this Section 2.1(c)(E)) be issuable on such conversion by a fraction of which (a) the numerator is the Conversion Price that would otherwise (but for the provisions of this Section 2.1(c)(E)) be in effect, and (b) the denominator is the Conversion Price in effect on the date of such conversion.
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F. Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the conversion of the Notes, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Note and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Conversion Price and the number of Conversion Shares to be received upon conversion of this Note, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Note. The Company will forthwith mail a copy of each such certificate to the Holder of the Note and any transfer agent of the Company.
2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower within 10 working days to the Holder for the principal balance of this Note and interest which shall not have been converted or paid. The failure of the borrowed to issue the note within a timely manner will be considered a term of default, as defined in Section 3.9.
2.3 Issuance Below Par. The Parties hereto agree that Nevada Law allows for the issuance of conversion shares under this section even if such conversion price is less than the shares’ stated par value, and that such shares shall be issued in response to a Conversion Request regardless of Conversion Price.
2.4 Intentionally Left Blank.
2.5 Conversion of Note.
(a) Upon the conversion of this Note or part thereof, the Company shall, at its own cost and expense, take all necessary action, including obtaining and delivering, an opinion of counsel to assure that the Company’s transfer agent shall issue stock certificates in the name of Holder (or its nominee) or such other persons as designated by Holder and in such denominations to be specified at conversion representing the number of Conversion Shares issuable upon such conversion. The Company warrants that no instructions other than these instructions have been or will be given to the transfer agent of the Company’s Common Stock and that, unless waived by the Holder, the Conversion Shares will be free-trading, and freely transferable, and will not contain a legend restricting the resale or transferability of the Conversion Shares provided the Conversion Shares are being sold pursuant to an effective registration statement covering the Conversion Shares or are otherwise exempt from registration.
(b) Subscriber will give notice of its decision to exercise its right to convert this Note or part thereof by telecopying an executed and completed Notice of Conversion (a form of which is attached as Exhibit A to the Note) to the Company via confirmed telecopier transmission or overnight courier or otherwise pursuant to Section 4.2 of this Note. The Subscriber will not be required to surrender this Note until this Note has been fully converted or satisfied, with each date on which a Notice of Conversion is telecopied to the Company in accordance with the provisions hereof shall be deemed a Conversion Date (as defined above). The Company will itself or cause the Company’s transfer agent to transmit the Company’s Common Stock certificates representing the Conversion Shares issuable upon conversion of this Note to the Subscriber via express courier for receipt by such Subscriber on or before the Delivery Date (as defined above). In the event the Conversion Shares are electronically transferable, then delivery of the Conversion Shares must be made by electronic transfer provided request for such electronic transfer has been made by the Subscriber and the Subscriber has complied with all applicable securities laws in connection with the sale of the Common Stock, including, without limitation, the prospectus delivery requirements. A Note representing the balance of this Note not so converted will be provided by the Company to the Subscriber if requested by Subscriber, provided the Subscriber delivers the original Note to the Company.
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(c) The Company understands and agrees that a delay in the delivery of the Conversion Shares in the form required pursuant to Section 2.5(a) hereof, after the Delivery Date (as hereinafter defined) could result in economic loss to the Holder. As compensation to the Holder for such loss, the Company agrees to pay (as liquidated damages and not as a penalty) to the Holder for late issuance of Conversion Shares upon Conversion of the Note in the amount of $500 per business day after the Delivery Date for each $10,000 of Note principal amount being converted of the corresponding Conversion Shares which are not timely delivered. The Company shall pay any payments incurred under this Section in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available to the Holder, in the event that the Company fails for any reason to effect delivery of the Conversion Shares by the Delivery Date the Holder will be entitled to revoke all or part of the relevant Notice of Conversion by delivery of a notice to such effect to the Company whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the delivery of such notice, except that the liquidated damages described above shall be payable through the date notice of revocation or rescission is given to the Company.
(d) Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.
2.6 Injunction Posting of Bond. In the event a Holder shall elect to convert a Note or part thereof in whole or in part, the Company may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, or for any other reason, unless an injunction from a court, on notice, restraining and or enjoining conversion of all or part of such Note shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of such Holder in the amount of 120% of the amount of the Note, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent Holder obtains judgment.
2.7 Optional Redemption.
(a) Provided that the Company has a number of authorized but unissued shares of Common Stock sufficient for the issuance of all Conversion Shares underlying the remaining principal amount of this Note, such Common Stock is listed or quoted (and is not suspended from trading) on the Principal Market and such shares of Common Stock are approved for listing on such Principal Market upon issuance if applicable, such Common Stock is registered for resale under the Registration Statement and the prospectus under such Registration Statement is available for the sale of all Registrable Securities held by the Subscriber or there is an applicable exemption from registration, such issuance would be permitted in full without violating Section 2.3 herein or the rules or regulations of any trading market on which such Common Stock may be listed or quoted, and both immediately before and after giving effect thereto, no Event of Default under this Note shall or would exist, the Borrower will have the option of prepaying the outstanding principal amount of this Note (“Optional Redemption”), in whole or in part, together with interest accrued thereon, by paying to the Holder a sum of money equal to the principal amount to be redeemed, (the “Redemption Amount”) on the day written notice of redemption (the “Notice of Redemption”) is given to the Holder. The Notice of Redemption shall specify the date for such Optional Redemption (the “Redemption Payment Date”), which date shall be not less than five (5) business days after the date of the Notice of Redemption (the “Redemption Period”). A Notice of Redemption shall not be effective with respect to any portion of this Note for which the Holder has a pending election to convert, or for Conversion Notices given by the Holder prior to the Redemption Payment Date. On the Redemption Payment Date, the Redemption Amount shall be paid in good funds to the Holder. In the event the Borrower fails to pay the Redemption Amount on the Redemption Payment Date as set forth herein, then (i) such Notice of Redemption will be null and void, and (ii) Borrower’s failure may be deemed by Holder to be a curable Event of Default. Should the Company pay the redemption amount and the redemption amount plus the other amounts realized by the Holder, by sale of conversion shares or otherwise, be equal to or exceed $25,000, then the remainder of the note shall be extinguished.
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2.8 Mandatory Redemption at Subscriber’s Election. In the event the Company is prohibited from issuing Conversion Shares, or fails to timely deliver Shares on a Delivery Date, or upon the occurrence of any other Event of Default (as defined in this Note) or for any reason other than pursuant to the limitations set forth in Section 2.3 hereof, then at the Subscriber’s election, the Company must pay to the Subscriber ten (10) business days after request by the Subscriber, at the Subscriber’s election, a sum of money in immediately available terms equal to the greater of (i) the product of the outstanding principal amount of the Note designated by the Subscriber multiplied by 125%, or (ii) the product of the number of Conversion Shares otherwise deliverable upon conversion of an amount of Note principal and/or interest designated by the Subscriber (with the date of giving of such designation being a “Deemed Conversion Date”) at the then Conversion Price that would be in effect on the Deemed Conversion Date multiplied by the average of the closing bid prices for the Common Stock for the five consecutive trading days preceding either: (1) the date the Company becomes obligated to pay the Mandatory Redemption Payment, or (2) the date on which the Mandatory Redemption Payment is made in full, whichever is greater, together with accrued but unpaid interest thereon and any liquidated damages then payable (“Mandatory Redemption Payment”). The Mandatory Redemption Payment must be received by the Subscriber on the same date as the Company Shares otherwise deliverable or within ten (10) business days after request, whichever is sooner (“Mandatory Redemption Payment Date”). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal and interest will be deemed paid and no longer outstanding. Liquidated damages calculated pursuant to Section 2.5(c) hereof, that have been paid or accrued for the twenty (20) day period prior to the actual receipt of the Mandatory Redemption Payment by the Subscriber shall be credited against the Mandatory Redemption Payment.
2.9 Buy-In. In addition to any other rights available to the Subscriber, but without any duplicative recovery by the Subscriber, if the Company fails to deliver to the Subscriber the Conversion Shares issuable upon conversion of this Note by the Delivery Date and if after five (5) business days after the Delivery Date the Subscriber purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Subscriber of the Common Stock which the Subscriber was entitled to receive upon such conversion (a “Buy-In”), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if the Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of note principal and/or interest, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In.
2.10 Reservation. During the period the conversion right exists, Borrower will reserve from its authorized and unissued Common Stock a number of shares of Common Stock equal to 100% of the amount of Common Stock issuable upon the full conversion of this Note. Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note.
2.11 Maximum Conversion
(a) Notwithstanding anything to the contrary contained herein, if the Company is reporting issuer filing period reports with the SEC, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. By written notice to the Company, a Subscriber may waive the provisions of this Section 2.3(a) as to itself but any such waiver will not be effective until the 61st day after delivery thereof and such waiver shall have no effect on any other Subscriber.
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(b) Notwithstanding anything to the contrary contained herein, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. This provision may not be waived.
(c) Notwithstanding sections (a) and (b) above, if the Company is a non-reporting issuer, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. This provision may not be waived.
2.12 Short sales. The Holder shall not sell short the common shares of the Company.
ARTICLE III
EVENTS OF DEFAULT
An “Event of Default,” wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay any installment of Principal, Interest or other sum due under this Note when due.
3.2 Breach of Covenant. The Borrower breaches any other covenant or other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of ten (10) business days after written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein, or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing Date.
3.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed.
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3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than $100,000 and shall remain unvacated, unbonded or unstayed for a period of thirty (30) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower and if instituted against Borrower are not dismissed within thirty (30) days of initiation.
3.7 Non-Payment. A default by the Borrower under any one or more obligations in an aggregate monetary amount in excess of $25,000 for more than forty-five (45) days after the due date.
3.8 Stop Trade. An SEC or judicial stop trade order or Principal Market trading suspension that lasts for five or more consecutive trading days.
3.9 Failure to Deliver Common Stock or Replacement Note. Borrower’s failure to timely deliver Common Stock to the Holder pursuant to and in the time required by this Note. Timely delivery is defined as the issuance within 10 working days from demand.
3.10 Failure to Maintain Current Public Information. The Company’s failure to maintain current public information as defined in Rule 144 of the Securities Act of 1933, including the timely filing of all financial reports including 10-k, 10-Q and 8-k.
3.11 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without the prior written consent of the Holder.
3.12 Reservation Default. Failure by the Borrower to have reserve for issuance upon conversion of the Note the amount of Common stock as set forth herein.
3.13 Cross Default. A default by the Borrower of a material term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties.
3.14 Change in Control. A change in control of the Company without at least fourteen (14) days prior written notice to Holder. A change in control shall mean that more than 50% of the shares of common stock are consolidated in one person or entity so that the person or entity (other than any one or more of the Holders) may control the election of the board of directors or the passage of a proposal that would normally require a shareholder vote without such shareholder vote and that such person or entity was not a holder of shares of the Company at the date of execution hereof.
3.15 Asset Sales. Any instance, undertaken without written consent of the Holder, whereby the Company or any of its subsidiaries, sells, transfers, leases or otherwise disposes (including pursuant to a merger) of substantially all of the Company’s assets, including any asset constituting an equity interest in any other person, except sales, transfers, leases and other dispositions of inventory, used, obsolete or surplus equipment or other property, in each case in the ordinary course of the Company’s business and consistent with past practice.
3.16 Delisting. Delisting of the Common Stock from the Principal Market, including the Pink Sheets or the Over-the-Counter Bulletin Board, on which the Common Stock is then listed or quoted for trading including. Delisting will also include a change in tiers on the OTCBB, as an example being forced to trade on the Experts exchange.
During the time that any portion of this Note is outstanding, if any Event of Default has occurred, the remaining principal amount of this Note, together with interest and other amounts owing in respect hereof, to the date of acceleration shall become, at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Borrower. In addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Note at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in- effect. The Holder need not provide and the Borrower hereby waives any presentment, demand, protest or other notice of any kind, and the Holder 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Note or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Note or the sale of the Conversion Shares, Shares or Other Securities.
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ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, registered email, 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 email, with accurate confirmation generated by the transmitting of a registered email, 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: (i) if to the Borrower to: Caro Holdings Inc. c/o President, 7 Castle Street, S3 8LT, Sheffield, United Kingdom and (ii) if to the Holder, Dan Ionescu 230 Chemin du Golf, suite 104, Verdun, QC H3E2A8 Canada.
4.3 Amendment Provision. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns.
4.5 Cost of Collection. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Florida. 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 Florida or in the federal courts located in the state of Florida located in Broward County, Florida. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
4.7 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
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4.8 Waiver of Jury Trial. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
4.9 Redemption. This Note may not be redeemed or paid without the consent of the Holder except as described in this Note.
4.10 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Note. However, the Holder will have all the rights of a shareholder of the Borrower with respect to the shares of Common Stock to be received by Holder after delivery by the Holder of a Conversion Notice to the Borrower.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the 13th day of October, 2022.
| CARO HOLDINGS INC | |||
| By: | /s/ Meriesha Rennalls | ||
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| Name: | Meriesha Rennalls | |
| Title: | President | ||
| Acknowledged by: |
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| By | /s/ Dan Ionescu |
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| Name: | Dan Ionescu |
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Exhibit A
NOTICE OF CONVERSION
(To be executed by the Holder in order to Convert the Note dated , 202_)
TO:
The undersigned hereby irrevocably elects to convert $ of the principal amount of the above Note into Shares of Common Stock of CARO HOLDINGS INC (CAHO), according to the conditions stated therein, as of the Conversion Date written below.
| Conversion Date: |
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| Applicable Conversion Price: |
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| Signature: |
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| Name: |
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| Address: |
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| Amount to be converted: | $ |
| Amount of Note unconverted: | $ |
| Conversion Price per share: | $ |
| Number of shares to be issued: |
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| Amount of Interest Converted: | $ |
| Conversion Price per share: | $ |
| Number of shares of to be issued: |
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| Please issue the shares of to: |
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| Broker DTC Participant Code: |
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| Account Number: |
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Exhibit B
Wire Instructions
Beneficiary: CARO HOLDINGS INTERNATIONAL LIMITED
IBAN: GB45 REVO 0099 6973 5805 40
BIC: REVOGB21
Intermediary BIC: CHASGB2L
Beneficiary address: 7 Castle Street, S3 8LT, Sheffield, United Kingdom
Bank / Payment institution: Revolut Ltd
Bank / Payment institution address: 7 Westferry Circus, E14 4HD, London, United Kingdom
Beneficiary: CARO HOLDINGS INTERNATIONAL LIMITED
Account number: 253163929233
ACH routing number: 026014928
Bank / Payment institution: Metropolitan Commercial Bank
Bank / Payment institution address: 99 Park Ave, NY, 10016, New York, United States
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EXHIBIT 4.3
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
| November 8, 2022 |
| $70,000 US |
CARO HOLDINGS INC
(OTC: CAHO)
8% Convertible Debenture
Due November 8th, 2023
FOR VALUE RECEIVED, CARO HOLDINGS INC, a Nevada corporation (hereinafter called the “Borrower” or the “Company”), hereby promises to pay to Sca Capital PTY LTD (the “Holder”) without demand, the sum of SEVENTY THOUSAND Dollars ($70,000.00), with simple interest accruing at the rate described below, on November 8th, 2023 (the “Maturity Date”).
NOW THEREFORE, the following terms shall apply to this Note:
ARTICLE I
GENERAL PROVISIONS
1.1 Payments. The entire unpaid principal amount due under this Note (the “Principal”) shall be due and payable on the Maturity Date. Interest on this Note (the “Interest”) will be payable on the Maturity Date. Interest shall be payable in cash or, at the Holder’s option, in shares of the Company’s common stock, $.0001 par value per share (the “Common Stock”).
Upon any conversion in part by the Holder in accordance with Article II, the Holder and the Borrower shall in good faith recalculate the outstanding principal balance. Upon any full conversion by the Holder in accordance with Article II of all of the Interest and the Principal due hereunder, all of the Borrower’s payment obligations shall terminate. All payments in respect of the indebtedness evidenced hereby shall be applied in the following order: to accrued Interest, Principal, and charges and expenses owing under or in connection with this Note.
If any payment of interest is paid in Common Stock, the number of shares issuable will be determined utilizing the conversion ratio as set forth in Article II. Notwithstanding the foregoing, the Company’s right to pay this Note, including any Interest due thereunder, in shares of Common Stock upon the Maturity Date is subject to the condition that: (i) the Common Stock is trading on the OTC Markets (Pink Sheets), OTC Bulletin Board, American Stock Exchange or Nasdaq; and (ii) there is an effective Registration Statement on the Maturity Date or the shares are otherwise eligible for resale pursuant to Rule 144 and payment thereof in full will not exceed the Maximum Conversion as defined below.
1.2 Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to eight percent (8%) from the date Principal was advanced in connection with this Note and shall be payable annually unless otherwise converted earlier at the election of the Holder as further described below. Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder will be paid to the Holder or its assignee in whose name this Note is registered on the records of the Borrower regarding registration and transfers of Notes (the “Note Register”). However, should the Company fail to maintain current public information as defined in Rule 144 of the Securities Act of 1933, the interest rate shall increase to 10% per annum for that period when the Company’s filings are not up-to-date.
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1.3 Payment Grace Period. From and after the 10th day after an Event of Default under Section 3.1, the Interest Rate applicable to any unpaid amounts owed hereunder shall be increased to ten percent (10%) per annum.
1.4 Conversion Privileges. The conversion privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. This Note shall be payable in full on the Maturity Date, unless previously converted into Common Stock in accordance with Article II hereof; provided, that if an Event of Default has occurred, the Holder may elect to extend the Maturity Date by the amount of days of the pendency of the Event of Default.
1.5 Corporate Existence. So long as this Note remains outstanding, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split, consolidation, change of control, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, a “Fundamental Change”) where the Company is not the surviving entity unless, prior to the consummation a Fundamental Change, the Company shall have given the Holder not less than fourteen (14) days prior written notice to the Holder. In any such case, the Company grants the Holder the right to put this Note to the Company up to the time of the effectiveness of the Fundamental Change at 125% of the then outstanding Principal plus any unpaid and accrued Interest.
1.6 Exchange for Regulation A Subscription. Upon the Company having a qualified Regulation A Offering Circular (the “Qualified Reg A Offering”), the Payee may exchange this Note in the amount of the then outstanding principal and accrued but unpaid interest, for a subscription for securities being sold pursuant to the Qualified Reg A Offering at the price set forth therein.
This Note is subject to the following additional provisions:
ARTICLE II
CONVERSION RIGHTS AND REDEMPTION RIGHTS
The Holder shall have the right to convert the principal and accrued and unpaid interest due under this Note into Shares of the Borrower’s Common Stock as set forth below.
2.1 Conversion into the Borrower’s Common Stock.
(a) The Company shall convert the principal amount of this note into shares of the Company’s stock. Additionally, the Holder shall have the right from and after the date of the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and accrued Interest, at the election of the Holder (the date of giving of such notice of conversion being a “Conversion Date”) into fully paid and non-assessable shares of Common Stock as such stock exists on the date of issuance of this Note (such shares, the “Conversion Shares”), or any shares of capital stock of Borrower into which such Common Stock shall hereafter be changed or reclassified (the “Other Securities”), at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”), determined as provided herein. Upon delivery to the Borrower of a completed Notice of Conversion, a form of which is attached hereto as Exhibit A, Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date (such third day being the “Delivery Date”) that number of Conversion Shares for the portion of the Note converted in accordance with the foregoing. At the election of the Holder, the Borrower will deliver accrued but unpaid interest on the principal amount of the Note being converted in the manner provided in Section 1.1 through the Conversion Date directly to the Holder on or before the Delivery Date. The number of Conversion Shares to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of this Note and accrued interest to be converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be “60%” of the average VWAP for the Company’s stock during the previous 15 trading days. For greater clarity if the VWAP is $1.00 for the previous 15 trading days, the Holder will receive common shares in the company at a price of $.60 cents per share.
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(c) The Conversion Price and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(a), shall be subject to adjustment from time to time upon the happening of the following certain events while this conversion right remains outstanding:
A. Reorganization, Consolidation, Merger, etc.; Reclassification. In case at any time or from time to time, the Company shall, subject to Section 1.5 hereof, effect a Fundamental Change, then, in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holder of this Note, on the conversion hereof as provided in Article II, at any time after the consummation of such Fundamental Change, shall receive, in lieu of the Conversion Shares (or Other Securities) issuable on such conversion prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation of a Fundamental Change if such Holder had so converted this Note, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 2.1(c)(E).
If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes that may be issued or outstanding, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.
B. Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of this Note after the effective date of such dissolution pursuant to this Article II to a bank or trust company (a “Trustee”) having its principal office in Fort Lauderdale, Florida as trustee for the Holder of the Notes.
C. Continuation of Terms. Upon any Fundamental Change or transfer (and any dissolution following any transfer) referred to in this Article II, this Note shall continue in full force and effect and the terms hereof shall be applicable to the Other Securities and property receivable on the conversion of this Note after the consummation of such Fundamental Change or transfer or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Note as provided in Section 2.1(c)(E). In the event this Note does not continue in full force and effect after the consummation of the transaction described in this Article II, then only in such event will the Company’s securities and property (including cash, where applicable) receivable by the Holder of this Note be delivered to the Trustee as contemplated by Section 2.1(c)(B).
D. Forced Conversion. Subject to the terms and conditions of this Section 2.1 (c), the Company shall have the absolute right, if not redeemed, exercisable at any time to require Conversion of this Note (a “Forced Conversion”). In order to effect a Forced Conversion, (i) the daily VWAP must, on each of twenty (20) Trading Days occurring during any period of thirty (30) consecutive Trading Days (such period of thirty Trading Days, a “Forced Conversion Period”), be equal to or greater than the Forced Conversion Price and (ii) each of the Equity Conditions must be satisfied on each Trading Day occurring during the Forced Conversion Period and through and including the Forced Conversion Date. Notwithstanding the foregoing, in no event shall the Company be permitted to effect a Forced Conversion to the extent that, upon receipt of the shares of Common Stock deliverable thereby, the Holder would beneficially own more than 4.99% of the number of shares of Common Stock then outstanding. In the event of a forced conversion, the conversion rate will be at a discount to market at 150% of the note value, including interest, penalties and cost.
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E. Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) subject to Section 1.5 hereof, combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Conversion Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Conversion Price then in effect. The Conversion Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 2.1(c)(E). The number of Conversion Shares that the Holder of this Note shall thereafter, on the conversion hereof as provided in Article II, be entitled to receive shall be adjusted to a number determined by multiplying the number of Conversion Shares that would otherwise (but for the provisions of this Section 2.1(c)(E)) be issuable on such conversion by a fraction of which (a) the numerator is the Conversion Price that would otherwise (but for the provisions of this Section 2.1(c)(E)) be in effect, and (b) the denominator is the Conversion Price in effect on the date of such conversion.
F. Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the conversion of the Notes, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Note and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Conversion Price and the number of Conversion Shares to be received upon conversion of this Note, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Note. The Company will forthwith mail a copy of each such certificate to the Holder of the Note and any transfer agent of the Company.
2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower within 10 working days to the Holder for the principal balance of this Note and interest which shall not have been converted or paid. The failure of the borrowed to issue the note within a timely manner will be considered a term of default, as defined in Section 3.9.
2.3 Issuance Below Par. The Parties hereto agree that Nevada Law allows for the issuance of conversion shares under this section even if such conversion price is less than the shares’ stated par value, and that such shares shall be issued in response to a Conversion Request regardless of Conversion Price.
2.4 Note Renewal: If the note comes to maturity, and neither the company nor the holder elects to convert the note to equity, the note will automatically renew at the same terms and conditions for an additional 5 successive terms.
2.5 Conversion of Note.
(a) Upon the conversion of this Note or part thereof, the Holder shall, at its own cost and expense, take all necessary action, including obtaining and delivering, an opinion of Company’s counsel to assure that the Company’s transfer agent shall issue stock certificates in the name of Holder (or its nominee) or such other persons as designated by Holder and in such denominations to be specified at conversion representing the number of Conversion Shares issuable upon such conversion. The Company warrants that no instructions other than these instructions have been or will be given to the transfer agent of the Company’s Common Stock and that, unless waived by the Holder, the Conversion Shares will be free-trading, and freely transferable, and will not contain a legend restricting the resale or transferability of the Conversion Shares provided the Conversion Shares are being sold pursuant to an effective registration statement covering the Conversion Shares or are otherwise exempt from registration.
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(b) Subscriber will give notice of its decision to exercise its right to convert this Note or part thereof by telecopying an executed and completed Notice of Conversion (a form of which is attached as Exhibit A to the Note) to the Company via confirmed telecopier transmission or overnight courier or otherwise pursuant to Section 4.2 of this Note. The Subscriber will not be required to surrender this Note until this Note has been fully converted or satisfied, with each date on which a Notice of Conversion is telecopied to the Company in accordance with the provisions hereof shall be deemed a Conversion Date (as defined above). The Company will itself or cause the Company’s transfer agent to transmit the Company’s Common Stock certificates representing the Conversion Shares issuable upon conversion of this Note to the Subscriber via express courier for receipt by such Subscriber on or before the Delivery Date (as defined above). In the event the Conversion Shares are electronically transferable, then delivery of the Conversion Shares must be made by electronic transfer provided request for such electronic transfer has been made by the Subscriber and the Subscriber has complied with all applicable securities laws in connection with the sale of the Common Stock, including, without limitation, the prospectus delivery requirements. A Note representing the balance of this Note not so converted will be provided by the Company to the Subscriber if requested by Subscriber, provided the Subscriber delivers the original Note to the Company.
(c) Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.
2.6 Injunction Posting of Bond. In the event a Holder shall elect to convert a Note or part thereof in whole or in part, the Company may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, or for any other reason, unless an injunction from a court, on notice, restraining and or enjoining conversion of all or part of such Note shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of such Holder in the amount of 120% of the amount of the Note, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent Holder obtains judgment.
2.7 Optional Redemption.
(a) Provided that the Company has a number of authorized but unissued shares of Common Stock sufficient for the issuance of all Conversion Shares underlying the remaining principal amount of this Note, such Common Stock is listed or quoted (and is not suspended from trading) on the Principal Market and such shares of Common Stock are approved for listing on such Principal Market upon issuance if applicable, such Common Stock is registered for resale under the Registration Statement and the prospectus under such Registration Statement is available for the sale of all Registrable Securities held by the Subscriber or there is an applicable exemption from registration, such issuance would be permitted in full without violating Section 2.3 herein or the rules or regulations of any trading market on which such Common Stock may be listed or quoted, and both immediately before and after giving effect thereto, no Event of Default under this Note shall or would exist, the Borrower will have the option of prepaying the outstanding principal amount of this Note (“Optional Redemption”), in whole or in part, together with interest accrued thereon, by paying to the Holder a sum of money equal to the principal amount to be redeemed, (the “Redemption Amount”) on the day written notice of redemption (the “Notice of Redemption”) is given to the Holder. The Notice of Redemption shall specify the date for such Optional Redemption (the “Redemption Payment Date”), which date shall be not less than five (5) business days after the date of the Notice of Redemption (the “Redemption Period”). A Notice of Redemption shall not be effective with respect to any portion of this Note for which the Holder has a pending election to convert, or for Conversion Notices given by the Holder prior to the Redemption Payment Date. On the Redemption Payment Date, the Redemption Amount shall be paid in good funds to the Holder. In the event the Borrower fails to pay the Redemption Amount on the Redemption Payment Date as set forth herein, then (i) such Notice of Redemption will be null and void, and (ii) Borrower’s failure may be deemed by Holder to be a curable Event of Default. Should the Company pay the redemption amount and the redemption amount plus the other amounts realized by the Holder, by sale of conversion shares or otherwise, be equal to or exceed $25,000, then the remainder of the note shall be extinguished.
| 5 |
2.8 Mandatory Redemption at Subscriber’s Election. In the event the Company is prohibited from issuing Conversion Shares, or fails to timely deliver Shares on a Delivery Date, or upon the occurrence of any other Event of Default (as defined in this Note) or for any reason other than pursuant to the limitations set forth in Section 2.3 hereof, then at the Subscriber’s election, the Company must pay to the Subscriber ten (10) business days after request by the Subscriber, at the Subscriber’s election, a sum of money in immediately available terms equal to the greater of (i) the product of the outstanding principal amount of the Note designated by the Subscriber multiplied by 125%, or (ii) the product of the number of Conversion Shares otherwise deliverable upon conversion of an amount of Note principal and/or interest designated by the Subscriber (with the date of giving of such designation being a “Deemed Conversion Date”) at the then Conversion Price that would be in effect on the Deemed Conversion Date multiplied by the average of the closing bid prices for the Common Stock for the five consecutive trading days preceding either: (1) the date the Company becomes obligated to pay the Mandatory Redemption Payment, or (2) the date on which the Mandatory Redemption Payment is made in full, whichever is greater, together with accrued but unpaid interest thereon and any liquidated damages then payable (“Mandatory Redemption Payment”). The Mandatory Redemption Payment must be received by the Subscriber on the same date as the Company Shares otherwise deliverable or within ten (10) business days after request, whichever is sooner (“Mandatory Redemption Payment Date”). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal and interest will be deemed paid and no longer outstanding. Liquidated damages calculated pursuant to Section 2.5(c) hereof, that have been paid or accrued for the twenty (20) day period prior to the actual receipt of the Mandatory Redemption Payment by the Subscriber shall be credited against the Mandatory Redemption Payment.
2.9 Buy-In. In addition to any other rights available to the Subscriber, but without any duplicative recovery by the Subscriber, if the Company fails to deliver to the Subscriber the Conversion Shares issuable upon conversion of this Note by the Delivery Date and if after five (5) business days after the Delivery Date the Subscriber purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Subscriber of the Common Stock which the Subscriber was entitled to receive upon such conversion (a “Buy-In”), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if the Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of note principal and/or interest, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In.
2.10 Reservation. During the period the conversion right exists, Borrower will reserve from its authorized and unissued Common Stock a number of shares of Common Stock equal to 100% of the amount of Common Stock issuable upon the full conversion of this Note. Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note.
2.11 Maximum Conversion
(a) Notwithstanding anything to the contrary contained herein, if the Company is reporting issuer filing period reports with the SEC, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. By written notice to the Company, a Subscriber may waive the provisions of this Section 2.3(a) as to itself but any such waiver will not be effective until the 61st day after delivery thereof and such waiver shall have no effect on any other Subscriber.
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(b) Notwithstanding anything to the contrary contained herein, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. This provision may not be waived.
(c) Notwithstanding sections (a) and (b) above, if the Company is a non-reporting issuer, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. This provision may not be waived.
2.12 Short sales. The Holder shall not sell short the common shares of the Company.
ARTICLE III
EVENTS OF DEFAULT
An “Event of Default,” wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay any installment of Principal, Interest or other sums due under this after the renewal and automatic renewal dates. No interest will be due and payable while the note is outstanding. The company has the irrevocable right to convert up to 4.99% of the total issue and outstanding shares, and the remainder of the note will be deemed to be outstanding and not in default.
3.2 Breach of Covenant. The Borrower breaches any other covenant or other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of ten (10) business days after written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein, or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing Date.
3.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than $100,000 and shall remain unvacated, unbonded or unstayed for a period of thirty (30) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower and if instituted against Borrower are not dismissed within thirty (30) days of initiation.
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3.7 Non-Payment. A default by the Borrower under any one or more obligations in an aggregate monetary amount in excess of $25,000 for more than forty-five (45) days after the due date.
3.8 Stop Trade. An SEC or judicial stop trade order or Principal Market trading suspension that lasts for five or more consecutive trading days.
3.9 Failure to Deliver Common Stock or Replacement Note. Borrower’s failure to timely deliver Common Stock to the Holder pursuant to and in the time required by this Note. Timely delivery is defined as the issuance within 10 working days from demand.
3.10 Failure to Maintain Current Public Information. The Company’s failure to maintain current public information as defined in Rule 144 of the Securities Act of 1933, including the timely filing of all financial reports including 10-k, 10-Q and 8-k.
3.11 Intentionally Left Blank
3.12 Reservation Default. Failure by the Borrower to have reserve for issuance upon conversion of the Note the amount of Common stock as set forth herein.
3.13 Cross Default. A default by the Borrower of a material term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties.
3.14 Change in Control. A change in control of the Company without at least fourteen (14) days prior written notice to Holder. A change in control shall mean that more than 50% of the shares of common stock are consolidated in one person or entity so that the person or entity (other than any one or more of the Holders) may control the election of the board of directors or the passage of a proposal that would normally require a shareholder vote without such shareholder vote and that such person or entity was not a holder of shares of the Company at the date of execution hereof.
3.15 Asset Sales. Any instance, undertaken without written consent of the Holder, whereby the Company or any of its subsidiaries, sells, transfers, leases or otherwise disposes (including pursuant to a merger) of substantially all of the Company’s assets, including any asset constituting an equity interest in any other person, except sales, transfers, leases and other dispositions of inventory, used, obsolete or surplus equipment or other property, in each case in the ordinary course of the Company’s business and consistent with past practice.
During the time that any portion of this Note is outstanding, if any Event of Default has occurred, the remaining principal amount of this Note, together with interest and other amounts owing in respect hereof, to the date of acceleration shall become, at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Borrower. In addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Note at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in- effect. The Holder need not provide and the Borrower hereby waives any presentment, demand, protest or other notice of any kind, and the Holder 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Note or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Note or the sale of the Conversion Shares, Shares or Other Securities.
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ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, registered email, 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 email, with accurate confirmation generated by the transmitting of a registered email, 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:
(i) if to the Borrower to:
Caro Holdings Inc.
c/o President,
7 Castle Street,
S3 8LT, Sheffield, United Kingdom
and (ii) if to the Holder:
Sca Capital PTY LTD
Attn: Rhys Bombaci
Level 1, 1 Burelli St
Wollongong
NSW, Australia, 2500
info@scacapital.com.au
4.3 Amendment Provision. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns.
4.5 Cost of Collection. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Florida. 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 Florida or in the federal courts located in the state of Florida located in Broward County, Florida. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
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4.7 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
4.8 Waiver of Jury Trial. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
4.9 Redemption. This Note may not be redeemed or paid without the consent of the Holder except as described in this Note.
4.10 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Note. However, the Holder will have all the rights of a shareholder of the Borrower with respect to the shares of Common Stock to be received by Holder after delivery by the Holder of a Conversion Notice to the Borrower.
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the 8th day of November, 2022.
| CARO HOLDINGS INC | |||
| By: | /s/ Meriesha Rennalls | ||
|
| Name: | Meriesha Rennalls | |
| Title: | President | ||
| Acknowledged by: |
| |
|
|
|
|
| By | /s/ Rhys Bombaci |
|
| Name: | Rhys Bombaci |
|
| SCA Capital PTY LTD |
| |
| Title: | Director |
|
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Exhibit A
NOTICE OF CONVERSION
(To be executed by the Holder in order to Convert the Note dated , 202_)
TO:
The undersigned hereby irrevocably elects to convert $ of the principal amount of the above Note into Shares of Common Stock of CARO HOLDINGS INC (CAHO), according to the conditions stated therein, as of the Conversion Date written below.
| Conversion Date: |
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| Applicable Conversion Price: |
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| Signature: |
|
| Name: |
|
| Address: |
|
| Amount to be converted: | $ |
| Amount of Note unconverted: | $ |
| Conversion Price per share: | $ |
| Number of shares to be issued: |
|
| Amount of Interest Converted: | $ |
| Conversion Price per share: | $ |
| Number of shares of to be issued: |
|
| Please issue the shares of to: |
|
| Broker DTC Participant Code: |
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| Account Number: |
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| 12 |
Exhibit B
Wire Instructions
Beneficiary: CARO HOLDINGS INTERNATIONAL LIMITED
IBAN: GB45 REVO 0099 6973 5805 40
BIC: REVOGB21
Intermediary BIC: CHASGB2L
Beneficiary address: 7 Castle Street, S3 8LT, Sheffield, United Kingdom
Bank / Payment institution: Revolut Ltd
Bank / Payment institution address: 7 Westferry Circus, E14 4HD, London, United Kingdom
Beneficiary: CARO HOLDINGS INTERNATIONAL LIMITED
Account number: 253163929233
ACH routing number: 026014928
Bank / Payment institution: Metropolitan Commercial Bank
Bank / Payment institution address: 99 Park Ave, NY, 10016, New York, United States
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EXHIBIT 4.4
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
| November 19, 2022 |
| $20,000 |
CARO HOLDINGS INC
(OTC: CAHO)
8% Convertible Debenture
November 19, 2022
FOR VALUE RECEIVED, CARO HOLDINGS INC, a Nevada corporation (hereinafter called the “Borrower” or the “Company”), hereby promises to pay to Rise Up Holdings LLC (the “Holder”) without demand, the sum of TWENTY THOUSANDS Dollars ($20,000), with simple interest accruing at the rate described below, on May 19th 2023 (the “Maturity Date”).
NOW THEREFORE, the following terms shall apply to this Note:
ARTICLE I
GENERAL PROVISIONS
1.1 Payments. The entire unpaid principal amount due under this Note (the “Principal”) shall be due and payable on the Maturity Date. Interest on this Note (the “Interest”) will be payable on the Maturity Date. Interest shall be payable in cash or, at the Holder’s option, in shares of the Company’s common stock, $.0001 par value per share (the “Common Stock”).
Upon any conversion in part by the Holder in accordance with Article II, the Holder and the Borrower shall in good faith recalculate the outstanding principal balance. Upon any full conversion by the Holder in accordance with Article II of all of the Interest and the Principal due hereunder, all of the Borrower’s payment obligations shall terminate. All payments in respect of the indebtedness evidenced hereby shall be applied in the following order: to accrued Interest, Principal, and charges and expenses owing under or in connection with this Note.
If any payment of interest is paid in Common Stock, the number of shares issuable will be determined utilizing the conversion ratio as set forth in Article II. Notwithstanding the foregoing, the Company’s right to pay this Note, including any Interest due thereunder, in shares of Common Stock upon the Maturity Date is subject to the condition that: (i) the Common Stock is trading on the OTC Markets (Pink Sheets), OTC Bulletin Board, American Stock Exchange or Nasdaq; and (ii) there is an effective Registration Statement on the Maturity Date or the shares are otherwise eligible for resale pursuant to Rule 144 and payment thereof in full will not exceed the Maximum Conversion as defined below.
1.2 Interest. Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to eight percent (8%) from the date Principal was advanced in connection with this Note and shall be payable annually unless otherwise converted earlier at the election of the Holder as further described below. Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder will be paid to the Holder or its assignee in whose name this Note is registered on the records of the Borrower regarding registration and transfers of Notes (the “Note Register”). However, should the Company fail to maintain current public information as defined in Rule 144 of the Securities Act of 1933, the interest rate shall increase to 10% per annum for that period when the Company’s filings are not up-to-date.
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1.3 Payment Grace Period. From and after the 10th day after an Event of Default under Section 3.1, the Interest Rate applicable to any unpaid amounts owed hereunder shall be increased to ten percent (10%) per annum.
1.4 Conversion Privileges. The conversion privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. This Note shall be payable in full on the Maturity Date, unless previously converted into Common Stock in accordance with Article II hereof; provided, that if an Event of Default has occurred, the Holder may elect to extend the Maturity Date by the amount of days of the pendency of the Event of Default.
1.5 Corporate Existence. So long as this Note remains outstanding, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split, consolidation, change of control, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, a “Fundamental Change”) where the Company is not the surviving entity unless, prior to the consummation a Fundamental Change, the Company shall have given the Holder not less than fourteen (14) days prior written notice to the Holder. In any such case, the Company grants the Holder the right to put this Note to the Company up to the time of the effectiveness of the Fundamental Change at 125% of the then outstanding Principal plus any unpaid and accrued Interest.
1.6 Exchange for Regulation A Subscription. Upon the Company having a qualified Regulation A Offering Circular (the “Qualified Reg A Offering”), the Payee may exchange this Note in the amount of the then outstanding principal and accrued but unpaid interest, for a subscription for securities being sold pursuant to the Qualified Reg A Offering at the price set forth therein.
This Note is subject to the following additional provisions:
ARTICLE II
CONVERSION RIGHTS AND REDEMPTION RIGHTS
The Holder shall have the right to convert the principal and accrued and unpaid interest due under this Note into Shares of the Borrower’s Common Stock as set forth below.
2.1 Conversion into the Borrower’s Common Stock.
(a) The Company shall convert the principal amount of this note into shares of the Company’s stock. Additionally, the Holder shall have the right from and after the date of the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and accrued Interest, at the election of the Holder (the date of giving of such notice of conversion being a “Conversion Date”) into fully paid and non-assessable shares of Common Stock as such stock exists on the date of issuance of this Note (such shares, the “Conversion Shares”), or any shares of capital stock of Borrower into which such Common Stock shall hereafter be changed or reclassified (the “Other Securities”), at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”), determined as provided herein. Upon delivery to the Borrower of a completed Notice of Conversion, a form of which is attached hereto as Exhibit A, Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date (such third day being the “Delivery Date”) that number of Conversion Shares for the portion of the Note converted in accordance with the foregoing. At the election of the Holder, the Borrower will deliver accrued but unpaid interest on the principal amount of the Note being converted in the manner provided in Section 1.1 through the Conversion Date directly to the Holder on or before the Delivery Date. The number of Conversion Shares to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of this Note and accrued interest to be converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be “60%” of the average VWAP for the Company’s stock during the previous 15 trading days. For greater clarity if the VWAP is $1.00 for the previous 15 trading days, the Holder will receive common shares in the company at a price of $.60 cents per share.
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(c) The Conversion Price and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(a), shall be subject to adjustment from time to time upon the happening of the following certain events while this conversion right remains outstanding:
A. Reorganization, Consolidation, Merger, etc.; Reclassification. In case at any time or from time to time, the Company shall, subject to Section 1.5 hereof, effect a Fundamental Change, then, in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holder of this Note, on the conversion hereof as provided in Article II, at any time after the consummation of such Fundamental Change, shall receive, in lieu of the Conversion Shares (or Other Securities) issuable on such conversion prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation of a Fundamental Change if such Holder had so converted this Note, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 2.1(c)(E). If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes that may be issued or outstanding, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.
B. Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of this Note after the effective date of such dissolution pursuant to this Article II to a bank or trust company (a “Trustee”) having its principal office in Fort Lauderdale, Florida as trustee for the Holder of the Notes.
C. Continuation of Terms. Upon any Fundamental Change or transfer (and any dissolution following any transfer) referred to in this Article II, this Note shall continue in full force and effect and the terms hereof shall be applicable to the Other Securities and property receivable on the conversion of this Note after the consummation of such Fundamental Change or transfer or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Note as provided in Section 2.1(c)(E). In the event this Note does not continue in full force and effect after the consummation of the transaction described in this Article II, then only in such event will the Company’s securities and property (including cash, where applicable) receivable by the Holder of this Note be delivered to the Trustee as contemplated by Section 2.1(c)(B).
D. Forced Conversion. Subject to the terms and conditions of this Section 2.1 (c), the Company shall have the absolute right, if not redeemed, exercisable at any time to require Conversion of this Note (a “Forced Conversion”). In order to effect a Forced Conversion, (i) the daily VWAP must, on each of twenty (20) Trading Days occurring during any period of thirty (30) consecutive Trading Days (such period of thirty Trading Days, a “Forced Conversion Period”), be equal to or greater than the Forced Conversion Price and (ii) each of the Equity Conditions must be satisfied on each Trading Day occurring during the Forced Conversion Period and through and including the Forced Conversion Date. Notwithstanding the foregoing, in no event shall the Company be permitted to effect a Forced Conversion to the extent that, upon receipt of the shares of Common Stock deliverable thereby, the Holder would beneficially own more than 4.99% of the number of shares of Common Stock then outstanding. In the event of a forced conversion, the conversion rate will be at a discount to market at 150% of the note value, including interest, penalties and cost.
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E. Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) subject to Section 1.5 hereof, combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Conversion Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Conversion Price then in effect. The Conversion Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 2.1(c)(E). The number of Conversion Shares that the Holder of this Note shall thereafter, on the conversion hereof as provided in Article II, be entitled to receive shall be adjusted to a number determined by multiplying the number of Conversion Shares that would otherwise (but for the provisions of this Section 2.1(c)(E)) be issuable on such conversion by a fraction of which (a) the numerator is the Conversion Price that would otherwise (but for the provisions of this Section 2.1(c)(E)) be in effect, and (b) the denominator is the Conversion Price in effect on the date of such conversion.
F. Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the conversion of the Notes, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Note and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Conversion Price and the number of Conversion Shares to be received upon conversion of this Note, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Note. The Company will forthwith mail a copy of each such certificate to the Holder of the Note and any transfer agent of the Company.
2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower within 10 working days to the Holder for the principal balance of this Note and interest which shall not have been converted or paid. The failure of the borrowed to issue the note within a timely manner will be considered a term of default, as defined in Section 3.9.
2.3 Issuance Below Par. The Parties hereto agree that Nevada Law allows for the issuance of conversion shares under this section even if such conversion price is less than the shares’ stated par value, and that such shares shall be issued in response to a Conversion Request regardless of Conversion Price.
2.4 Note Renewal: If the note comes to maturity, and neither the company nor the holder elects to convert the note to equity, the note will automatically renew at the same terms and conditions for an additional 5 successive terms.
2.5 Conversion of Note.
(a) Upon the conversion of this Note or part thereof, the Holder shall, at its own cost and expense, take all necessary action, including obtaining and delivering, an opinion of Company’s counsel to assure that the Company’s transfer agent shall issue stock certificates in the name of Holder (or its nominee) or such other persons as designated by Holder and in such denominations to be specified at conversion representing the number of Conversion Shares issuable upon such conversion. The Company warrants that no instructions other than these instructions have been or will be given to the transfer agent of the Company’s Common Stock and that, unless waived by the Holder, the Conversion Shares will be free-trading, and freely transferable, and will not contain a legend restricting the resale or transferability of the Conversion Shares provided the Conversion Shares are being sold pursuant to an effective registration statement covering the Conversion Shares or are otherwise exempt from registration.
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(b) Subscriber will give notice of its decision to exercise its right to convert this Note or part thereof by telecopying an executed and completed Notice of Conversion (a form of which is attached as Exhibit A to the Note) to the Company via confirmed telecopier transmission or overnight courier or otherwise pursuant to Section 4.2 of this Note. The Subscriber will not be required to surrender this Note until this Note has been fully converted or satisfied, with each date on which a Notice of Conversion is telecopied to the Company in accordance with the provisions hereof shall be deemed a Conversion Date (as defined above). The Company will itself or cause the Company’s transfer agent to transmit the Company’s Common Stock certificates representing the Conversion Shares issuable upon conversion of this Note to the Subscriber via express courier for receipt by such Subscriber on or before the Delivery Date (as defined above). In the event the Conversion Shares are electronically transferable, then delivery of the Conversion Shares must be made by electronic transfer provided request for such electronic transfer has been made by the Subscriber and the Subscriber has complied with all applicable securities laws in connection with the sale of the Common Stock, including, without limitation, the prospectus delivery requirements. A Note representing the balance of this Note not so converted will be provided by the Company to the Subscriber if requested by Subscriber, provided the Subscriber delivers the original Note to the Company.
(c) Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.
2.6 Injunction Posting of Bond. In the event a Holder shall elect to convert a Note or part thereof in whole or in part, the Company may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, or for any other reason, unless an injunction from a court, on notice, restraining and or enjoining conversion of all or part of such Note shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of such Holder in the amount of 120% of the amount of the Note, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent Holder obtains judgment.
2.7 Optional Redemption.
(a) Provided that the Company has a number of authorized but unissued shares of Common Stock sufficient for the issuance of all Conversion Shares underlying the remaining principal amount of this Note, such Common Stock is listed or quoted (and is not suspended from trading) on the Principal Market and such shares of Common Stock are approved for listing on such Principal Market upon issuance if applicable, such Common Stock is registered for resale under the Registration Statement and the prospectus under such Registration Statement is available for the sale of all Registrable Securities held by the Subscriber or there is an applicable exemption from registration, such issuance would be permitted in full without violating Section 2.3 herein or the rules or regulations of any trading market on which such Common Stock may be listed or quoted, and both immediately before and after giving effect thereto, no Event of Default under this Note shall or would exist, the Borrower will have the option of prepaying the outstanding principal amount of this Note (“Optional Redemption”), in whole or in part, together with interest accrued thereon, by paying to the Holder a sum of money equal to the principal amount to be redeemed, (the “Redemption Amount”) on the day written notice of redemption (the “Notice of Redemption”) is given to the Holder. The Notice of Redemption shall specify the date for such Optional Redemption (the “Redemption Payment Date”), which date shall be not less than five (5) business days after the date of the Notice of Redemption (the “Redemption Period”). A Notice of Redemption shall not be effective with respect to any portion of this Note for which the Holder has a pending election to convert, or for Conversion Notices given by the Holder prior to the Redemption Payment Date. On the Redemption Payment Date, the Redemption Amount shall be paid in good funds to the Holder. In the event the Borrower fails to pay the Redemption Amount on the Redemption Payment Date as set forth herein, then (i) such Notice of Redemption will be null and void, and (ii) Borrower’s failure may be deemed by Holder to be a curable Event of Default. Should the Company pay the redemption amount and the redemption amount plus the other amounts realized by the Holder, by sale of conversion shares or otherwise, be equal to or exceed $25,000, then the remainder of the note shall be extinguished.
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2.8 Mandatory Redemption at Subscriber’s Election. In the event the Company is prohibited from issuing Conversion Shares, or fails to timely deliver Shares on a Delivery Date, or upon the occurrence of any other Event of Default (as defined in this Note) or for any reason other than pursuant to the limitations set forth in Section 2.3 hereof, then at the Subscriber’s election, the Company must pay to the Subscriber ten (10) business days after request by the Subscriber, at the Subscriber’s election, a sum of money in immediately available terms equal to the greater of (i) the product of the outstanding principal amount of the Note designated by the Subscriber multiplied by 125%, or (ii) the product of the number of Conversion Shares otherwise deliverable upon conversion of an amount of Note principal and/or interest designated by the Subscriber (with the date of giving of such designation being a “Deemed Conversion Date”) at the then Conversion Price that would be in effect on the Deemed Conversion Date multiplied by the average of the closing bid prices for the Common Stock for the five consecutive trading days preceding either: (1) the date the Company becomes obligated to pay the Mandatory Redemption Payment, or (2) the date on which the Mandatory Redemption Payment is made in full, whichever is greater, together with accrued but unpaid interest thereon and any liquidated damages then payable (“Mandatory Redemption Payment”). The Mandatory Redemption Payment must be received by the Subscriber on the same date as the Company Shares otherwise deliverable or within ten (10) business days after request, whichever is sooner (“Mandatory Redemption Payment Date”). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal and interest will be deemed paid and no longer outstanding. Liquidated damages calculated pursuant to Section 2.5(c) hereof, that have been paid or accrued for the twenty (20) day period prior to the actual receipt of the Mandatory Redemption Payment by the Subscriber shall be credited against the Mandatory Redemption Payment.
2.9 Buy-In. In addition to any other rights available to the Subscriber, but without any duplicative recovery by the Subscriber, if the Company fails to deliver to the Subscriber the Conversion Shares issuable upon conversion of this Note by the Delivery Date and if after five (5) business days after the Delivery Date the Subscriber purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Subscriber of the Common Stock which the Subscriber was entitled to receive upon such conversion (a “Buy-In”), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if the Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of note principal and/or interest, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In.
2.10 Reservation. During the period the conversion right exists, Borrower will reserve from its authorized and unissued Common Stock a number of shares of Common Stock equal to 100% of the amount of Common Stock issuable upon the full conversion of this Note. Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note.
2.11 Maximum Conversion
(a) Notwithstanding anything to the contrary contained herein, if the Company is reporting issuer filing period reports with the SEC, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. By written notice to the Company, a Subscriber may waive the provisions of this Section 2.3(a) as to itself but any such waiver will not be effective until the 61st day after delivery thereof and such waiver shall have no effect on any other Subscriber.
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(b) Notwithstanding anything to the contrary contained herein, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. This provision may not be waived.
(c) Notwithstanding sections (a) and (b) above, if the Company is a non-reporting issuer, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. This provision may not be waived.
2.12 Short sales. The Holder shall not sell short the common shares of the Company.
ARTICLE III
EVENTS OF DEFAULT
An “Event of Default,” wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay any installment of Principal, Interest or other sums due under this after the renewal and automatic renewal dates. No interest will be due and payable while the note is outstanding. The company has the irrevocable right to convert up to 4.99% of the total issue and outstanding shares, and the remainder of the note will be deemed to be outstanding and not in default.
3.2 Breach of Covenant. The Borrower breaches any other covenant or other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of ten (10) business days after written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein, or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing Date.
3.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than $100,000 and shall remain unvacated, unbonded or unstayed for a period of thirty (30) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower and if instituted against Borrower are not dismissed within thirty (30) days of initiation.
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3.7 Non-Payment. A default by the Borrower under any one or more obligations in an aggregate monetary amount in excess of $25,000 for more than forty-five (45) days after the due date.
3.8 Stop Trade. An SEC or judicial stop trade order or Principal Market trading suspension that lasts for five or more consecutive trading days.
3.9 Failure to Deliver Common Stock or Replacement Note. Borrower’s failure to timely deliver Common Stock to the Holder pursuant to and in the time required by this Note. Timely delivery is defined as the issuance within 10 working days from demand.
3.10 Failure to Maintain Current Public Information. The Company’s failure to maintain current public information as defined in Rule 144 of the Securities Act of 1933, including the timely filing of all financial reports including 10-k, 10-Q and 8-k.
3.11 Intentionally Left Blank
3.12 Reservation Default. Failure by the Borrower to have reserve for issuance upon conversion of the Note the amount of Common stock as set forth herein.
3.13 Cross Default. A default by the Borrower of a material term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties.
3.14 Change in Control. A change in control of the Company without at least fourteen (14) days prior written notice to Holder. A change in control shall mean that more than 50% of the shares of common stock are consolidated in one person or entity so that the person or entity (other than any one or more of the Holders) may control the election of the board of directors or the passage of a proposal that would normally require a shareholder vote without such shareholder vote and that such person or entity was not a holder of shares of the Company at the date of execution hereof.
3.15 Asset Sales. Any instance, undertaken without written consent of the Holder, whereby the Company or any of its subsidiaries, sells, transfers, leases or otherwise disposes (including pursuant to a merger) of substantially all of the Company’s assets, including any asset constituting an equity interest in any other person, except sales, transfers, leases and other dispositions of inventory, used, obsolete or surplus equipment or other property, in each case in the ordinary course of the Company’s business and consistent with past practice.
During the time that any portion of this Note is outstanding, if any Event of Default has occurred, the remaining principal amount of this Note, together with interest and other amounts owing in respect hereof, to the date of acceleration shall become, at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Borrower. In addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Note at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in- effect. The Holder need not provide and the Borrower hereby waives any presentment, demand, protest or other notice of any kind, and the Holder 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 declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Upon an Event of Default, notwithstanding any other provision of this Note or any Transaction Document, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Note or the sale of the Conversion Shares, Shares or Other Securities.
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ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, registered email, 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 email, with accurate confirmation generated by the transmitting of a registered email, 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: (i) if to the Borrower to: Caro Holdings Inc. c/o President, 7 Castle Street, S3 8LT, Sheffield, United Kingdom and (ii) if to the Holder: Rise Up Holdings LLC 18305 Biscayne Blvd. Suite 200 Aventura, FL 33160,
4.3 Amendment Provision. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns.
4.5 Cost of Collection. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Florida. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the courts of England. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
4.7 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
4.8 Waiver of Jury Trial. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
4.9 Redemption. This Note may not be redeemed or paid without the consent of the Holder except as described in this Note.
4.10 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Note. However, the Holder will have all the rights of a shareholder of the Borrower with respect to the shares of Common Stock to be received by Holder after delivery by the Holder of a Conversion Notice to the Borrower.
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the_______ th day of _________, 2022.
| CARO HOLDINGS INC | |||
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| Acknowledged by: |
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Exhibit A
NOTICE OF CONVERSION
(To be executed by the Holder in order to Convert the Note dated , 202_)
TO:
The undersigned hereby irrevocably elects to convert $ of the principal amount of the above Note into Shares of Common Stock of CARO HOLDINGS INC (CAHO), according to the conditions stated therein, as of the Conversion Date written below.
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| Applicable Conversion Price: |
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| Amount to be converted: | $ |
| Amount of Note unconverted: | $ |
| Conversion Price per share: | $ |
| Number of shares to be issued: |
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| Amount of Interest Converted: | $ |
| Conversion Price per share: | $ |
| Number of shares of to be issued: |
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Exhibit B
Wire Instructions
Beneficiary: CARO HOLDINGS INTERNATIONAL LIMITED
IBAN: GB45 REVO 0099 6973 5805 40
BIC: REVOGB21
Intermediary BIC: CHASGB2L
Beneficiary address: 7 Castle Street, S3 8LT, Sheffield, United Kingdom
Bank / Payment institution: Revolut Ltd
Bank / Payment institution address: 7 Westferry Circus, E14 4HD, London, United Kingdom
Beneficiary: CARO HOLDINGS INTERNATIONAL LIMITED
Account number: 253163929233
ACH routing number: 026014928
Bank / Payment institution: Metropolitan Commercial Bank
Bank / Payment institution address: 99 Park Ave, NY, 10016, New York, United States
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher McEachnie, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Caro Holdings Inc.; |
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| 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; |
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| 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; |
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| 4. | I am 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: |
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| (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; |
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| (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; |
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| (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 |
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| (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; |
| 5. | I have disclosed, based on my 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): |
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| (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 |
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| (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. |
Date: February 21st, 2023
| /s/ Christopher McEachnie |
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| Christopher McEachnie |
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| Chief Executive Officer |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Christopher McEachnie, Chief Executive Officer of Caro Holdings Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the quarterly report on Form 10-Q of Caro Holdings Inc. for the period ended December 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Caro Holdings Inc. |
Dated: February 21st, 2023
| /s/ Christopher McEachnie |
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| Christopher McEachnie |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
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A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Caro Holdings Inc. and will be retained by Caro Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.