Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of December ___,
2019, is between Q BIOMED INC., a company incorporated under the laws of the
State of Nevada, with headquarters located at 366 Madison Ave, 3rd Floor, New
York, NY, 10022 (the “Company”), and each of the investors listed on the
Schedule of Buyers attached hereto (individually, a “Buyer” and collectively the
“Buyers”).

 

WITNESSETH

 

WHEREAS, the Company and each Buyer desire to enter into this transaction for
the Company to sell and the Buyers to purchase the Convertible Debentures (as
defined below) pursuant to an exemption from registration pursuant to Section
4(2) and/or Rule 506 of Regulation D (“Regulation D”) as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended (the “Securities Act”);

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Buyer(s), as provided
herein, and the Buyer(s) shall purchase convertible debentures in the principal
amount of up to $3,000,000 in the form attached hereto as “Exhibit A” (the
“Convertible Debentures”), which shall be convertible into shares of the
Company’s common stock, par value $0.001 (the “Common Stock”) (as converted, the
“Conversion Shares”), of which $1,000,000 shall be purchased upon the signing
this agreement (the “First Closing”), $1,000,000 (as may be adjusted by Section
4(m)) shall be purchased on or about the date 30 days after the date hereof (the
“Second Closing”), and $1,000,000 (as may be adjusted by Section 4(m)) shall be
purchased on or about the date 60 days after the date hereof (the “Third
Closing”) (individually referred to as a “Closing” and collectively referred to
as the “Closings”), for a total purchase price of up to $3,000,000 (the
“Purchase Price”) in the respective amounts set forth opposite each Buyer(s)
name on Schedule I (the “Subscription Amount”);

 

WHEREAS, the Convertible Debentures and the Conversion Shares are collectively
referred to herein as the “Securities.”

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Buyer hereby
agree as follows:

 

1.PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.

 

(a)                   Purchase of Convertible Debentures. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer, and each Buyer severally, but
not jointly, agrees to purchase from the Company at each Closing the Convertible
Debentures in amounts corresponding with the Subscription Amount set forth
opposite each Buyer’s name on Schedule of Buyers attached as Schedule I hereto.
The Second Closing and the Third Closing shall be at the option of the Company
provided that the conditions to each such Closing set forth in Sections 6 and 7
below are satisfied or waived (i) .

 

 

 

 

(b)                  Closing Dates. Each Closing of the purchase of Convertible
Debentures by the Buyers shall occur at the offices Yorkville Advisors Global,
LP, 1012 Springfield Avenue, Mountainside, NJ 07092. The date and time of each
Closing shall be as follows: (i) the First Closing shall be 10:00 a.m., New York
time, on the first (1st) Business Day on which the conditions to the Closing set
forth in Sections 6 and 7 below are satisfied or waived (or such other date as
is mutually agreed to by the Company and each Buyer) (the “First Closing Date”),
(ii) the Second Closing shall be 10:00 a.m., New York time, on the first (1st)
Business Day on or after the date that is 30 days from the date hereof provided
that the conditions to the Closing set forth in Sections 6 and 7 below are
satisfied or waived (or such other date as is mutually agreed to by the Company
and each Buyer) (the “Second Closing Date”), and (iii) the Third Closing shall
be 10:00 a.m., New York time, on the first (1st) Business Day on or after the
date that is 60 days from the date hereof provided that the conditions to the
Closing set forth in Sections 6 and 7 below are satisfied or waived (or such
other date as is mutually agreed to by the Company and each Buyer) (the “Third
Closing Date” and collectively along with the First Closing Date and the Second
Closing Date, the “Closing Dates”). As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain closed.

 

(c)                   Form of Payment; Deliveries. Subject to the satisfaction
of the terms and conditions of this Agreement, on each Closing Date, (i) the
Buyers shall deliver to the Company such aggregate proceeds for the Convertible
Debentures to be issued and sold to such Buyer at such Closing, minus the fees
to be paid directly from the proceeds of such Closing as set forth herein, and
(ii) the Company shall deliver to each Buyer, Convertible Debentures which such
Buyer is purchasing at such Closing in amounts indicated opposite such Buyer’s
name on Schedule I, duly executed on behalf of the Company.

 

2.BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer, severally and not jointly, represents and warrants to the Company
with respect to only itself that, as of the date hereof and as of each Closing
Date:

 

(a)                   Investment Purpose. The Buyer is acquiring the Securities
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act; provided,
however, that by making the representations herein, such Buyer reserves the
right to dispose of the Securities at any time in accordance with or pursuant to
an effective registration statement covering such Securities or an available
exemption under the Securities Act. Such Buyer does not presently have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.

 

(b)                  Accredited Investor Status. The Buyer is an “Accredited
Investor” as that term is defined in Rule 501(a)(3) of Regulation D.

 

2

 

 

(c)                   Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.

 

(d)                  Information. The Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Securities, which have been requested by such Buyer. The Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company and
its management. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a high degree of
risk. The Buyer has sought such accounting, legal and tax advice, as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

 

(e)                   Transfer or Resale. The Buyer understands that: (i) the
Securities have not been registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration
requirements, or (C) such Buyer provides the Company with reasonable assurances
(in the form of seller and broker representation letters) that such Securities
can be sold, assigned or transferred pursuant to Rule 144 promulgated under the
Securities Act, as amended (or a successor rule thereto) (collectively, “Rule
144”), in each case following the applicable holding period set forth therein;
and (ii) any sale of the Securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder.

 

(f)                    Legends. The Buyer agrees to the imprinting, so long as
its required by this Section 2(f), of a restrictive legend on the Securities in
substantially the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

 

3

 

 

Certificates evidencing the Conversion Shares shall not contain any legend
(including the legend set forth above), (i) while a registration statement
covering the resale of such security is effective under the Securities Act, (ii)
following any sale of such Conversion Shares pursuant to Rule 144, (iii) if such
Conversion Shares are eligible for sale under Rule 144, or (iv) if such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the SEC). The
Buyer agrees that the removal of restrictive legend from certificates
representing Securities as set forth in this Section 3(f) is predicated upon the
Company’s reliance that the Buyer will sell any Securities pursuant to either
the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a registration statement, they will be sold in
compliance with the plan of distribution set forth therein.

 

(g)                  Organization; Authority. Such Buyer is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents (as defined below) to which it is a party and otherwise to carry out
its obligations hereunder and thereunder.

 

(h)                  Authorization, Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and shall
constitute the legal, valid and binding obligations of such Buyer enforceable
against such Buyer in accordance with its terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.

 

(i)                    No Conflicts. The execution, delivery and performance by
such Buyer of this Agreement and the consummation by such Buyer of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents of such Buyer, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Buyer is a party or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Buyer, except, in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

 

4

 

 

(j)                    Certain Trading Activities. The Buyer hereby agrees that
it shall not directly or indirectly, engage in any Short Sales involving the
Company’s securities during the period commencing on the date hereof and ending
when no Convertible Debentures remain outstanding. "Short Sales" means all
"short sales" as defined in Rule 200 promulgated under Regulation SHO under the
1934 Act (as defined below). The Buyer is aware that Short Sales and other
hedging activities may be subject to applicable federal and state securities
laws, rules and regulations and the Buyer acknowledges that the responsibility
of compliance with any such federal or state securities laws, rules and
regulations is solely the responsibility of the Buyer.

 

3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

Except as set forth under the corresponding section of the Disclosure Schedules
which Disclosure Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, the Company hereby makes the representations and warranties set
forth below to the Buyer as of each Closing Date:

 

(a)             Organization and Qualification. The Company and each of its
Subsidiaries are entities duly formed, validly existing and in good standing
under the laws of the jurisdiction in which they are formed, and have the
requisite power and authority to own their properties and to carry on their
business as now being conducted and as presently proposed to be conducted. The
Company and each of its Subsidiaries is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not reasonably be expected to have a Material Adverse Effect
(as defined below). As used in this Agreement, “Material Adverse Effect” means
any material adverse effect on (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company and its Subsidiary, taken as a whole,
(ii) the transactions contemplated hereby or in any of the other Transaction
Documents or any other agreements or instruments to be entered into by the
Company in connection herewith or therewith or (iii) the authority or ability of
the Company to perform any of its obligations under any of the Transaction
Documents (as defined below). “Subsidiaries” means any Person in which the
Company, directly or indirectly, owns a majority of the outstanding capital
stock having voting power or holds a majority of the equity or similar interest
of such Person, and each of the foregoing, is individually referred to herein as
a “Subsidiary”.

 

5

 

 

(b)             Authorization; Enforcement; Validity. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents and to issue the Securities
in accordance with the terms hereof and thereof. The execution and delivery of
this Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Convertible Debentures, the
reservation for issuance and issuance of the Conversion Shares issuable upon
conversion of the Convertible Debentures, have been duly authorized by the
Company's board of directors and no further filing, consent or authorization is
required by the Company, its board of directors or its stockholders or other
governmental body. This Agreement has been, and the other Transaction Documents
to which the Company is a party will be prior to the Closing, duly executed and
delivered by the Company, and each constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
its respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law. “Transaction Documents” means, collectively, this Agreement, the
Convertible Debentures, and each of the other agreements and instruments entered
into by the Company or delivered by the Company in connection with the
transactions contemplated hereby and thereby, as may be amended from time to
time.

 

(c)             Issuance of Securities. The issuance of the Convertible
Debentures are duly authorized and, upon issuance and payment in accordance with
the terms of the Transaction Documents the Convertible Debentures shall be
validly issued, fully paid and non-assessable and free from all preemptive or
similar rights, mortgages, defects, claims, liens, pledges, charges, taxes,
rights of first refusal, encumbrances, security interests and other encumbrances
(collectively “Liens”) with respect to the issuance thereof. As of each Closing
Date, the Company shall have reserved from its duly authorized capital stock not
less than (i) 300% of the maximum number of shares of Common Stock issuable upon
conversion of all Convertible Debentures (assuming for purposes hereof that (x)
such Convertible Debentures are convertible at the Conversion Price (as defined
therein) as of the date of determination, (y) any such conversion shall not take
into account any limitations on the conversion of the Convertible Debentures set
forth therein, including the Floor Price). Upon issuance or conversion in
accordance with the Convertible Debentures, the Conversion Shares, when issued,
will be validly issued, fully paid and nonassessable and free from all
preemptive or similar rights or Liens with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.

 

(d)             No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Convertible Debentures, the Conversion Shares, and the
reservation for issuance of the Conversion Shares) will not (i) result in a
violation of the Articles of Incorporation (as defined below), Bylaws (as
defined below), certificate of formation, memorandum of association, articles of
association, bylaws or other organizational documents of the Company or any of
its Subsidiaries, or any capital stock or other securities of the Company or any
of its Subsidiaries, (ii) conflict with, or constitute a default under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, U.S.
federal and state securities laws and regulations, the securities laws of the
jurisdictions of the Company's incorporation or in which it or its subsidiaries
operate and the rules and regulations of the OTC QB (the “Principal Market”) and
including all applicable laws, rules and regulations of the State of Nevada)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected, except in
the case of (ii) and (iii) for any conflict, default, right or violation that
would not reasonably be expected to result in a Material Adverse Effect.

 

6

 

 

 

(e)             Consents. The Company is not required to obtain any material
consent from, authorization or order of, or make any filing or registration with
(other than any filings as may be required by any federal or state securities
agencies and any filings as may be required by the Principal Market), any
Governmental Entity (as defined below) or any regulatory or self-regulatory
agency or any other Person in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents, in each
case, in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company or any
Subsidiary is required to obtain pursuant to the preceding sentence have been or
will be obtained or effected on or prior to the each Closing Date, and neither
the Company nor any of its Subsidiaries are aware of any facts or circumstances
which might prevent the Company or any of its Subsidiaries from obtaining or
effecting any of the registration, application or filings contemplated by the
Transaction Documents. The Company is not in violation of the requirements of
the Principal Market and has no knowledge of any facts or circumstances which
could reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future. The Company has notified the Principal Market of the
issuance of all of the Securities hereunder, which does not require obtaining
the approval of the stockholders of the Company or any other Person or
Governmental Entity, and the Principal Market has completed its review of the
related Listing of Additional Share form. “Governmental Entity” means any
nation, state, county, city, town, village, district, or other political
jurisdiction of any nature, federal, state, local, municipal, foreign, or other
government, governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal), multi-national organization or body; or body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature or
instrumentality of any of the foregoing, including any entity or enterprise
owned or controlled by a government or a public international organization or
any of the foregoing.

 

(f)              Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) to its knowledge, an
"affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule thereto) (collectively, “Rule 144”)) of the Company or any of its
Subsidiaries or (iii) to its knowledge, a “beneficial owner” of more than 10% of
the shares of Common Stock (as defined for purposes of Rule 13d-3 of the 1934
Act). The Company further acknowledges that no Buyer is acting as a financial
advisor or fiduciary of the Company or any of its Subsidiaries (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each Buyer
that the Company's decision to enter into the Transaction Documents to which it
is a party has been based solely on the independent evaluation by the Company
and its representatives.

 

7

 

 

(g)             No Integrated Offering. None of the Company, its Subsidiaries or
any of their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated for quotation.
None of the Company, its Subsidiaries, their affiliates nor any Person acting on
their behalf will take any action or steps that would cause the offering of any
of the Securities to be integrated with other offerings of securities of the
Company.

 

(h)             Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares will increase in certain circumstances. The
Company further acknowledges its obligation to issue the Conversion Shares upon
conversion of the Convertible Debentures in accordance with this Agreement and
the Convertible Debentures is, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.

 

(i)              Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, interested
stockholder, business combination, poison pill (including, without limitation,
any distribution under a rights agreement), stockholder rights plan or other
similar anti-takeover provision under the Articles of Incorporation, Bylaws or
other organizational documents or the laws of the jurisdiction of its
incorporation or otherwise which is or could become applicable to any Buyer as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and any Buyer's ownership
of the Securities.

 

(j)              SEC Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Company has timely filed all reports, schedules,
forms, proxy statements, statements and other documents required to be filed by
it with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed
prior to the date hereof and all exhibits and appendices included therein and
financial statements, notes and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the “SEC Documents”). The
Company has delivered or has made available to the Buyers or their respective
representatives true, correct and complete copies of each of the SEC Documents
not available on the EDGAR system. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect as of the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles (“GAAP”), consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments which will not be
material, either individually or in the aggregate). The reserves, if any,
established by the Company or the lack of reserves, if applicable, are
reasonable based upon facts and circumstances known by the Company on the date
hereof and there are no loss contingencies that are required to be accrued by
the Statement of Financial Accounting Standard No. 5 of the Financial Accounting
Standards Board which are not provided for by the Company in its financial
statements or otherwise. No other information provided by or on behalf of the
Company to any of the Buyers which is not included in the SEC Documents
(including, without limitation, information in the disclosure schedules to this
Agreement) contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein not
misleading, in the light of the circumstance under which they are or were made.
The Company is not currently contemplating to amend or restate any of the
financial statements (including, without limitation, any notes or any letter of
the independent accountants of the Company with respect thereto) included in the
SEC Documents (the “Financial Statements”), nor is the Company currently aware
of facts or circumstances which would require the Company to amend or restate
any of the Financial Statements, in each case, in order for any of the
Financials Statements to be in compliance with GAAP and the rules and
regulations of the SEC. The Company has not been informed by its independent
accountants that they recommend that the Company amend or restate any of the
Financial Statements or that there is any need for the Company to amend or
restate any of the Financial Statements.

 

8

 

 

(k)             Absence of Certain Changes. Since the date of the Company's most
recent audited financial statements contained in a Form 10-K, there has been no
material adverse change and no material adverse development in the business,
assets, liabilities, properties, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any of its
Subsidiaries. Since the date of the Company's most recent audited financial
statements contained in a Form 10-K, neither the Company nor any of its
Subsidiaries has (i) declared or paid any dividends, (ii) sold any material
assets, individually or in the aggregate, outside of the ordinary course of
business or (iii) made any material capital expenditures, individually or in the
aggregate, outside of the ordinary course of business. Neither the Company nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any
law or statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any Subsidiary have any
knowledge or reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so.

 

(l)              No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is reasonably expected to exist or occur specific to the Company, any
of its Subsidiaries or any of their respective businesses, properties,
liabilities, prospects, operations (including results thereof) or condition
(financial or otherwise), that has not been publicly disclosed and would
reasonably be expected to have a Material Adverse Effect.

 

(m)          Conduct of Business; Regulatory Permits. Neither the Company nor
any of its Subsidiaries is in violation of any term under its Articles of
Incorporation, any certificate of designation, preferences or rights of any
other outstanding series of preferred stock of the Company or any of its
Subsidiaries or Bylaws or their organizational charter, certificate of
formation, memorandum of association, articles of association, Articles of
Incorporation or certificate of incorporation or bylaws, respectively. Neither
the Company nor any of its Subsidiaries is in violation of any judgment, decree
or order or any statute, ordinance, rule or regulation applicable to the Company
or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except in all
cases for violations which would not reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in violation of any of the rules, regulations or requirements of the
Principal Market and has no knowledge of any facts or circumstances that could
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. During the one year prior to the date hereof,
(i) the Common Stock has been listed or designated for quotation on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market, which has not been
publicly disclosed. The Company and each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, and neither the Company nor any of its Subsidiaries has received
any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit. There is no agreement, commitment,
judgment, injunction, order or decree binding upon the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries is a party which
has or would reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
Subsidiaries, any acquisition of property by the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted other than such effects, individually or in
the aggregate, which have not had and would not reasonably be expected to have a
Material Adverse Effect on the Company or any of its Subsidiaries.

 

(n)             Foreign Corrupt Practices. Neither the Company nor any of its
Subsidiaries nor any director, officer, agent, employee, nor any other person
acting for or on behalf of the Company or any of its Subsidiaries (individually
and collectively, a “Company Affiliate”) have violated the U.S. Foreign Corrupt
Practices Act (the “FCPA) or any other applicable anti-bribery or anti-
corruption laws, nor has any Company Affiliate offered, paid, promised to pay,
or authorized the payment of any money, or offered, given, promised to give, or
authorized the giving of anything of value, to any officer, employee or any
other person acting in an official capacity for any Governmental Entity to any
political party or official thereof or to any candidate for political office
(individually and collectively, a “Government Official”) or to any person under
circumstances where such Company Affiliate knew or was aware of a high
probability that all or a portion of such money or thing of value would be
offered, given or promised, directly or indirectly, to any Government Official,
for the purpose, in violation of applicable law, of: (i) (A) influencing any act
or decision of such Government Official in his/her official capacity, (B)
inducing such Government Official to do or omit to do any act in violation of
his/her lawful duty, (C) securing any improper advantage, or (D) inducing such
Government Official to influence or affect any act or decision of any
Governmental Entity, or (ii) assisting the Company or its Subsidiaries in
obtaining or retaining business for or with, or directing business to, the
Company or its Subsidiaries.

 

9

 

 

(o)             Equity Capitalization.

 

(i)                 Definitions:

 

(A)              “Common Stock” means (x) the Company's shares of common stock,
par value $0.001 per share, and (y) any capital stock into which such common
stock shall have been changed or any share capital resulting from a
reclassification of such common stock.

 

(B)              “Preferred Stock” means (x) the Company's blank check preferred
stock, par value $0.001 per share, the terms of which may be designated by the
board of directors of the Company in a statement of designations and (y) any
capital stock into which such preferred stock shall have been changed or any
share capital resulting from a reclassification of such preferred stock (other
than a conversion of such preferred stock into Common Stock in accordance with
the terms of such Certificate of Designations).

 

(ii)               Authorized and Outstanding Capital Stock. As of the date
hereof, the authorized capital stock of the Company consists of (A) 250,000,000
shares of Common Stock, of which, 20,252,399 are issued and outstanding and (B)
100,000,000 shares of Preferred Stock, none of which are issued and outstanding.

 

(iii)             Valid Issuance; Available Shares. All of such outstanding
shares are duly authorized and have been validly issued and are fully paid and
nonassessable.

 

(iv)              Existing Securities; Obligations. Except as disclosed in the
SEC Documents: (A) none of the Company's or any Subsidiary's shares, interests
or capital stock is subject to preemptive rights or any other similar rights or
Liens suffered or permitted by the Company or any Subsidiary; (B) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares, interests or
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares, interests or
capital stock of the Company or any of its Subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares, interests or capital stock of the Company or any
of its Subsidiaries; (C) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to this Agreement); (D)
there are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (E) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; and (G) neither the Company nor any Subsidiary has
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement.

 

(v)                Organizational Documents. The Company has furnished to the
Buyers or filed on EDGAR true, correct and complete copies of the Company's
Articles of Incorporation, as amended and as in effect on the date hereof (the
“Articles of Incorporation”), and the Company's bylaws, as amended and as in
effect on the date hereof (the “Bylaws”), and the terms of all Convertible
Securities and the material rights of the holders thereof in respect thereto.

 

10

 

 

(p)             Litigation. Except as disclosed in the SEC Documents, there is
no action, suit, arbitration, proceeding, inquiry or investigation before or by
the Principal Market, any court, public board, other Governmental Entity,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries,
the Common Stock or any of the Company's or its Subsidiaries' officers or
directors, whether of a civil or criminal nature or otherwise, in their
capacities as such, which would reasonably be expected to result in a Material
Adverse Effect. After reasonable inquiry of its employees, the Company is not
aware of any event which might result in or form the basis for any such action,
suit, arbitration, investigation, inquiry or other proceeding. Without
limitation of the foregoing, there has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the SEC
involving the Company, any of its Subsidiaries or any current or former director
or officer of the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries is the subject of any order, writ, judgment, injunction,
decree, determination or award of any Governmental Entity that would reasonably
be expected to result in a Material Adverse Effect.

 

(q)             Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. In accordance with the previous sentence, the Company currently
maintains no insurance policies. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for, and neither the
Company nor any such Subsidiary has any reason to believe that it will be unable
to renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.

 

(r)              Manipulation of Price. Neither the Company nor any of its
Subsidiaries has, and, to the knowledge of the Company, no Person acting on
their behalf has, directly or indirectly, (i) taken any action designed to cause
or to result in the stabilization or manipulation of the price of any security
of the Company or any of its Subsidiaries to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of the Company or any of its Subsidiaries.

 

(s)              Registration Eligibility. The Company is eligible to register
the resale of the Conversion Shares by the Buyers using Form S-1 promulgated
under the 1933 Act.

 

(t)              Shell Company Status. The Company is not, but was until January
8, 2016, an issuer identified in, or subject to, Rule 144(i).

 

(u)             Money Laundering. The Company and its Subsidiaries are in
compliance with, and have not previously violated, the USA Patriot Act of 2001
and all other applicable U.S. and non-U.S. anti-money laundering laws and
regulations, including, but not limited to, the laws, regulations and Executive
Orders and sanctions programs (“Sanctions Programs”) administered by the U.S.
Office of Foreign Assets Control (“OFAC”), including, without limitation, (i)
Executive Order 13224 of September 23, 2001 entitled, "Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism" (66 Fed. Reg. 49079 (2001)); and any regulations contained in 31 CFR,
Subtitle B, Chapter V.

 

(v)             Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected to
constitute material, non- public information concerning the Company or any of
its Subsidiaries, other than the existence of the transactions contemplated by
this Agreement and the other Transaction Documents. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Buyers regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries, taken as a
whole, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. All of the written information furnished after the date
hereof by or on behalf of the Company or any of its Subsidiaries to each Buyer
pursuant to or in connection with this Agreement and the other Transaction
Documents, taken as a whole, will be true and correct in all material respects
as of the date on which such information is so provided and will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, liabilities, prospects,
operations (including results thereof) or conditions (financial or otherwise),
which, under applicable law, rule or regulation, requires public disclosure at
or before the date hereof or announcement by the Company but which has not been
so publicly disclosed. All financial projections and forecasts that have been
prepared by or on behalf of the Company or any of its Subsidiaries and made
available to the Buyers have been prepared in good faith based upon reasonable
assumptions and represented, at the time each such financial projection or
forecast was delivered to each Buyer, the Company's best estimate of future
financial performance (it being recognized that such financial projections or
forecasts are not to be viewed as facts and that the actual results during the
period or periods covered by any such financial projections or forecasts may
differ from the projected or forecasted results). The Company acknowledges and
agrees that no Buyer makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 2.

 

11

 

 

(w)           No General Solicitation. Neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities.

 

(x)             Private Placement. Assuming the accuracy of the Buyers’
representations and warranties set forth in Section 2, no registration under the
Securities Act is required for the offer and sale of the Securities by the
Company to the Buyers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Primary Market.

 

4.COVENANTS.

 

(a)               Reporting Status. Until the date on which the Buyers shall
have sold all of the Underlying Securities, as defined below, (the “Reporting
Period”), the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would no longer require or otherwise permit
such termination.

 

(b)               Use of Proceeds. The Company will use the proceeds from the
sale of the Securities hereunder for working capital and other general corporate
purposes. Neither the Company nor any Subsidiary will, directly or indirectly,
use the proceeds of the transactions contemplated herein, or lend, contribute,
facilitate or otherwise make available such proceeds to any Person (i) to fund,
either directly or indirectly, any activities or business of or with any Person
that is identified on the list of Specially Designated Nationals and Blocker
Persons maintained by OFAC, or in any country or territory, that, at the time of
such funding, is, or whose government is, the subject of Sanctions Programs, or
(ii) in any other manner that will result in a violation of Sanctions Programs.

 

(c)               Listing. The Company shall promptly secure the listing or
designation for quotation (as the case may be) of all of the Underlying
Securities (as defined below) upon each national securities exchange and
automated quotation system, if any, upon which the Common Stock is then listed
or designated for quotation (as the case may be) (subject to official notice of
issuance) and shall maintain such listing or designation for quotation (as the
case may be) of all Underlying Securities from time to time issuable under the
terms of the Transaction Documents on such national securities exchange or
automated quotation system. The Company shall maintain the Common Stock’s
listing or authorization for quotation (as the case may be) on the Principal
Market, The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Market, the
Nasdaq Global Select Market, the OTCQX or the OTCQB (each, an “Eligible
Market”). Neither the Company nor any of its Subsidiaries shall take any action
which could be reasonably expected to result in the delisting or suspension of
the Common Stock on an Eligible Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(i).
“Underlying Securities” means the (i) the Conversion Shares, and (ii) any common
stock of the Company issued or issuable with respect to the Conversion Shares,
including, without limitation, (1) as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise and (2)
shares of capital stock of the Company into which the shares of Common Stock are
converted or exchanged without regard to any limitations on conversion of the
Convertible Debentures.

 

(d)               Fees. The Company shall pay to YA Global II SPV, LLC, an
affiliate of the lead Buyer, a commitment fee in the amount of 2.5% of the
Purchase Price of the Second and Third Closing as compensation for the
monitoring and managing of the purchase and investments made by the Buyers
described. In addition, the Company shall pay a one-time structuring fee in the
amount of $10,000 which shall be deducted from the gross proceeds of First
Closing.

 

(e)               Pledge of Securities. Notwithstanding anything to the contrary
contained in this Agreement, the Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer.

 

12

 

 

(f)                Disclosure of Transactions and Other Material Information.
The Company shall, on or before 9:30 a.m., New York time, on the first (1st)
Business Day after the date of this Agreement, issue a press release (the “Press
Release”) reasonably acceptable to the Buyers disclosing all the material terms
of the transactions contemplated by the Transaction Documents. On or before 9:30
a.m., New York time, on the first (1st) Business Day after the date of this
Agreement, the Company shall file a Report of Foreign Issuer on Form 8-K
describing all the material terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching all the
material Transaction Documents (including, without limitation, this Agreement
(and all schedules to this Agreement) and the form of Statement of Designations)
(including all attachments, the “8-K Filing”). From and after the filing of the
8-K Filing, the Company shall have disclosed all material, non-public
information (if any) provided to any of the Buyers by the Company or any of its
Subsidiaries or any of their respective officers, directors, employees or agents
in connection with the transactions contemplated by the Transaction Documents.
In addition, effective upon the filing of the 8-K Filing, the Company
acknowledges and agrees that any and all confidentiality or similar obligations
with respect to the transactions contemplated by the Transaction Documents under
any agreement, whether written or oral, between the Company, any of its
Subsidiaries or any of their respective officers, directors, affiliates,
employees or agents, on the one hand, and any of the Buyers or any of their
affiliates, on the other hand, shall terminate. The Company shall not, and the
Company shall cause each of its Subsidiaries and each of its and their
respective officers, directors, employees and agents not to, provide any Buyer
with any material, non-public information regarding the Company or any of its
Subsidiaries from and after the date hereof without the express prior written
consent of such Buyer (which may be granted or withheld in such Buyer's sole
discretion).

 

(g)               Reservation of Shares. So long as any of the Convertible
Debentures remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than 300% of the maximum number of shares of Common Stock issuable upon
conversion of all the Convertible Debentures then outstanding (assuming for
purposes hereof that (x) the Convertible Debentures are convertible at the
Conversion Price then in effect, and (y) any such conversion shall not take into
account any limitations on the conversion of the Convertible Debentures,
including the Floor Price) (the “Required Reserve Amount”); provided that at no
time shall the number of shares of Common Stock reserved pursuant to this
Section 4(g) be reduced other than proportionally in connection with any
conversion and/or redemption, or reverse stock split. If at any time the number
of shares of Common Stock authorized and reserved for issuance is not sufficient
to meet the Required Reserved Amount, the Company will promptly take all
corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of stockholders
to authorize additional shares to meet the Company's obligations pursuant to the
Transaction Documents, in the case of an insufficient number of authorized
shares, and obtain stockholder approval of an increase in such authorized number
of shares, and voting the management shares of the Company in favor of an
increase in the authorized shares of the Company to ensure that the number of
authorized shares is sufficient to meet the Required Reserved Amount.

 

(h)               Piggy-Back Registration. If at any time there is not an
effective Registration Statement covering the resale of all of the Conversion
Shares and the Company shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Buyer a written notice of
such determination and, if within fifteen (15) days after the date of such
notice, any such Buyer shall so request in writing, the Company shall include in
such registration statement all or any part of such Conversion Shares, subject
to applicable rules and regulations, such Buyer requests to be registered;
provided, however, that, the Company shall not be required to register any
Conversion Shares pursuant to this Section that are eligible for resale pursuant
to Rule 144 or that are the subject of a then effective Registration Statement.

 

(i)                Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except where such violations would not
reasonably be expected to result, either individually or in the aggregate, in a
Material Adverse Effect.

 

13

 

 

(j)                The Company and the Buyers hereby agree that the obligations
of each of the Company and the Buyers in respect of the purchase and sale of the
$250,000 of convertible debentures pursuant to the securities purchase agreement
dated October 11, 2019 shall be terminated and are replaced and superseded by
the obligations contained herein.

 

(k)               From the date hereof until the (a) first date on which the
daily VWAP (as defined in the form the Convertible Debentures attached as
Exhibit A) of the Common Stock during each of the twenty (20) consecutive prior
Trading Days shall exceed 200% of the Floor Price (as defined in the
Debentures), and (b) provided that at such time no Event of Default (as defined
in the Debentures) shall have occurred, unless the holders of at least 67% in
principal amount of the then outstanding Convertible Debentures shall have given
prior written consent, the Company shall not, and shall not permit any of its
subsidiaries (whether or not a subsidiary on the date hereof) to, directly or
indirectly (i) other than Permitted Indebtedness, enter into, create, incur,
assume, guarantee or suffer to exist any indebtedness for borrowed money of any
kind, including, but not limited to, a guarantee, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom, (ii) other than Permitted Liens, enter into,
create, incur, assume or suffer to exist any lien, security interest, option or
other charge or encumbrance (each, a “Lien”) of any kind, on or with respect to
any of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom, or (iii) amend its charter
documents, including, without limitation, its certificate of incorporation and
bylaws, in any manner that materially and adversely affects any rights of the
holders of the Convertible Debentures.

 

“Permitted Indebtedness” shall mean: (i) indebtedness evidenced by the
Convertible Debentures; (ii) indebtedness described on a Disclosure Schedule
attached hereto; (iii) indebtedness incurred solely for the purpose of financing
the acquisition or lease of any equipment, including capital lease obligations
with no recourse other than to such equipment; (iv) indebtedness (A) the
repayment of which has been subordinated to the payment of the Convertible
Debentures on terms and conditions acceptable to the Buyers, including with
regard to interest payments and repayment of principal, (B) which does not
mature or otherwise require or permit redemption or repayment prior to or on the
91st day after the maturity date of any Convertible Debentures then outstanding;
and (C) which is not secured by any assets of the Company or its subsidiaries;
(v) indebtedness associated with acquiring new intellectual property assets and
licenses, so long as the proceeds are going to the party(ies) from which the
Company is acquiring the assets, licenses, and other properties and (vi) any
indebtedness (other than the indebtedness set out in (i) – (v) above) incurred
after the date hereof, provided that such indebtedness does not exceed $20,000
at any given time.

 

“Permitted Liens” shall mean (1) any security interest granted to the Buyers to
secure the obligations under the Convertible Debentures, (2) any prior security
interest granted to the Buyers, (3) existing Liens disclosed by the Company on a
Disclosure Schedule attached hereto; (4) inchoate Liens for taxes, assessments
or governmental charges or levies not yet due, as to which the grace period, if
any, related thereto has not yet expired, or being contested in good faith and
by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP; (5) Liens of carriers, materialmen, warehousemen,
mechanics and landlords and other similar Liens which secure amounts which are
not yet overdue by more than 60 days or which are being contested in good faith
by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP; (6) licenses, sublicenses, leases or subleases granted to
other persons not materially interfering with the conduct of the business of the
Company; (7) Liens securing capitalized lease obligations and purchase money
indebtedness incurred solely for the purpose of financing an acquisition or
lease; (8) easements, rights-of-way, restrictions, encroachments, municipal
zoning ordinances and other similar charges or encumbrances, and minor title
deficiencies, in each case not securing debt and not materially interfering with
the conduct of the business of the Company and not materially detracting from
the value of the property subject thereto; (9) Liens arising out of the
existence of judgments or awards which judgments or awards do not constitute an
Event of Default; (10) Liens incurred in the ordinary course of business in
connection with workers compensation claims, unemployment insurance, pension
liabilities and social security benefits and Liens securing the performance of
bids, tenders, leases and contracts in the ordinary course of business,
statutory obligations, surety bonds, performance bonds and other obligations of
a like nature (other than appeal bonds) incurred in the ordinary course of
business (exclusive of obligations in respect of the payment for borrowed
money); (11) Liens in favor of a banking institution arising by operation of law
encumbering deposits (including the right of set-off) and contractual set-off
rights held by such banking institution and which are within the general
parameters customary in the banking industry and only burdening deposit accounts
or other funds maintained with a creditor depository institution; (12) usual and
customary set-off rights in leases and other contracts; (13) escrows in
connection with acquisitions and dispositions and (14) royalties and other
rights to revenue derived from the sale of the Company’s products that are
granted in the ordinary course of business.

 

14

 

 

5.REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

 

(a)               Register. The Company shall maintain at its principal
executive offices or with the Transfer Agent (or at such other office or agency
of the Company as it may designate by notice to each holder of Securities), a
register for the Convertible Debentures in which the Company shall record the
name and address of the Person in whose name the Convertible Debentures have
been issued (including the name and address of each transferee), the amount of
Convertible Debentures held by such Person, and the number of Conversion Shares
issuable upon conversion of the Convertible Debentures held by such Person. The
Company shall keep the register open and available at all times during business
hours for inspection of any Buyer or its legal representatives.

 

(b)               Transfer Restrictions. The Securities may only be disposed of
in compliance with state and federal securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a Buyer or in
connection with a pledge as contemplated herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably acceptable to the Company, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have the
rights and obligations of a Buyer under this Agreement.

 

6.CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

The obligation of the Company hereunder to issue and sell the Convertible
Debentures to each Buyer at each Closing is subject to the satisfaction, at or
before the Closing Dates, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:

 

(a)               Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.

 

(b)               Such Buyer and each other Buyer shall have delivered to the
Company the Purchase Price (less, in the case of any Buyer, the amounts withheld
pursuant to Section 4(d)) for the Convertible Debentures being purchased by such
Buyer at the Closing by wire transfer of immediately available funds in
accordance with the Closing Statement.

 

(c)               The representations and warranties of such Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Dates as though originally made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct
as of such specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Dates.

 

15

 

 

7.CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

 

The obligation of each Buyer hereunder to purchase its Convertible Debentures at
each Closing is subject to the satisfaction, at or before the Closing Dates, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice thereof:

 

(a)               The Company shall have duly executed and delivered to such
Buyer each of the Transaction Documents to which it is a party and the Company
shall have duly executed and delivered to such Buyer such aggregate principal
amount of Convertible Debentures as is set forth opposite such Buyer's name in
column (b) of the Schedule of Buyers for each Closing.

 

(b)               Such Buyer shall have received the opinion of Ortoli
Rosenstadt LLP, the Company's counsel, dated as of the Closing Date, in the form
reasonably acceptable to such Buyer.

 

(c)               The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company issued by the
Registrar for the State of the Nevada as of a date within ten (10) days of the
Closing Date.

 

(d)               Each and every representation and warranty of the Company
shall be true and correct in all material respects (other than representations
and warranties qualified by materiality, which shall be true and correct in all
respects) as of the date when made and as of the Closing Dates as though
originally made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such specific
date) and the Company shall have performed, satisfied and complied in all
respects with the covenants, agreements and conditions required to be performed,
satisfied or complied with by the Company at or prior to the Closing Dates, as
set forth in section 3 and 4.

 

(e)               The Common Stock (A) shall be designated for quotation or
listed (as applicable) on the Principal Market and (B) shall not have been
suspended, as of the Closing Dates, by the SEC or the Principal Market from
trading on the Principal Market nor shall suspension by the SEC or the Principal
Market have been threatened, as of the Closing Dates, either (I) in writing by
the SEC or the Principal Market or (II) by falling below the minimum maintenance
requirements of the Principal Market.

 

(f)                The Company shall have obtained all governmental, regulatory
or third-party consents and approvals, if any, necessary for the sale of the
Securities, including without limitation, those required by the Principal
Market, if any.

 

(g)               No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or Governmental Entity of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.

 

(h)               Since the date of execution of this Agreement, no event or
series of events shall have occurred that has resulted in or would reasonably be
expected to result in a Material Adverse Effect.

 

(i)                The Company shall have obtained approval of the Principal
Market to list or designate for quotation (as the case may be) the Conversion
Shares, if applicable.

 

(j)                Such Buyer shall have received a letter, duly executed by an
officer of the Company, setting forth the wire amounts of each Buyer and the
wire transfer instructions of the Company (the “Closing Statement”).

 

16

 

 

(k)               The following conditions shall be satisfied: (i) from the date
hereof up to the applicable Closing Date, trading in the Common Stock shall not
have been suspended by the SEC or the Principal Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), (ii) for the Second
Closing Date and the Third Closing Date, the daily VWAP of the Common Stock
during each of the five (5) consecutive Trading Days immediately prior to the
applicable Closing Date shall be at least 100% of the Floor Price (as defined in
the Debentures), and (iii) from the date hereof to the applicable Closing Date,
trading in securities generally as reported by Bloomberg L.P. shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on the Principal
Market, nor shall a banking moratorium have been declared either by the United
States or New York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in,
any financial market which, in each case, in the reasonable judgment of each
Buyer, makes it impracticable or inadvisable to purchase the Securities at the
Closing.

 

(l)                The Company and its Subsidiaries shall have delivered to such
Buyer such other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.

 

(m)            Solely with respect to the Second Closing and the Third Closing,
the amount of outstanding principal and unpaid interest due from the Company on
all notes and debentures issued by the Company to the Buyer and its affiliates
(the “Aggregate Amount Due”) immediately after such Closing would not exceed
$5,000,000 (the “Excess Limit”); provided that if such Closing would cause the
Aggregate Amount Due to exceed the Excess Limit, the principal of the Debenture
to be issued on such Closing Date shall be reduced by an equal to (i) the
Aggregate Amount Due immediately prior to such Closing plus $1,000,000 less (ii)
the Excess Limit.

 

8.TERMINATION.

 

In the event that the First Closing shall not have occurred with respect to a
Buyer within five (5) days of the date hereof, then such Buyer shall have the
right to terminate its obligations under this Agreement with respect to itself
at any time on or after the close of business on such date without liability of
such Buyer to any other party; provided, however, (i) the right to terminate
this Agreement under this Section 8 shall not be available to such Buyer if the
failure of the transactions contemplated by this Agreement to have been
consummated by such date is the result of such Buyer's breach of this Agreement
and (ii) the abandonment of the sale and purchase of the Convertible Debentures
shall be applicable only to such Buyer providing such written notice, provided
further that no such termination shall affect any obligation of the Company
under this Agreement to reimburse such Buyer for the expenses described herein.
Nothing contained in this Section 8 shall be deemed to release any party from
any liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.

 

17

 

 

9.MISCELLANEOUS.

 

(a)               Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. The Company hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or under any of the other Transaction Documents or with any transaction
contemplated hereby or thereby, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Nothing contained herein shall be deemed or operate to
preclude any Buyer from bringing suit or taking other legal action against the
Company in any other jurisdiction to collect on the Company's obligations to
such Buyer or to enforce a judgment or other court ruling in favor of such
Buyer. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR THEREBY.

 

(b)               Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
signature page were an original thereof.

 

(c)               Headings; Gender. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Unless the context clearly indicates
otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms "including,"
"includes," "include" and words of like import shall be construed broadly as if
followed by the words "without limitation." The terms "herein," "hereunder,"
"hereof" and words of like import refer to this entire Agreement instead of just
the provision in which they are found.

 

(d)               Entire Agreement, Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

 

18

 

 

(e)               Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by email
(provided confirmation of transmission is electronically generated and kept on
file by the sending party); or (iii) one (1) Business Day after deposit with an
overnight courier service with next day delivery specified, in each case,
properly addressed to the party to receive the same. The addresses and e-mail
addresses for such communications shall be:

 

If to the Company, to: Q Biomed Inc.  

c/o Ortoli Rosenstadt

366 Madison Avenue, 3rd Floor

New York, NY 10017

Telephone:  212-588-0022
Attention:  William Rosenstadt
E-Mail:  wsr@orllp.legal

 

 

With Copy to:

Denis Corin

10 Market Street

Suite 427

Grand Cayman

KY1-9006

Cayman Islands

Email: dcorin@qbiomed.com

    If to a Buyer, to its address and e-mail address set forth on the Schedule
of Buyers, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers,         With copy to:

David Gonzalez, Esq.

c/o Yorkville Advisors Global, LP

1012 Springfield Avenue

Mountainside, NJ 07092

Email: legal@yorkvilleadvisors.com

 

or to such other address, e-mail address and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) electronically generated by the sender's
e-mail service provider containing the time, date, recipient e-mail address or
(C) provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively

 

(f)                Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of any of the Convertible Debentures (but
excluding any purchasers of Underlying Securities, unless pursuant to a written
assignment by such Buyer). The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the Buyers.
In connection with any transfer of any or all of its Securities, a Buyer may
assign all, or a portion, of its rights and obligations hereunder in connection
with such Securities without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such
transferred Securities.

 

19

 

 

(g)               Indemnification.

 

(i)                 In consideration of each Buyer's execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each holder of any Securities and all of their stockholders, partners,
members, officers, directors, employees and direct or indirect investors and any
of the foregoing Persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in any of the Transaction
Documents, (ii) any breach of any covenant, agreement or obligation of the
Company or any Subsidiary contained in any of the Transaction Documents or (iii)
any cause of action, suit, proceeding or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company or any Subsidiary) or which otherwise involves
such Indemnitee that arises out of or results from (A) the execution, delivery,
performance or enforcement of any of the Transaction Documents, (B) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (C) any
disclosure properly made by such Buyer pursuant to Section 4(f), or (D) the
status of such Buyer or holder of the Securities either as an investor in the
Company pursuant to the transactions contemplated by the Transaction Documents
or as a party to this Agreement (including, without limitation, as a party in
interest or otherwise in any action or proceeding for injunctive or other
equitable relief). To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

 

(ii)              Promptly after receipt by an Indemnitee under this Section
9(g) of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such
Indemnitee shall, if a claim in respect thereof is to be made against the
Company under this Section 9(g), deliver to the Company a written notice of the
commencement thereof, and the Company shall have the right to participate in,
and, to the extent the Company so desires, to assume control of the defense
thereof with counsel mutually reasonably satisfactory to the Company and the
Indemnitee; provided, however, that an Indemnitee shall have the right to retain
its own counsel with the fees and expenses of such counsel to be paid by the
Company if: (A) the Company has agreed in writing to pay such fees and expenses;
(B) the Company shall have failed promptly to assume the defense of such
Indemnified Liability and to employ counsel reasonably satisfactory to such
Indemnitee in any such Indemnified Liability; or (C) the named parties to any
such Indemnified Liability (including any impleaded parties) include both such
Indemnitee and the Company, and such Indemnitee shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnitee and the Company (in which case, if such Indemnitee
notifies the Company in writing that it elects to employ separate counsel at the
expense of the Company, then the Company shall not have the right to assume the
defense thereof and such counsel shall be at the expense of the Company),
provided further, that in the case of clause (C) above the Company shall not be
responsible for the reasonable fees and expenses of more than one (1) separate
legal counsel for the Indemnitees. The Indemnitee shall reasonably cooperate
with the Company in connection with any negotiation or defense of any such
action or Indemnified Liability by the Company and shall furnish to the Company
all information reasonably available to the Indemnitee which relates to such
action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the
prior written consent of the Indemnitee, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability in respect to such Indemnified
Liability or litigation, and such settlement shall not include any admission as
to fault on the part of the Indemnitee. Following indemnification as provided
for hereunder, the Company shall be subrogated to all rights of the Indemnitee
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the Company within a reasonable time of the commencement of any such action
shall not relieve the Company of any liability to the Indemnitee under this
Section 9(g), except to the extent that the Company is materially and adversely
prejudiced in its ability to defend such action.

 

(iii)            The indemnification required by this Section 9(g) shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, within ten (10) days after bills supporting the
Indemnified Liabilities are received by the Company.

 

(iv)             The indemnity agreement contained herein shall be in addition
to (A) any cause of action or similar right of the Indemnitee against the
Company or others, and (B) any liabilities the Company may be subject to
pursuant to the law.

 

(h)               No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

 

[REMAINDER PAGE INTENTIONALLY LEFT BLANK]

 

20

 

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

 

 

COMPANY:

 

  Q BIOMED INC.       By:   Name: Denis Corin   Title: President    

 

21

 

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

  BUYER:       YA II PN, LTD.       By: Yorkville Advisors Global, LP   Its:
Investment Manager            By: Yorkville Advisors Global II, LLC     Its:
General Partner         By:     Name:       Title: Member

 

22

 

 

LIST OF EXHIBITS:

 

23

 

 

EXHIBIT A

 

FORM OF CONVERTIBLE DEBENTURES

 

24

 

 

SCHEDULE OF BUYERS

 

 

(a)   (b) (c) Buyer   Principal Amount of Convertible Debentures Purchase Price
(100% of Face Value)         YA II PN, Ltd.       1012 Springfield Avenue First
Closing: $ 1,000,000.00 $ 1,000,000.00 Mountainside, NJ 07092 Second Closing $
1,000,000.00 $ 1,000,000.00   Third Closing $ 1,000,000.00 $ 1,000,000.00 Email:
Legal@yorkvilleadvisors.com       Aggregate: $ 3,000,000.00 $ 3,000,000.00      
        Legal Representative’s Address and E-Mail Address   David Gonzalez, Esq.
      1012 Springfield Avenue       Mountainside, NJ 07092       Email:
Legal@yorkvilleadvisors.com