UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 10-Q

 

(Mark One)

 

 [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
For the quarterly period ended September 30, 2020

 

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 000-55470

 

CQENS Technologies Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   27-1521407

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

5550 Nicollet Avenue, Minneapolis, MN   55419
(Address of principal executive offices)   (Zip Code)

 

(612) 812-2037

(Registrant’s telephone number, including area code)

 

not applicable

(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   not applicable   not applicable

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically 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). Yes [X] No [  ]

 

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 [  ]
Non-accelerated filer [X] Smaller reporting company [X]
Emerging growth company [X]  

 

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 Act). Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 25,397,685 shares of common stock are issued and outstanding as of November 20, 2020.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page No.
  PART 1 – FINANCIAL INFORMATION  
     
Item 1. Financial Statements (Unaudited). 4
Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations. 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 15
Item 4. Controls and Procedures. 15
     
  PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings. 16
Item 1A. Risk Factors. 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 16
Item 3. Defaults upon Senior Securities. 16
Item 4. Mine Safety Disclosures. 16
Item 5. Other Information. 16
Item 6. Exhibits. 16

 

2

 

 

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

 

This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about:

 

  our history of losses, lack of revenues and insufficient working capital;
     
  our ability to continue as a going concern;
     
  the possible impact of COVID-19 on our company;
     
  our ability to raise capital to fund our business plan, pay our operating expense and satisfy our obligations;
     
  our limited operating history and lack of developed, proven or launched products;
     
  the lack of operating history of Leap Technology LLC (“Leap Technology”) and the risks it will face as a new business venture;
     
  conflicts of interest facing certain of our officers and directors;
     
  future reliance on third parties to formulate and manufacturer our products;
     
  our future ability to comply with government regulations;
     
  our lack of experience in selling, marketing or distributing products;
     
  our future ability to establish and maintain strategic partnerships;
     
  our possible future dependence on licensing or collaboration agreements;
     
  the inability of Xten Capital Group Inc., formerly Chong Corporation (“Xten”), to protect the intellectual property which is licensed to us, and risks of possible third-party infringement of intellectual property rights;
     
  the lack of a public market for our common stock; and
     
  anti-takeover provisions of Delaware law.

 

You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements, Part 1. Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed on April 10, 2020 (the “2019 10-K”) and our other filings with the Securities and Exchange Commission. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

OTHER PERTINENT INFORMATION

 

Unless specifically set forth to the contrary, when used in this report the terms “CQENS,” “we,” “our,” “us,” and similar terms refers to CQENS Technologies Inc., a Delaware corporation formerly known as VapAria Corporation and, where applicable, VapAria Solutions Inc., a Minnesota corporation (“VapAria Solutions”), a wholly owned subsidiary of CQENS. In 2019 we dissolved VapAria Solutions which had no separate operations, assets or liabilities. In addition, “third quarter of 2020” refers to the three months ended September 30, 2020, “third quarter of 2019” refers to the three months ended September 30, 2019, “2019” refers to the year ended December 31, 2019, and “2020” refers to the year ending December 31, 2020. The information which appears on our web site at www.cqens.com is not part of this report.

 

All share and per share information appearing in this report gives pro forma effect to the one for seven (1:7) reverse stock split of our outstanding common stock on December 26, 2019.

 

3

 

 

PART 1 – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

CQENS Technologies Inc.

Balance Sheets

 

   September 30, 2020   December 31, 2019 
    (Unaudited)      
ASSETS          
Current Assets          
Cash and cash equivalents  $1,255,783   $1,298 
Prepaid expenses   69,940    1,553 
Total Current Assets   1,325,723    2,851 
Equipment, net   202,596    - 
Intellectual property, net   617,251    290,346 
TOTAL ASSETS  $

2,145,570

   $293,197 

LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)

          
LIABILITIES          
Current Liabilities          
Accounts payable  $35,017   $2,197 

Accounts payable – related party

   293,999    

8,525

 
Accrued expenses   

29,006

    6,865 
Accrued expenses – related party   

72,400

    

-

 
Interest payable   -    48,232 
Note payable   -    50,000 
Convertible note   -    40,000 
Loan from related party   455,544    703,044 
Total Current Liabilities   885,966    858,863 
TOTAL LIABILITIES   885,966    858,863 
STOCKHOLDERS’ EQUITY (DEFICIT)          
Common Stock: $0.0001 par value; 200,000,000 shares authorized: 25,369,113 shares issued and outstanding at September 30, 2020 and 24,837,203 issued and outstanding at December 31, 2019   2,537   2,484
Additional paid-in capital   

4,605,148

    1,733,900 
Accumulated deficit   (3,348,081)   (2,302,050)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)   

1,259,604

    (565,666)
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)  $

2,145,570

   $293,197 

 

See accompanying notes to unaudited financial statements

 

4

 

 

CQENS Technologies Inc.

Statements of Operations

(Unaudited)

 

   Three months ended September 30,   Nine months ended September 30, 
   2020   2019   2020   2019 
Operating Expenses                    
General and administrative  $150,551   $6,851   $267,102   $20,864 
Research and development   187,958    -    458,204    - 
Professional fees   134,117    16,290    315,733    47,308 
Total Operating Expenses   472,626    23,141    1,041,039    68,172 
Other (Expense)   (1,134)   (2,017)   (4,992)   (6,434)
Net Loss  $(473,760)  $(25,158)  $(1,046,031)  $(74,606)
Preferred dividends  $-   $10,000   $-   $10,000 
Net loss available to common shareholders  $(473,760)  $(35,158)  $(1,046,031)  $(84,606)
                     
Basic and diluted loss per common share   (0.02)   (0.00)   (0.04)   (0.01)
Basic and diluted weighted average shares outstanding   25,375,190    10,787,609    25,195,747    10,768,357 

 

See accompanying notes to unaudited financial statements

 

5

 

 

CQENS Technologies Inc.

Statements of Changes in Stockholders’ Equity (Deficit)

For the three and nine months ended September 30, 2020 and 2019

(Unaudited)

 

   Series A                     
   Preferred Stock   Common Stock             
   Number of shares   $0.0001 Par Value   Number of Shares   $0.0001 Par Value   Additional Paid in Capital   Accumulated Deficit   Total 
Balance, June 30, 2020   0   $-    25,371,908   $2,537    4,322,879    (2,874,321)  $1,451,095 
                                                    
Common stock for consulting services   -    -    18,635    2    93,173    -   93,175 
                                    
Common stock returned to treasury   -    -    (21,430)   (2)   (2,498)   -   (2,500)
                                    
Warrants for intellectual property   -    -    -    -    

191,594

    -  

191,594

 
                                    
Net Loss   -    -    -    -    -    (473,760)  (473,760)
                                    
Balance, September 30, 2020   0   $-    25,369,113   $2,537   $

4,605,148

   $(3,348,081)  $

1,259,604

 

 

   Series A                     
   Preferred Stock   Common Stock             
   Number of shares   $0.0001 Par Value   Number of Shares   $0.0001 Par Value   Additional Paid in Capital   Accumulated Deficit   Total 
Balance, December 31, 2019   0   $-    24,837,203   $2,484    1,733,900    (2,302,050)  $(565,666)
                                    
Common stock for cash          -           -    496,898    50    2,399,950    -   2,400,000 
                                    
Common stock for note payable   -    -    15,384    1    76,916    -   76,917 
                                    
Common stock for consulting services   -    -    41,058    4    205,286    -   205,290 
                                    
Warrants for intellectual property   -    -    -    -    

191,594

    -  

191,594

 
                                    
Common stock returned to treasury   -    -    (21,430)   (2)   (2,498)   -   (2,500)
                                    
Net Loss   -    -    -    -    -    (1,046,031)  (1,046,031)
                                    
Balance, September 30, 2020   0   $-    25,369,113   $2,537   $

4,605,148

   $(3,348,081)  $

1,259,604

 

 

   Series A                     
   Preferred Stock   Common Stock             
   Number of shares   $0.0001 Par Value   Number of Shares   $0.0001 Par Value   Additional Paid in Capital   Accumulated Deficit   Total 
Balance, June 30, 2019   500,000   $50    10,758,631   $1,076    1,622,728    (2,211,619)  $(587,765)
                                    
Common stock issued for dividend   -    -    7,143    1    9,999    (10,000)  - 
                                    
Preferred stock converted to common stock   (500,000)   (50)   71,429    7    43    -   - 
                                    
Net Loss   -    -    -    -    -    (25,158)  (25,158)
                                    
Balance, September 30, 2019   0   $-    10,837,203   $1,084   $1,632,770   $(2,246,777)  $(612,923)

 

   Series A                     
   Preferred Stock   Common Stock             
   Number of shares   $0.0001 Par Value   Number of Shares   $0.0001 Par Value   Additional Paid in Capital   Accumulated Deficit   Total 
Balance, December 31, 2018   500,000   $50    10,758,631   $1,076    1,622,728    (2,162,171)  $(538,317)
                                    
Common stock issued for dividend   -    -    7,143    1    9,999    (10,000)  - 
                                    
Preferred stock converted to common stock   (500,000)   (50)   71,429    7    43    -   - 
                                    
Net Loss   -    -    -    -    -    (74,606)  (74,606)
                                    
Balance, September 30, 2019   0   $-    10,837,203   $1,084   $1,632,770   $(2,246,777)  $(612,923)

 

See accompanying notes to unaudited financial statements

 

6

 

 

CQENS Technologies Inc.

Statements of Cash Flows

(Unaudited)

 

   Nine Months Ended September 30, 
   2020   2019 
         
Cash flows from operating activities          
Net loss  $(1,046,031)  $(74,606)
Adjustments to reconcile net loss to net cash used in operations:          
Amortization expense   17,061    13,113 
Common stock issued for consulting services   205,290    - 
Changes in operating assets and liabilities:          
Prepaid expenses   (68,387)   (1,068)
Accounts payable   

24,295

    4,418 
Accounts payable – related party   

91,403

    

-

 
Accrued expenses   

22,141

    4,122 
Accrued expenses – related party     72,400       -  
Interest payable   (21,315)   5,984 
Net cash used in operating activities   (703,143)   (48,037)
           
Cash flows used in investing activities          
Additions to intellectual property   (152,372)   - 
Net cash flows used in investing activities   (152,372)   - 
           
Cash flows from financing activities          
Proceeds from issuance of common stock   2,400,000    - 
Repurchase of common stock   (2,500)   - 
Borrowing on debt with related party   2,500    54,000 
Repayment of related party debt   (250,000)   - 
Repayment of convertible note   (40,000)   - 
Net Cash provided by financing activities   2,110,000    54,000 
           
Net change in cash and cash equivalents   1,254,485    5,963 
Cash and cash equivalents, beginning of period   1,298    1,477 
Cash and cash equivalents, end of period  $1,255,783   $7,440 
           
Supplementary Information          
Interest paid   22,323    - 
Income taxes paid   -    - 
           
Supplementary disclosure of non-cash activities:          
Preferred stock converted to common stock  $-   $50 
Stock dividends on Series A Preferred stock  $-   $10,000 
Warrants issued for intellectual property  $

191,594

   $- 
Common stock issued from conversion of note payable and accrued interest  $76,917   $- 
Purchase of fixed asset through accounts payable related party  $202,596   $- 

 

See accompanying notes to unaudited financial statements

 

7

 

 

CQENS Technologies Inc.

(Formerly VapAria Corporation)

Notes to Unaudited Financial Statements

September 30, 2020

 

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF BASIS OF PRESENTATION

 

Nature of Business

 

CQENS Technologies Inc. (“we”, “our”, the “Company”, “CQENS”) is a technology company with a proprietary method of heating plant-based consumable formulations that produce an aerosol that lead to the effective and efficient inhalation of the plant’s constituents. This is accomplished at a high temperature but without the accompanying constituents of combustion. Our system of heating is a high temperature, non-combustion system. Our Heat-not-Burn Tobacco Product (HTP) system is a patent-pending method of heating plant-based consumables for inhalation that is superior to other methods of ingestion, smoking, vaping, swallowing or via topical application.

 

In the first nine months of 2020 the effects of the COVID-19 pandemic were felt by the Company. While the duration and full impact of the pandemic is unknown at this time, we expect that the pandemic will continue to adversely impact CQENS in several ways. Our business model is dependent upon our ability to enter into strategic partnerships in the future, including alliances with consumer product companies, to enhance and accelerate the development and commercialization of our proposed products. We will also be dependent upon third party manufacturers to produce our proposed products, as well as third party marketing and distribution companies. We believe that our business opportunities are international in nature and include potential partnerships in the UK, the EU and Asia, including the People’s Republic of China. The worldwide pandemic caused by COVID-19 have caused certain of these opportunities to be delayed. Should the pandemic continue and /or be prolonged into 2021 certain of these opportunities might be limited or lost. We also need to raise additional working capital to provide sufficient funding to bring our proposed products to market. The impact of COVID-19 on the capital markets will make it more difficult for small, pre-revenue companies such as ours to access capital. We will continue to assess the impact of the COVID-19 pandemic on our company, however, at this time we are unable to predict all possible impacts on our company, our operations and our prospects.

 

The Company has a fiscal year end of December 31.

 

Basis of Presentation

 

Basis of Presentation - The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows as of September 30, 2020 have been made.

 

Certain information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and footnotes thereto in the Company’s audited financial statements for the year ended December 31, 2019 appearing in its 2019 10-K. The results of operations for the periods ended September 30, 2020 are not necessarily indicative of the operating results for the full year.

 

8

 

 

Reclassifications – Certain reclassifications may have been made to our prior year’s consolidated financial statements to conform to current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.

 

Recent Accounting Pronouncements – Management has evaluated recently issued accounting pronouncements and does not believe that any of these pronouncements will have significant impact on our financial statements and related disclosures.

 

NOTE 2 – GOING CONCERN

 

The Company’s financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. At September 30, the Company has recurring losses, and although has cash in excess of one million dollars, with renewed research and development efforts and with no source of revenue sufficient to cover its operations costs over the next 12 months these may not allow it to continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company will be dependent upon the raising of additional capital. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

 

NOTE 3 – STOCKHOLDERS’ EQUITY

 

On January 29, 2020 we sold 248,448 shares of our common stock for $1,200,000 to a non-U.S. Person in a private transaction. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

 

On March 6, 2020, the holder of the $50,000 note that was entered into on May 30, 2013 agreed to convert the principal and accrued unpaid interest totalling $76,917 into shares of CQENS common stock at $5.00 per share. A total of 15,384 shares were issued as satisfaction of this note.

 

On April 13, 2020 we entered into a consulting engagement memorandum with an unrelated third party pursuant to which we engaged this party to identify key Asian resources for our company. As compensation for the services we issued this individual 12,423 shares of our common stock valued at $62,115. The recipient was a non-U.S. person.

 

On April 16, 2020 we entered into a consulting engagement memorandum and agreement with an unrelated third party and engaged this individual to provide certain services to us in connection with the further development of certain of our patents. As compensation, upon execution, we issued this individual 10,000 shares of our common stock valued at $50,000 and are obligated to issue him an additional 10,000 shares at such time as additional patents are issued. The recipient was a non-U.S. person.

 

On June 1, 2020 we sold a total of 82,818 shares of our common stock for $400,000 to six non-U.S. Persons in private transactions. We did not pay a commission or finder’s fee and are using proceeds for working capital.

 

On June 4, 2020 we sold 165,632 shares of our common stock for $800,000 to a non-U.S. Person in a private transaction. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

 

On June 17, 2020, the Company entered into a Stock Purchase Agreement with an unrelated stockholder pursuant to which it agreed to repurchase 21,430 shares of its common stock from the stockholder for $2,500. The Stock Purchase Agreement contained customary terms, including cross general releases. On August 10, 2020, the transaction closed. Following the closing of the transaction, the shares have been cancelled and returned to the status of authorized but unissued shares of common stock.

 

On July 17, 2020 we entered into a consulting engagement memorandum with an unrelated third party for the consultant’s guidance and expertise in identifying business opportunities, partners and other skilled consultants in the People’s Republic of China and/or other territories of Asia. As compensation for the services we issued this individual 12,423 shares of our common stock valued at $62,115. The recipient was a non-U.S. person.

 

9

 

 

On July 17, 2020 we entered into a consulting engagement memorandum with an unrelated third party for the consultant’s guidance and expertise in identifying potential financiers, partners and other skilled consultants in the People’s Republic of China and/or other territories of Asia. As compensation for the services we issued this individual 6,212 shares of our common stock valued at $31,060. The recipient was a non-U.S. person.

 

On September 30, 2020 the Company entered into an Asset Purchase Agreement with Xten, a common control entity, pursuant to which it acquired a portfolio of 29 U.S. and international patents and patent applications in the areas of devices and technologies for aerosolizing certain remedies and pharmaceutical preparations, as well as the solutions and preparation for inhaled delivery. As consideration for the acquisition, the Company issued Xten common stock purchase warrants exercisable for an aggregate of 21,000,000 shares of its common stock at an exercise price of $5.31 per share (the “Warrants”), consisting of (i) a Series A Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2023 and expiring on September 30, 2026, (ii) a Series B Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2026 and expiring on September 30, 2029, and (iii) a Series C Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2029 and expiring on September 30, 2032. The Company has the right to accelerate or extend the exercise period of each series of Warrants in its discretion. In addition, the exercise period of each series of Warrants automatically accelerates in the event of a “change of control” (as defined in the Warrants) prior to such series of Warrants becoming exercisable by its respective terms. The Asset Purchase Agreement contained customary indemnification provisions.  The Warrants were valued at $191,594 based on the carrying value of the assets acquired.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

Early in 2020 the Company borrowed an additional $2,500 from Xten, a common control entity. On June 24, 2020 the Company paid $250,000 to reduce the debt to Xten, a common control entity. The balance outstanding at September 30, 2020 due Xten is $455,544. The loan is unsecured, noninterest bearing and due on demand. No additional borrowing or repayment occurred in the third quarter.

 

We maintain our corporate offices at 5550 Nicollet Avenue, Minneapolis, MN 55419. We lease the premises from 5550 Nicollet, LLC, a company owned by Mr. Chong, the Company’s Chief Executive Officer. In December 2019 we entered into a month-to-month lease that began January 1, 2020 with a monthly rental rate of $775. We have rented the space continuously through the first nine months of 2020. As of September 30, 2020, there is no outstanding balance for rent due to 5550 Nicollet, LLC.

 

In the first nine months of 2020, pursuant to a signed agreement, Xten provided research and development related expertise and services specific to HNB technologies, devices and intellectual property. Costs to the Company were $427,788 for these research and development services during the first nine months of 2020. As of September 30, 2020, $92,541 remains outstanding with $66,900 as an accrued expense and $25,641 as an account payable to this related party.

 

On September 30, 2020 the Company entered into an Asset Purchase Agreement with Xten, a common control entity, pursuant to which it acquired a portfolio of 29 U.S. and international patents and patent applications in the areas of devices and technologies for aerosolizing certain remedies and pharmaceutical preparations, as well as the solutions and preparation for inhaled delivery. As consideration for the acquisition, the Company issued Xten the Warrants, including (i) a Series A Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2023 and expiring on September 30, 2026, (ii) a Series B Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2026 and expiring on September 30, 2029, and (iii) a Series C Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2029 and expiring on September 30, 2032. The Company has the right to accelerate or extend the exercise period of each series of Warrants in its discretion. In addition, the exercise period of each series of Warrants automatically accelerates in the event of a “change of control” (as defined in the Warrants) prior to such series of Warrants becoming exercisable by its respective terms. The Asset Purchase Agreement contained customary indemnification provisions. The assets have been accounted for at a carrying value of $191,594.

 

10

 

 

In the third quarter of 2020 the Company procured the services of Plexus Corporation, a common control entity, to create, design and deliver an online interactive presentation in English and Simplified Chinese for use in presentations to potential investors. Cost to the Company for this service was $5,500. At September 30, 2020 this balance accounted for in accrued expenses is outstanding.

 

On September 30, 2020 the Company entered into an Other Assets Purchase Agreement with Xten, a common control entity, to purchase certain assets including: multiple pieces of laboratory and workshop equipment; custom built plume and inhalation testing machine; computers, monitors and accessories; prepaid rent; and, laboratory/workshop supplies, for a purchase price of $268,358, The Other Asset Purchase Agreement also contained customary indemnification provisions. The purchase price was tendered to Xten in November 2020.

 

NOTE 5 – NOTE PAYABLE

 

On May 20, 2013 the Company issued a $50,000 note to an unrelated third party. On March 6, 2020, this note and accrued unpaid interest, upon agreement by the noteholder, were fully satisfied through the conversion of the principal and accrued interest totalling $76,917 into 15,384 common shares of our stock at a conversion rate of $5.00 per share. No gain or loss was recognized from the conversion of this note to the Company’s common stock.

 

NOTE 6 – CONVERTIBLE NOTE

 

On July 14, 2014 the Company issued a $40,000 convertible note to an unrelated third party that was originally issued July 14, 2014 as part of the acquisition of VapAria Solutions. This convertible note matured on December 31, 2019. In February 10, 2020 we fully satisfied any and all obligations of the convertible note through repayment of the principal and accrued interest of $62,323

 

NOTE 7 – SUBSEQUENT EVENTS

 

On October 1, 2020 in line with the Company’s 2019 Equity Compensation Plan, 250,000 non-qualified stock options were granted to its management as additional compensation for services provided. These options were fully vested upon grant and have an exercise price of $5.31 per share.

 

On November 18, 2020 we sold 28,572 shares of our common stock to an accredited investor in a private transaction and we received proceeds of $200,000. We did not pay any commissions or finders’ fees and are using the proceeds for working capital.

 

11

 

 


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion of our financial condition and results of operations for the three and nine months ended September 30, 2020 and 2019 should be read in conjunction with the unaudited financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward looking statements as a result of a number of factors, including those set forth under “Cautionary Statements Regarding Forward-Looking Information” appearing earlier in this report, Part I. Item 1A. Risk Factors appearing in our 2019 10-K, and our other filings with the Securities and Exchange Commission. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report.

 

Impact of COVID-19 on the Company

 

In the first nine months of 2020 the effects of the COVID-19 pandemic were felt by the Company. While the duration and full impact of the pandemic is unknown at this time, we expect that the pandemic will continue to adversely impact CQENS in several ways. Our business model is dependent upon our ability to enter into strategic partnerships in the future, including alliances with consumer product companies, to enhance and accelerate the development and commercialization of our proposed products. We will also be dependent upon third party manufacturers to produce our proposed products, as well as third party marketing and distribution companies. We believe that our business opportunities are international in nature and include potential partnerships in the UK, the EU and Asia, including the People’s Republic of China. The worldwide pandemic caused by COVID-19 have caused certain of   these opportunities to be delayed. Should the pandemic continue and /or be prolonged into 2021 certain of these opportunities might be limited or lost. We also need to raise additional working capital to provide sufficient funding to bring our proposed products to market. The impact of COVID-19 on the capital markets will make it more difficult for small, pre-revenue companies such as ours to access capital. We will continue to assess the impact of the COVID-19 pandemic on our company, however, at this time we are unable to predict all possible impacts on our company, our operations and our prospects.

 

Overview and plan of operations

 

We are a technology company involved in the development of proprietary and patentable methods for heating plant-based consumable formulations leading to the production of aerosols for safe, effective and efficient inhalation of plant constituents. The technology, often called Heat Not Burn (“HNB”) accomplishes this by heating tobacco to produce an aerosol, but without the accompanying constituents of combustion. Our technology differs from other such technologies currently on the market because the CQENS System is a high-temperature, non-combustion system, unlike the low-temp, non-combustion systems available today. Current applications of the technology include tobacco, hemp-CBD and cannabis where non-combusting methods of preparation for inhalation are believed to be safer and more effective.

 

On December 31, 2019, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Xten, a related party, pursuant to which we acquired certain intellectual property and other assets. Following the closing of the Asset Purchase Agreement, our business and operations are now focused on commercializing the CQENS System, a patent-pending method of inductively heating tobacco and other substances and ingredients that support reduced risk as a reduced risk product (RRP), given that the technology prevents combustion and prevents consumers from inhaling the dangerous byproducts of combustion.

 

We believe that HNB technologies will be of great interest to the international tobacco industry and the growing hemp-CBD cannabis industries. HNBs represent the latest in tobacco and inhalable technologies, and likely to supplant the electronic vapor system (EVS) technologies including e-cigarettes and electronic nicotine delivery systems. We believe HNBs, if properly designed, will avoid many of the issues that have proved troublesome for EVS’ including thermal decomposition, heating irregularities and the formation and presence of high levels of acrolein and formaldehyde. In the fall of 2019 Philip Morris International introduced its HNB product to U.S. markets. This product, which was sold in more than 40 countries before entering U.S. markets, like other HNB technologies, is a device that heats a tobacco stick, rather than burning it, and testing supports claims that the product can potentially reduce the number of noxious chemicals found in cigarette smoke by 95%.

 

The CQENS System is supported by three patent applications, the most recent of these, a Patent Cooperation Treaty (PCT) patent application, was filed by Xten in January 2019. In May 2019 Xten was informed that the International Searching Authority (ISA) had completed its review of the PCT patent application and issued the International Search Report and Written Opinion relative to that application. The ISA found that 34 of the application’s 55 claims were patentable and the remaining 21 would also be patentable if successfully amended. On September 5, 2019, Xten filed a Chapter II Demand and Article 34 Amendments with the International Bureau of the World International Property Office (WIPO) as a part of what we expect will be a successful effort to obtain a favorable opinion for all of its claims. We have succeeded to these rights with our purchase of the Assets as described earlier in this report.

 

During 2020 we have continued our efforts begun in 2019 following the closing of the Asset Purchase Agreement, including:

 

On July 24, 2020 we entered into an Amended and Restated Operating Agreement (the “Operating Agreement”) of Leap Technology LLC (“Leap Technology”) with Zong Group Holdings LLC (“Zong”) and Leap Management LLC (“LM”). Under the terms of the Operating Agreement and the related Contribution Agreement dated July 24, 2020 (the “Contribution Agreement”), we acquired a 55% membership interest in Leap Technology in exchange for the contribution of an exclusive, royalty-free license (the “License Agreement”) for the use in the Asia Pacific countries listed in the Contribution Agreement of certain of our intellectual property, patents pending and patents related to our heated tobacco product technology. It is expected that Leap Technology will form additional business entities to commercialize our propriety technology in those Asia Pacific countries which include China, India, Indonesia, Vietnam, the Philippines, Thailand, Malaysia, Singapore and Hong Kong. The goal of the joint venture is the market development of the Company’s intellectual property in the Asia Pacific region together with other initiatives and the formation business relationships with tobacco companies who operate in the Asia Pacific region;

 

On August 25, 2020, we were issued United States Patent 10,750,787 by the U.S. Patent and Trademark Office for a Heat-not-Burn Device and Method. The patent covers the technology behind the proprietary CQENS System;

 

• On September 4, 2020, we were informed by our intellectual property counsel that it had received a favorable International Preliminary Report on Patentability that was issued as a result of its filing of a Chapter II Demand and Article 34 Amendments with the International Bureau of the World International Property Office (WIPO) on September 5, 2019. The report was issued in connection with the PCT patent application filed by on January 3, 2019 for our Heat-Not-Burn Device and Method. The examiner’s conclusion was that 84 of the 91 claims were considered to be “patentable,” and while the PCT does not issue patents, based upon management’s experience we believe that a preliminary, favorable examination does provide insight as to how individual country examinations would likely proceed;

 

On September 30, 2020 we entered into an Asset Purchase Agreement (the “IP Asset Purchase Agreement”) with Xten pursuant to which we acquired a portfolio of 29 U.S. and international patents and patent applications in the areas of devices and technologies for aerosolizing certain remedies and pharmaceutical preparations, as well as the solutions and preparation for inhaled delivery; and

 

• On September 30, 2020 we also entered into a second Asset Purchase Agreement (the “Other Assets Asset Purchase Agreement”) with Xten pursuant to which we acquired certain assets including, but not limited to, a custom built plume and inhalation testing machine, oscilloscope with probe, multiple pieces of laboratory and workshop equipment, computers, monitors and accessories.

 

We believe that the actions and transaction we have undertaken in 2019 and 2020 will facilitate and accelerate the commercialization of our IP assets in the near term and well into the future.

 

12

 

 

Going concern

 

For the first nine months of 2020 we reported a net loss of $1,046,031 and net cash used in operations of $703,143 compared to a net loss of $74,606 and net cash used in operations of $48,037 for the first nine months of 2019. At September 30, 2020, we had cash on hand of $1,255,783 and an accumulated deficit of $3,348,081. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2019 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our minimal cash and no source of revenues which may not be sufficient to cover our operating costs. These factors, among others, despite the cash and cash equivalent amount on hand at the end of this quarter, raise substantial doubt about our ability to continue as a going concern and pay our obligations as they become due over the next year. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to raise additional capital, develop a source of revenues, report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

 

Results of operations

 

We did not generate any revenues from our operations in either the third quarter or the first nine months of 2020 or 2019. Our total operating expenses for the third quarter of 2020 and the nine months then ended increased 1942.4% and 1427.1%, respectively, over those reported in the comparable 2019 periods. General and administrative expenses increased 2097.5% in the third quarter of 2020 from the comparable period in 2019 and showed an overall increase of 1180.2% for the first nine months from the same period in 2019 due mainly to the compensation payments to the Company’s management, purchase of non-capital equipment and lab supplies and some slight increases in amortization and office expenses.

 

13

 

 

Research and development expenses in the third quarter of 2020 were $187,958 as we work on variant prototypes comparatively, we had no research and development expenses in this same period in 2019. For the first nine months in 2020 our research and development expenses were $458,204 against no research and development in the first nine months of 2019. Professional fees increased 723% for the third quarter of 2020, compared to the third quarter of 2019. The first nine months of 2020 showed an increase in professional fees of 567.4% over the same 2019 timeframe. These increases are attributable to consulting service fees and increased legal costs.

 

We expect that our operating expenses will increase as we continue to develop our business and we devote additional resources towards promoting that growth, most notably reflected in anticipated increases in research and development, general overhead, salaries for personnel and technical resources, as well as increased costs associated with our SEC reporting obligations. However, as set forth elsewhere in this report, our ability to continue to develop our business and achieve our operational goals is dependent upon our ability to raise significant additional working capital. As the availability of this capital is unknown, we are unable to quantify at this time the expected increases in operating expenses in future periods.

 

Liquidity and capital resources

 

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of September 30, 2020, we had $1,255,783 in cash and cash equivalents and a working capital surplus of $439,757 compared to $1,298 in cash and cash equivalents and a working capital deficit of $856,012 at December 31, 2019. Our current liabilities increased only $27,103 from December 31, 2019, reflecting the retirement of debt and associated interest payable despite a significant increase in our accounts payable and in our accrued expenses, including accounts payable and accrued expenses due a related party as described in Note 4 to the financial statements appearing earlier in this report. Our source of operating capital in the first nine months of 2020 came from the sale of 496,898 shares of our common stock raising $2,400,000 in capital compared to the same period in 2019 where our sole source of operating capital came from additional borrowings from a related party which loaned us an additional $54,000.

 

The ability of the Company to continue as a going concern is dependent upon the Company obtaining adequate capital to fund operating losses until it becomes profitable. As the company is not generating revenues, continued activities and expenditures to bring product(s) to market as soon as we are able is important. Management believes the currently available funding will be insufficient to finance the Company’s operations for a year from the date of these financial statements and to satisfy our obligations as they become due.

 

During the first nine months of 2020 we have retired approximately $340,000 of debt, including a net amount of $247,500 owed to a related party, through repayments or conversion into equity. At September 30, 2020 the outstanding amount we owe the related party is $455,544 which is due on demand.

 

While we raised $2,400,000 from the sale of our securities during the first nine months of 2020, plus an additional $200,000 in November 2020, we still will need to raise $2,000,000 to $3,000,000 in additional capital during the next 12 months. As we do not have any firm commitments for all or any portion of this necessary capital, there are no assurances we will have sufficient funds to fund our operating expenses and continued development of our products and to satisfy our obligations as they become due over the next 12 months. In that event, our ability to continue as a going concern is in jeopardy.

 

Summary of cash flows

 

   September 30, 2020   September 30, 2019 
Net cash (used) in operating activities  $(703,143)  $(48,037)
Net cash (used) in investing activities  $

(152,372

)  $

-

 
Net cash provided by financing activities  $2,110,000   $54,000 

 

Our cash used in operating activities increased 1364% in the first nine months of 2020 compared the first nine months of 2019. During these time periods we used the cash primarily to fund our net losses.

 

During the first nine months of 2020 our cash used in investing activities was comprised of $150,683 from capitalization of intellectual property related legal fees and $1,689 cash used for trademarks. There was no cash used in investing activities in this same period in 2019.

 

14

 

 

During the first nine months of 2020 net cash provided by financing activities consisted primarily of $2,400,000 raised from the sale of 496,898 shares of our common stock, repayment and satisfaction in full of the convertible note of $40,0000 and repayment of $250,000 and borrowing of $2,500 to and from Xten, a common control entity compared to net cash from $54,000 of additional borrowings from Xten in the first nine months of 2019.

 

Critical accounting policies

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, accounts receivable allowances and impairment of long-lived assets. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our audited consolidated financial statements for 2019 appearing in our 2019 10-K.

 

Off balance sheet arrangements

 

As of the date of this report, we do not have any 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 are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures.

 

We maintain “disclosure controls and procedures” as such term is defined in Rules 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 their evaluation as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure 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, including our Chief Executive Officer, to allow timely decisions regarding required disclosure due to the presence of continuing material weakness in our internal control over financial reporting as reported in our Annual Report on Form 10-K for the year ended December 31, 2019. These material weaknesses in our internal control over financial reporting result from limited segregation of duties and limited multiple level of review in the financial close process.

 

15

 

 

The existence of the continuing material weaknesses in our internal control over financial reporting increases the risk that a future restatement of our financials is possible. In order to remediate these material weaknesses, we will need to expand our accounting resources. We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal control over financial reporting on an ongoing basis, however, we do not expect that the deficiencies in our disclosure controls will be remediated until such time as we have remediated the material weaknesses in our internal control over financial reporting. Subject to the availability of sufficient capital, we expect to expand our accounting resources during 2020 in an effort to remediate the material weaknesses in our internal control over financial reporting.

 

Changes in Internal Control over Financial Reporting.

 

There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

In addition to the other information set forth in this report you should carefully consider the risk factors in Part I, Item 1A in our 2019 10-K, Part II, Item 1A. in our Quarterly Report on Form 10-Q for the period ended June 30, 2020 and our subsequent filings with the Securities and Exchange Commission, which could materially affect our business, financial condition or future results. These cautionary statements are to be used as a reference in connection with any forward-looking statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

On July 17, 2020 we entered into a consulting engagement memorandum with an unrelated third party for the consultant’s guidance and expertise in identifying business opportunities, partners and other skilled consultants in the People’s Republic of China and/or other territories of Asia. As compensation for the services we issued this individual 12,423 shares of our common stock valued at $62,115. The recipient was a non-U.S. person and the issuance was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on an exemption provided by Regulation S promulgated thereunder.

 

On July 17, 2020 we entered into a consulting engagement memorandum with a second unrelated third party for the consultant’s guidance and expertise in identifying potential financiers, partners and other skilled consultants in the People’s Republic of China and/or other territories of Asia. As compensation for the services we issued this individual 6,212 shares of our common stock valued at $31,060. The recipient was a non-U.S. person and the issuance was exempt from registration under the Securities Act in reliance on an exemption provided by Regulation S promulgated thereunder.

 

On November 18, 2020 we sold 28,572 shares of our common stock to an accredited investor in a private transaction exempt from registration under the Securities Act in reliance on Section 4(a)(2) of that act. We received proceeds of $200,000. We did not pay any commissions or finders’ fees and are using the proceeds for working capital.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable to our company’s operations.

 

Item 5. Other Information.

 

None

 

Item 6. Exhibits.

 

No.   Exhibit Description   Form  

Date

Filed

  Number   Herewith
2.1   Share Exchange Agreement and Plan of Reorganization dated April 11, 2014 by and between OICco Acquisition IV, Inc., VapAria Corporation and the listed shareholders   8-K   4/11/14   2a    
3.1   Amended and Restated Certificate of Incorporation   S-1   6/30/10   3.C    
3.2   Certificate of Amendment to the Amended and Restated Certificate of Incorporation   8-K   8/21/14   3.4    
3.3   Certificate of Amendment to the Amended and Restated Certificate of Incorporation   10-Q   11/19/16   3.5    

 

16

 

 

3.4   Bylaws   S-1   3/29/10   3(b)    
4.1   Form of Series A Common Stock Purchase Warrant   8-K   10/2/20   4.1    
4.2   Form of Series B Common Stock Purchase Warrant   8-K   10/2/20   4.2    
4.3   Form of Series C Common Stock Purchase Warrant   8-K   10/2/20   4.3    
10.1   Asset Purchase Agreement dated September 30, 2020 between CQENS Technologies Inc. and Xten Capital Group, Inc. (IP)   8-K   10/2/20   10.1    
10.2   Asset Purchase Agreement dated September 30, 2020 between CQENS Technologies Inc. and Xten Capital Group, Inc. (Other Assets)   8-K   10/2/20   10.2    
10.3   Securities Purchase Agreement dated November 18, 2020               Filed
31.1   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer               Filed
31.2   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer and Chief Financial Officer               Filed
32.1   Section 1350 Certification               Filed
101.INS   XBRL Instance Document               Filed
101.SCH   XBRL Taxonomy Extension Schema Document               Filed
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document               Filed
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document               Filed
101.LAB   XBRL Taxonomy Extension Label Linkbase Document               Filed
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document               Filed

 

17

 

 

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.

 

  CQENS Technologies Inc.
   
November 20, 2020 By: /s/ Alexander Chong
    Alexander Chong, Chief Executive Officer
     
November 20, 2020 By: /s/ Daniel Markes
    Daniel Markes, Chief Financial Officer

 

18

 

 

EXHIBIT 10.3

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (the “Agreement”) is entered into as of the 18th day of November, 2020 by and between CQENS Technologies Inc., a Delaware corporation with its principal place of business located at 5550 Nicollet Avenue, Minneapolis, MN 55419 (the “Company”) and the purchaser set forth on the signature page hereto (the “Purchaser”).

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to Purchaser as provided herein, and Purchaser shall purchase from the Company, 42,858 (Forty Two Thousand Eight Hundred and Fifty-eight ) shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) in reliance on exemptions provided by Section 4(a)(2) promulgated thereunder.

 

NOW, THEREFORE, in consideration of the foregoing premises, and the promises and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE 1

PURCHASE AND SALE OF COMMON STOCK

 

Section 1.1 Purchase and Sale of the Shares. Subject to the terms and conditions of this Agreement, at Closing (as hereinafter defined) the Company will issue and sell to the Purchaser and the Purchaser will purchase from the Company, such number of 28,572 (Twenty Eight Thousand Five Hundred and Seventy-two ) shares (“the Shares”) at a per share purchase price of Seven Dollars ($7.00) per Share for a total purchase price of Two Hundred Thousand Dollars (U.S.) ($200,000.00) (the “Purchase Price”).

 

Section 1.2 Closing. The Closing shall take place immediately following the execution of this Agreement by the parties hereto (the “Closing”) or at such other date as the parties may agree in writing. At Closing, the Company will deliver a stock certificate to the Purchaser representing the Shares, and the Purchaser shall tender the Purchase Price to the Company in immediately available funds in U.S. dollars. All actions taken at the Closing shall be deemed to have been taken simultaneously at the time the last of any such actions is taken or completed.

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

 

Section 2.1 Representation and Warranties of the Company. The Company hereby makes the following representations and warranties to the Purchaser:

 

(a) Organization and Good Standing. The Company is an entity duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate its business and properties and to carry on its business in the places and in the manner as presently conducted. The Company is in good standing as a foreign entity in each jurisdiction in which the properties owned, leased or operated, or where the business is conducted by it requires such qualification, except where the failure to so qualify would not have a material adverse effect on its business, taken as a whole, or consummation of the transactions contemplated hereby.

 

 

 

 

(b) Authority and Enforcement. The Company has taken all corporate action necessary for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement constitutes the valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as may be affected by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefor may be brought.

 

(c) No Conflicts or Defaults. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby do not (a) contravene its Amended and Restated Certificate of Incorporation or Bylaws, or (b) with or without the giving of notice or the passage of time (i) violate, conflict with, or result in a material breach of, or a material default or loss of rights under, any covenant, agreement, mortgage, indenture, lease, instrument, permit or license to which it is a party or by which it is bound, or any judgment, order or decree, or any law, rule or regulation to which it is subject, (ii) result in the creation of, or give any party the right to create, any lien upon any assets or properties of the Company, or (iii) terminate or give any party the right to terminate, amend, abandon or refuse to perform, any material agreement, arrangement or commitment relating to which the Company is a party.

 

(d) Capitalization; Shares of Company’s Common Stock. The Company’s authorized capital consists of 200,000,000 shares of Common Stock and 10,000,000 shares of preferred stock. As of the date hereof, there are 25,390,543 shares of Common Stock and no shares of preferred stock issued and outstanding. The Shares of the Company’s Common Stock have been duly authorized, and upon issuance pursuant to the provisions hereof, will be validly issued, fully paid and non-assessable.

 

(e) SEC Reports. The Company files annual, quarterly and current reports with the SEC pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has filed all reports required to be filed by it under the Exchange Act since January 1, 2017 (the “SEC Reports”). The SEC Reports do not misrepresent a material fact, do not omit to state a material fact and do not omit any fact necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading.

 

Section 2.2 Representations and Warranties of the Purchaser. The Purchaser hereby makes the following representations and warranties to the Company:

 

(a) Power and Authority; Enforcement. The execution and delivery of this Agreement and each instrument required hereby to be executed and delivered by the Purchaser prior to or at the Closing, the performance of the Purchaser’s obligations hereunder and thereunder and the consummation by the Purchaser of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Purchaser, and no other proceedings on the part of the Purchaser is necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed by the Purchaser, and, assuming this Agreement has been duly executed by the Company, this Agreement constitutes a valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

 

2

 

 

(b) No Conflicts or Defaults. The execution and delivery of this Agreement by the Purchaser and the consummation of the transactions contemplated hereby with or without the giving of notice or the passage of time (i) violate, conflict with, or result in a material breach of, or a material default or loss of rights under, any covenant, agreement, mortgage, indenture, lease, instrument, permit or license to which it is a party or by which it is bound, or any judgment, order or decree, or any law, rule or regulation to which it is subject, (ii) result in the creation of, or give any party the right to create, any lien upon any assets or properties of the Purchaser, or (iii) terminate or give any party the right to terminate, amend, abandon or refuse to perform, any material agreement, arrangement or commitment relating to which the Purchaser is a party. No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental entity, is required by the Purchaser in connection with the execution of this Agreement by the Purchaser or the consummation by it of the transactions contemplated hereby, except for such other consents, approvals, orders, authorizations, registrations, declarations or filings, the failure of which to obtain would not individually or in the aggregate have a material adverse effect.

 

(c) Information on the Company. The Purchaser has been provided access to the SEC Reports via the SEC’s public website at www.sec.gov/EDGAR, and represents and warrants that the Purchaser has read and reviewed the SEC Reports. The Purchaser has relied solely on the SEC Reports in making its decision to purchase the Shares. The Purchaser is not relying on any offering documents or other literature other than this Agreement in connection with the purchase of the Shares.

 

(d) Financial Risk. The Purchaser has significant prior investment experience, including investments in non-registered securities. Purchaser is sufficiently experienced in financial and business matters to be capable of evaluating the merits and risks of its investments and to make an informed decision relating thereto. In evaluating its investment, Purchaser has consulted its own investment and/or legal and/or tax advisors. The Purchaser acknowledges that there is no market for the Shares and that no market may ever develop. The Purchase further acknowledges that the Purchaser has adequate means of providing for the Purchaser’s current financial needs and foreseeable contingencies and has no need for liquidity of its investment in the Shares.

 

(e) Investment Representations. The Purchaser meets the requirements of at least one of the suitability standards for an “accredited investor” as that term is defined in Regulation D under the 1933 Act. The Purchaser is acquiring the Shares for its own account with the present intention of holding such securities for purposes of investment, and it has no intention of distributing such Shares, or selling, transferring or otherwise disposing of such Shares in a public distribution, in any of such instances, in violation of the federal securities laws of the United States of America. The Purchaser understands that (a) the Shares will be “restricted securities,” as defined in Rule 144 promulgated under the 1933 Act; (b) such Shares will be subject to restrictions on transfer and will be issued in reliance on exemptions for private offerings contained in Section 4(a)(2) of the 1933 Act; (c) the Company has no obligation to so register the Shares for resale; and (d) the Shares may not be distributed, re-offered or resold except through a valid and effective registration statement or pursuant to a valid exemption from the registration requirements under the 1933 Act at such time as the Shares become eligible for resale by the Purchaser.

 

(f) Legend. The Purchaser agrees that the Company may insert the following or similar legend on the face of the certificate evidencing the Shares in compliance with the 1933 Act or state securities laws:

 

“The shares of common stock evidenced by this certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). Such shares may not be sold, transferred, pledged, hypothecated or otherwise disposed of unless they have been so registered or CQENS Technologies Inc. shall have received an opinion of counsel satisfactory to it to the effect that registration thereof for purposes of transfer is not required under the Securities Act or the securities laws of any state.”

 

(g) No Reliance. The Purchaser is not relying on the Company or any of its employees or agents with respect to the legal, tax, economic and related considerations of an investment in the Shares, and the Purchaser has relied on the advice of, or has consulted with, only its own advisors, if any.

 

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(h) No General Solicitation. The Purchaser is unaware of, is in no way relying on, and did not become aware of the offering of the Shares directly or indirectly through or as a result of, any form of general solicitation or general advertising including, without limitation, any press release, article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or the internet (including without limitation, internet “blogs,” bulletin boards, discussion groups or social networking sites) in connection with the offering and sale of the Shares and is not subscribing for the Shares and did not become aware of the offering of the Shares through or as a result of any seminar or meeting to which the Purchaser was invited by, or any solicitation of a subscription by, a person not previously known to the Purchaser in connection with investments in securities generally.

 

(i) OFAC Compliance. The Purchaser should check the Office of Foreign Assets Control (“OFAC”) website at <http://www.treas.gov/ofac> before making the following representations. The Purchaser represents that the amounts invested by it in the Company pursuant to this Agreement were not and are not directly or indirectly derived from activities that contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. Federal regulations and Executive Orders administered by OFAC prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals. The lists of OFAC prohibited countries, territories, persons and entities can be found on the OFAC website at <http://www.treas.gov/ofac>. In addition, the programs administered by OFAC (the “OFAC Programs”) prohibit dealing with individuals1 or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists. To the best of the Purchaser’s knowledge, none of: (1) the Purchaser; (2) any person controlling or controlled by the Purchaser; (3) if the Purchaser is a privately-held entity, any person having a beneficial interest in the Purchaser; or (4) any person for whom the Purchaser is acting as agent or nominee in connection with this investment is a country, territory, individual or entity named on an OFAC list, or a person or entity prohibited under the OFAC Programs. The Purchaser agrees to promptly notify the Company should the Purchaser become aware of any change in the information set forth in these representations. The Purchaser understands and acknowledges that, by law, the Company may be obligated to “freeze the account” of the Purchaser, either by prohibiting additional purchases by the Purchaser and/or segregating the assets in the account in compliance with governmental regulations.

 

(j) Senior Political Figure. To the best of the Purchaser’s knowledge, none of: (1) the Purchaser; (2) any person controlling or controlled by the Purchaser; (3) if the Purchaser is a privately-held entity, any person having a beneficial interest in the Purchaser; or (4) any person for whom the Purchaser is acting as agent or nominee in connection with this investment is a senior foreign political figure2, or any immediate family3 member or close associate4 of a senior foreign political figure, as such terms are defined in the footnotes below.

 

(k) Foreign Bank. If the Purchaser is affiliated with a non-U.S. banking institution (a “Foreign Bank”), or if the Purchaser receives deposits from, makes payments on behalf of, or handles other financial transactions related to a Foreign Bank, the Purchaser represents and warrants to the Company that: (1) the Foreign Bank has a fixed address, other than solely an electronic address, in a country in which the Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank maintains operating records related to its banking activities; (3) the Foreign Bank is subject to inspection by the banking authority that licensed the Foreign Bank to conduct banking activities; and (4) the Foreign Bank does not provide banking services to any other Foreign Bank that does not have a physical presence in any country and that is not a regulated affiliate.

 

 

1 These individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.

2 A “senior foreign political figure” is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government owned corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure.

3 “Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws.

4 A “close associate” of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure.

 

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(l) Independent Investigation; Access. Purchaser acknowledges that Purchaser, in making the decision to purchase the Shares pursuant to the terms of this Agreement, has relied upon independent investigations made by it and Purchaser’s representatives, if any, and Purchaser and such representatives, if any, have been given access and the opportunity, prior to any sale to it, to examine all material books and records of the Company, and the opportunity to ask questions of, and to receive answers from the Company or any person acting on its behalf concerning the terms and conditions of this Agreement. Purchaser and its advisors, if any, have received complete and satisfactory answers to any such inquiries.

 

(m) No Government Recommendation or Approval. Purchaser understands that no federal or state agency has made or will make any finding or determination relating to the fairness for public investment in the Company, or has passed or made, or will pass on or make, any recommendation or endorsement of the Shares.

 

(n) General. The Purchaser understands that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the suitability of the Purchaser to acquire the Shares. The Purchaser certifies that each of the foregoing representations and warranties set forth in this Section 2 are true as of the date hereof and shall survive thereafter.

 

ARTICLE 3

CONDITIONS TO CLOSING

 

Section 3.1 Conditions Precedent to the Obligation of the Company to Sell the Shares. The obligation hereunder of the Company to proceed to close this Agreement and to issue and sell the Shares to the Purchaser is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below. These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion.

 

(a) Accuracy of the Purchaser’s Representations and Warranties. The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing as though made at that time, except for representations and warranties that speak as of a particular date.

 

(b) Performance by the Purchaser. The Purchaser shall have performed, satisfied and complied in all material respects with all material covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing.

 

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

(d) Documentation. The Purchaser shall provide the Company with such information and documentation as it may reasonably request in connection with the issuance of the Shares to the Purchaser.

 

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Section 3.2 Conditions Precedent to the Obligation of the Purchaser to Close. The obligation hereunder of the Purchaser to perform its obligations under this Agreement and to purchase the Shares is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below. These conditions are for the Purchaser’s sole benefit and may be waived by the Purchaser at any time in its sole discretion.

 

(a) Accuracy of the Company’s Representations and Warranties. Each of the representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing as though made at that time (except for representations and warranties that speak as of a particular date).

 

(b) Performance by the Company. The Company shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing.

 

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by his Agreement.

 

ARTICLE 4

MISCELLANEOUS

 

Section 4.1 Fees and Expenses. Each of the parties to this Agreement shall pay its own fees and expenses related to the transactions contemplated by this Agreement.

 

Section 4.2 Entire Agreement, Amendment. This Agreement contains the entire understanding of the parties with respect to the matters covered herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought.

 

Section 4.3 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery or facsimile at the address or number designated in this Agreement (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. Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto in accordance herewith.

 

Section 4.4 Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement hereof nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

 

6

 

 

Section 4.5 Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof

 

Section 4.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The parties hereto may not amend this Agreement or any rights or obligations hereunder without the prior written consent of the Company and the Purchaser.

 

Section 4.7 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any other person hereof enforce any provision.

 

Section 4.8 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to the choice of law provisions. Each of the parties hereto expressly and irrevocably: (1) agree that any legal suit, action or proceeding arising out of or relating to this Agreement will be instituted exclusively in United States District Court for the District of Minnesota; (2) waive any objection they may have now or hereafter to the venue of any such suit, action or proceeding; and (3) consent to the in personam jurisdiction of United States District Court for the District of Minnesota in any such suit, action or proceeding. Each of the parties hereto further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the United States District Court for the District of Minnesota and agree that service of process upon it mailed by certified mail to its address will be deemed in every respect effective service of process upon it, in any such suit, action or proceeding. ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN MINNEAPOLIS, MN, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.8.

 

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Section 4.9 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other

 

Section 4.10 Publicity. Neither the Company nor the Purchaser shall issue any press release or otherwise make any public statement or announcement with request to this Agreement until the closing. After the closing, the Company may issue a press release, or otherwise make a public statement or announcement with respect to this agreement and/or transaction.

 

Section 4.11 Further Assurances. From and after the date of this Agreement, upon the request of the Purchaser or the Company, each of the Company or and the Purchaser shall execute and deliver such instruments, documents and other writings as maybe reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purpose of this agreement.

 

Section 4.12 Role of Counsel. The parties acknowledge their understandings that this Agreement was prepared at the request of the Company by Pearlman Law Group LLP, its counsel, and that such firm did not represent the Purchaser in conjunction with this Agreement or any of the related transactions. The Purchaser, as further evidenced by its signature below, acknowledges that it has had the opportunity to obtain the advice of independent counsel of its choosing prior to its execution of this Agreement and that it has availed itself of this opportunity to the extent it deemed necessary and advisable.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and date first above written.

 

  CQENS Technologies Inc.
     
  By: /s/ Alexander Chong
    Alexander Chong, Chief Executive Officer
     
  PURCHASER
     
    /s/John Bores
    John Bores
     
   

Address:

    [●]
    [●]
     
  (On File)
  Taxpayer ID Number

 

8

 

 

EXHIBIT 31.1

 

Rule 13a-14(a)/15d-14(a) Certification

 

I, Alexander Chong, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2020 of CQENS Technologies Inc.
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

November 20, 2020 /s/ Alexander Chong
  Alexander Chong, Chief Executive Officer, principal
executive officer

 

 

 

EXHIBIT 31.2

 

Rule 13a-14(a)/15d-14(a) Certification

 

I, Daniel Markes, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2020 of CQENS Technologies Inc.
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

November 20, 2020 /s/ Daniel Markes
  Daniel Markes, Chief Financial Officer, principal financial and accounting officer

 

 

 

EXHIBIT 32.1

 

Section 1350 Certification

 

In connection with the Quarterly Report of CQENS Technologies Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2020 as filed with the Securities and Exchange Commission (the “Report”), I, Alexander Chong, Chief Executive Officer of the Company, and I, Daniel Markes, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
   
2. The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company.

 

November 20, 2020 /s/ Alexander Chong
 

Alexander Chong, Chief Executive Officer, principal

executive officer

   
November 20, 2020 /s/ Daniel Markes
  Daniel Markes, Chief Financial Officer, principal financial and accounting officer

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.